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Business & Economics

DEBT FINANCING BEHAVIOUR OF ROMANIAN LISTED FIRMS: EMPIRICAL EVIDENCE
Angela Roman, Valentina Diana Rusu, Silvia Ghita-Mitrescu

ABSTRACT. The paper aims to empirically investigate how the firm-specific factors identified in the empirical literature in the field (the size of the firm, profitability, asset tangibility, growth opportunities and earnings volatility) affect the debt ratio of the Romanian listed firms. Our empirical analysis is based on a panel which includes 62 firms listed on the Bucharest Stock Exchange during 2009-2014 and is based on three models of estimation, namely Pooled regression model, Fixed effects model and Random effects model.
The empirical results of our study generally confirm previous findings, showing that profitability, the business risk, growth opportunities and assets tangibility have a significant negative impact on debt ratio of the Romanian listed firms while firm size is positively or negatively correlated with the debt ratio. Overall, our research highlights with reference to Romania that profitable companies, with better growth opportunities and willing to assume more risks make greater use of internal funding and borrow less. 

KEYWORDS: debt financing, leverage, static trade-off theory, pecking order theory, Romanian firms.

JEL classification: G32, C33.