Profitability and Capital Structure: An Empirical Study of French and Hungarian Wine Producers in 2004-2013

Background: Profitability of the Hungarian wine industry has been a focus of numerous research studies due to the centuries-old history and the recent changes. Objectives: The aim of the study is to analyse the capital structure of the Hungarian and the French wine industries and demonstrate the benefits of the usage of an international company database. Methods/Approach: First, the database and the applied methods are described and then the descriptive statistical analysis of the industry is presented. The two set hypotheses are aimed at testing the main contradiction between the pecking order and the trade-off theory, which is related to profitability and the usage of external funds. Results: The analysis examines the differences between the funding policies applied in the two countries. This was carried out by means of a discriminant analysis, which indicates the financing characteristics of French and Hungarian wine producers. In order to confirm the results of the discriminant analysis we conducted a cluster analysis on the same sample where 3 out of 4 variables proved to be significant in classifying the two groups. Conclusions: The main conclusion of the study is that the behaviour of the factors explaining the development of the capital structure differs significantly in the two examined countries