Capital Structure and Thin-capitalization Rule: Case study of parent companies in Slovenia

Lidija Hauptman; Sašo   Tič

Lidija Hauptman
Sašo Tič

Keywords: Thin-capitalization rule, capital structure, balance sheet analyses, debt financing

Abstract

Theory defines the quality of a capital structure in different ways, and many factors have an impact on it. In the case of loans between the related parties (as a form of debt financing) and the savings that can be achieved using this form of financing, the companies create a so-called tax shield, by which exploitation is restricted by the thin capitalization rules in many countries. In this paper, the changes in the capital structure of selected parent companies in Slovenia for the 1997–2012 period were analyzed. The survey reveals that the proportion of debt financing increased after the adoption of the thin capitalization rules in 2004 and despite its escalation.

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Author Biographies

Lidija Hauptman

Faculty of Business and Economics, University of Maribor, Slovenia
E-mail: lidija.hauptman@uni-mb.si

Lidija Hauptman is an assistant professor of accounting and auditing at the Faculty of Business and Economics at the University of Maribor. She is a member of the program and the organization committee of DRFR Maribor as well as a member of IFA and EEA. Her research work includes the field of financial and tax accounting, group accounting, and taxation. She has several national and inter- national publications (see Cobiss, Research Nr. 19613).

Sašo Tič

AD VITA d.o.o., Slovenia
E-mail: saso.tic@vitapur.com

Sašo Tič graduated from the Faculty of Economics and Business, University of Maribor, in 2013, completing his academic work in the accounting and auditing and preparing his thesis, entitled “Analysis of Thin Capitalisation Effects on Capital Structure in Selected Companies.” In the nine years of his professio- nal career, he has worked with several successful Slovenian companies, mainly in leading positions and dealing with accounting and finance. He is currently employed as the financial director of AD VITA.

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