INFLUENCE OF ECONOMIC CYCLES ON THE RELATIONSHIP BETWEEN BUSINESS PERFORMANCE AND CAPITAL STRUCTURE OF PUBLICLY TRADED COMPANIES IN BRAZIL
DOI:
https://doi.org/10.4270/ruc.2021424Keywords:
Economic Cycles, Economic Performance, Capital StructureAbstract
The study's objective is to analyze the influence of economic cycles on the relationship between business performance and capital structure of companies listed on B3 S/A - Brasil, Bolsa, Balcão (B3) in the period from 1998 to 2019. To this end, we analyzed a sample of 126 non-financial corporations, with the four phases listed by Schumpeter (1939) as a proxy for economic cycles: i) expansion; ii) recession; iii) depression; and iv) recovery. As for the capital structure, we use Debt to Market (ENDM) and Accounting (ENDC) variables; and for business performance: return on assets (ROA); return on investment (ROI); and return on equity (ROE). Through multiple regression with a balanced panel, there was a negative relationship between ENDM and ENDC, with ROA and ROI being significant only in periods of recession. On the other hand, ROE also refers to indebtedness in all the analyzed phases, being negative with ENDM and positive with ENDC. Still, we found that, depending on the economic moment, periods of expansion (depression) make companies resort to less (more) debt in their capital structure, changing their business performance. Thus, it appears that the economic cycle influences the relationship between economic performance and the capital structure of Brazilian companies. This research, therefore, contributes by generating evidence on how the non-symmetrical oscillations of a country's development activities affect the economic performance and capital structure relationship, providing empirical results that can assist stakeholders in decision-making, especially investors, managers, and the government.
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