Publication detail

Corporate Negative Equity: The Evidence from the European Union

MOKHOVA, N. ZINECKER, M.

Original Title

Corporate Negative Equity: The Evidence from the European Union

Type

journal article in Scopus

Language

English

Original Abstract

After the Global Financial Crisis the frequency of reported losses of companies has increased significantly in countries of the European Union. Moreover, the financial leverage of companies have increased and even exceeded 100% in several countries. The reason of this development is negative equity that companies find themselves to report. At first sight negative equities are caused by accumulated losses from prior periods. However, there are some other reasons that can result in increasing negative equities in companies. They remain adequate as long as a company is able to pay its bills. Nevertheless, a company with negative equity is exposed to risks. This paper investigates whether the corporate negative equity is a sign of the future failure of a company. We examine non-financial manufactured companies from selected countries of the European Union within the period 2005-2012 from database Amadeus (Czech Republic, Slovakia, Hungary, Poland and Germany). By the means of comparison between negative and positive equities we applied descriptive statistics and Pearson correlation analysis. We find that in all surveyed countries the size positively influences the equity of companies. Other factors as profitability and growth opportunities do not influence the corporate equity. In addition the binary logistic regression analysis has been conducted based on the evidence from Czech companies. Our results indicate that negative equities are not a sign of bankruptcy or insolvency of a company. But the low profitability or low business activities (that are predictors of bankruptcy) might lead to negative equities in the balance sheet.

Keywords

business cycle, financial crisis, corporate economics, European Union

Authors

MOKHOVA, N.; ZINECKER, M.

Released

2. 6. 2016

Publisher

Mendel University Press

Location

Brno

ISBN

1211-8516

Periodical

Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis

Year of study

64

Number

3

State

Czech Republic

Pages from

1021

Pages to

1036

Pages count

16

URL

https://acta.mendelu.cz/64/3/1021/

Full text in the Digital Library

http://hdl.handle.net/11012/70180

BibTex

@article{BUT127313,
  author="Natalia {Mokhova} and Marek {Zinecker}",
  title="Corporate Negative Equity: The Evidence from the European Union",
  journal="Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis",
  year="2016",
  volume="64",
  number="3",
  pages="1021--1036",
  doi="10.11118/actaun201664031021",
  issn="1211-8516",
  url="https://acta.mendelu.cz/64/3/1021/"
}