Farm sector capital structure indicators in Estonia

Empirical tests are provided to determine the optimal leverage adjustment in transitional economy. Econometric model of agricultural firm capital structure is specified and estimated in order to analyze, how different factors affect agricultural firm’s capital structure. Issues in financial structure, that under particular ownership type should be considered in responding to changes in the operating environment, are found. The evidence suggests that profit, income tax, depreciation have an influence on increase in financial leverage. Results indicate that increase in firm’s profits may induce firms to increase financial risk through capital structure adjustments