Export Market Participation and Other Determinants of Capital Structure : The Case of Hungarian Manufacturing Firms

The paper analyzes the determinants of capital structure choices for Hungarian manufacturing firms in the period 1992-2006. First, these firms have most likely difficulties to plan long-term investment since short-term liabilities has a dominant role in their corporate capital structure. Second, other things equal, it is crucial to be both a large firm and a large exporter to have access to external funding. Smaller firms however, even when they are large exporters, they have more trouble to obtain external funding. Third, to acquire additional long-term debt it is essential to provide collateral. Fourth, there is not evidence that when Hungarian firms become larger, they can easily access long-term funding as the trade-off theory predicts. Fifth, small firms reduce long-term liabilities when they have more free cash holdings possibly to gain reputation, while large firms and domestic firms reduce their short-term liabilities if they have more cash holdings possibly to reduce costs. Firms of foreign ownership origin leave the level of their liabilities unchanged even when more available cash