Determinants of Polish Companies’. Debt Financing Preferences

  • Anna Białek-Jaworska University of Warsaw
  • Natalia Nehrebecka Narodowy Bank Polski


The purpose of the paper is to identify determinants of the Polish non-finance companies’ choices in respect of debt financing, with the monetary policy impact and the year effect taken into consideration. The study has been conducted using the system GMM method (robust), based on a research sample of corporate data of the years 1995-2012 (800 thousand observations). The correlation between profitability (self-financing) and debt financing is found to be negative in the group of large companies and the negative relationship between quick ratio and leverage observed regardless of the company size supports the pecking order theory. Furthermore, the analysis proves a very low influence of monetary policy on debt financing decisions of companies in Poland. The analysis showing how small and medium enterprises’ payment gridlocks and small businesses’ growth opportunities affect debt financing should help banks tailor their offer to the SME sector needs. The positive effect of the bankruptcy risk computed by means of a combination of traditional logistic regression with scoring methods on debt financing should influence bank loan committees’ decisions when developing the creditworthiness assessment and loan application verification procedures. The value added here is the empirical proof of the statement that Poland’s accession to EU and the access to EU grants reduced small enterprises’ demand for external financing in the period 2004-2008, while the financial crisis in the EU states (2009-2010) triggered a decline in external financing.