Managing the capital structure of a non-public company through regulation of corporate rights
Abstract In the activities of almost any non-public company, there is a need to attract borrowed capital both to replenish working capital and to implement investment projects. When deciding on the provision of financing external creditors strive to minimize theirown property risks, the likelihood of which largely depends on the regulation of the exercise of corporate rights of the participants of the borrower company. Given this circumstance, participants wishingto raise borrowed funds for their own company should regulate the procedure for exercising their corporate rights in the interests of creditors by concluding a corporate agreement. Solvingthe problem of increasingthe share of borrowed funds in the capital structure of a non-public company requires the development of a methodological approach that would allow determining how many corporate rights of participants and how they should be regulated in order to obtain the desired financing. The purpose of this study is to develop a methodological approach to managing the capital structure of a non-public company based on the use of corporate governance mechanisms. The methods of complex, systemic and correlation-regression analysis are applied. It is noted that there is a strong positive relationship between the value of the financial leverage ratio, the number of regulated corporate rights and the coefficient of participation in regulation. The constructed econometric model helps to make management decisions necessary to optimize the capital structure of a non-public company.
Keywords: non-public corporation, corporate rights, corporate agreement, corporate governance risks, financial leverage ratio, participation ratio in the regulation of corporate rights.
Highlights:
♦ based on the correlation analysis of statistical data, a strong positive dependence of the value of the financial leverage ratio on two factors was established - the number of regulated corporate rights and the coefficient of participation in regulation;
♦ the constructed econometric model makes it possible to predict the value of the financial leverage ratio depending on the number of regulated corporate rights and the value of the coefficient of participation in regulation;
♦ the proposed methodological approach allows solvingthe problem of increasingthe share of borrowed funds in the capital structure of a non-public company using the constructed econometric model.
Vasily V. Zhalnin - Samara State University of Economics, Samara, Russia