CAPITAL STRUCTURE: AN OVERVIEW FOR ROMANIAN LISTED COMPANIES ON REPUTATION, SIZE AND PROFITABILITY

This paper aims to analyze the relation between capital structure and reputation, size and profitability for a sample of Romanian companies. The study is conducted using a sample of companies listed on Bucharest Stock Exchange, taking into account that bigger companies with good reputation and growth opportunities can borrow funds more easily and usually at lower costs. This should affect the level of indebtedness and have impact on capital structure of companies especially when volatility on stock prices is present. The paper is divided into 6 chapters covering a brief description of the relevant literature, the selection of the data sample, the methodology used, the empirical results obtained and some conclusions and future areas of research. The book-to-market ratio of equity is used in order to proxy the reputation that a company enjoys among investors. Companies with a better reputation enjoy a lower cost of capital and its earnings best reflects changes in the global value of the company. We expect to conclude that companies with sound reputation tend to borrow more on short term. Following our results, the long-term debt financing the total assets of company is not influenced by the price of its stocks, and therefore by its reputation.