Determinants of the capital structure of large companies: Evidence from Serbia

The subject of this study is the capital structure of the largest Serbian companies in the period after the global economic crisis in 2008. The research sample comprises the 141 largest non-financial (mostly private) companies in Serbia over the period 2009–2017. In order to identify the key determinants of the capital structure of the sampled companies, three models of financial leverage were tested (total, short-term, and long-term) using panel data fixed effects models. The main result of the analysis indicates that these companies, mostly financed by short-term debt, predominantly belong to the ‘pecking order’ theory. When the total leverage is split into its short-term and long-term components, the results show that short-term leverage behaviour aligns with the ‘pecking order’ theory, whereas long-term leverage is fully consistent with the expectations of the trade-off theory. Also, this study shows that the country-specific determinants, such as inflation and development of the banking sector, have a significant impact on the capital structure of the largest companies in Serbia.