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The bachelor research project (Corporate finance)

First two chapters are not worthy attention.

The third chapter is an attempt to test the following hypothesis:

1) Capital of company and amount of raised capital have a positive relationship, yet the amount of debt has a larger contribution then the own capital for explaining the volume of raised equity capital. (Donaldson Pecking Order Model and Ross Signaling Model);

In Pecking Order Model management prefers to use debt to equity financing. Internal funds are used first, then debt is issued, and when it comes to natural limits, equity is issued. Pre-IPO companies in the sample have reached natural limits of debt financing and now about to use the last investment instrument. In Ross Signaling Model increase of debt burden is a positive signal concerning the financial position of the company since the managers believe that the company will pay back, hence the stock prices during IPO go up

2) Weighted average cost of capital has an explanatory power for amount of raised capital;

3) The volume of company’s own capital has an explanatory power for costs of IPO;

Sample consists of Russian companies that went public.

In retrospect, throughout the work OLS estimates are not really BLUE. I didn’t test for heteroskedasticity, endogeneity and serial correlation. But it was a useful exercise anyway

Here is the work

Published in Work

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