Corporate life cycle as determinant of capital structure in companies of czech automotive industry

Abstract

The issue of capital structure choice belongs to fundamental strategic fi nancial decisions. A variety of potential determinants was suggested by theoreticians; however, the corporate life cycle was considered of peripheral importance, and thus the relationship between corporate life stages and capital structure was investigated only exceptionally. Both concepts were in the meantime developed separately. Recently, it has appeared that the aforementioned relation has become a subject of increased interest of the researches as a way to better understanding of how the corporate funding is changing in the course of time. The main objective of this paper is to investigate the impact of corporate life cycle on the capital structure of companies. For the purpose of the article quantitative research is used. The sample consists of finnly companies belonging to NACE division 29, manufacture of motor vehicles, trailers and semi-trailers. The data come from fi nancial statements of the chosen companies and mostly cover a period since their start-up till year 2010. First, the method based on cash fl ow patterns is applied for the identifi cation of fi rm's life cycle. Next, the methods of descriptive statistics and the hypothesis test about a population proportion are used. The paper explores the relationship between capital structure and corporate life cycle. The empirical study is performed to support theoretical fi ndings.