ECONOMIC ADDED VALUE AND CAPITAL STRUCTURE IN THE IBRX 100’S COMPANIES

Abstract

Starting from the principles that the choice of capital structure of a company directly interferes in the generation of value, this research aimed to investigate whether there is positive and significant relationship between indebtedness and economic value added. The research question of this paper is whether there is a positive and significant relationship between indebtedness and economic value added. The research hypothesis involves the relationship between three factors considered as possible explanations of level of indebtedness in a company: company size, profitability and economic added value. The survey selected as a sample companies from the IBRX 100 index of the Stock Exchange of Brazil, leaving out the financial institutions. The data collected for the analysis were from the financial statements ended on 31/12/2009. For its objectives, the research can be classified as: descriptive; documentary as for its procedure; and with quantitative approach to its research question. The results of the linear regression analysis using the method of ordinary least squares (OLS) found no significant relationship between the variables of indebtedness and generation of added value. Only the variable “Size of the company” was confirmed as one of the determinants for the amount of debt in companies selected in this survey.