The influence of capital structure on the value of public companies in chemical industry
The study is about the relation between the financial leverage and the value of a firm in the chemical industry. Financial stability (low level of growth and financial health) is considered as a factor that can influence the relation. The panel data analysis of the sample of public chemical companies is used. Instrumental variables are used to avoid endogenity problem of the leverage in the model. We find that the relation between the financial leverage and the value is positive. We show that the big amounts of debt past the optimum level influence company’s market value negatively. We also find that financial stability influences the relation between the leverage and the value only partly. Financial health strengthens the relation while growth has little or no influence on the relation. Testing for the change of influence patterns before and after financial crisis of 2008 gives significant difference only in relation between the value and the square financial leverage. In the first part of this work the existing body of literature on the relation between the financial leverage and the value of a company will be studied and hypotheses will be formulated. The second part will be dedicated to methodology of the study. The third part will contain the description of the data and the results of econometric analysis.