Statutory Regulations and Companies’ Capital Structure: EU Based Empirical Study

This study presents an empirical analysis of the impact of statutory minimum share capital and equity requirements, dividend restrictions and thin capitalization rules on companies’ capital structure. The study is based on the information available from the Amadeus database in respect of a sample of companies of the EU countries. The results of the study give support to the hypothesis that companies operating in the conditions of statutory maximum dividend restrictions tend to have a lower demand for debt. The existence of thin capitalisation rules appears to decrease companies’ debt utilization. Requirements concerning minimum share capital and equity levels do not seem to have a significant impact on companies’ capital structure. Further econometric analysis of the above issues with the incorporation of various micro and macro level control variables would be needed to substantiate these preliminary results.