OPTIMAL CAPITAL STRUCTURE FOR UKRAINIAN AGRICULTURAL ENTERPRISES

Abstract

The purpose of the article is to find the optimal capital structure for Ukrainian agricultural companies on the example of PJSC "Myronivsky Hliboproduct" to develop a strategy for their financing in the given conditions of national and world markets’ development. Capital Structure definition was explained as the amount of debt and/or equity employed by a firm to fund its operations and finance its assets. Companies that use more debt than equity to finance their assets and fund operating activities have a high leverage ratio and an aggressive capital structure. Debt and equity capital are used to fund a business’s operations, capital expenditures, acquisitions, and other investments. For purposes of the research, there was mentioned about achievements of scholars of national and world economics schools, who have worked in particular scientific field and noted that although the impact of the capital structure on the financial results of the company is not linear and it is often difficult to accurately quantify, this impact mostly exists. Its degree depends on the industry, economic environment, market where the activity of the enterprise is concentrated. Using the financial statements and publicly traded data on PJSC “Myronivsky Hliboproduct”, a correlation between the capital structure and the share price of the enterprise was found. No connection was found between capital structure and return on equity. Based on the results obtained, it is recommended that the financial management of the company should manage the financial leverage of the company as one of the expedient methods for improving the key indicators of its activities. In addition, other enterprises of the agro-industrial complex of Ukraine should conduct an analysis on the effectiveness of regulation of financial leverage on the example of precedent from PJSC «MHP». It is also suggested for enterprises to review the optimal value of the capital structure over certain intervals (1-2 years), as the economic environment and investor sentiment in Ukraine and the world are constantly changing. It was determined that if company has finally decided to change the mix of debt and equity, next methods of recapitalization are common: issue debt and repurchase equity, issue debt and pay a large dividend to equity investors, issue equity and repay debt.