How Do Russian Construction Companies Use Debt Financing?

Construction industry largely determines the development of society and its productive forces. Significant part of construction works in Russia is carried out by small construction companies. The success of companies’ economic activity is ensured by the effective use of capital formed by the use of own and debt sources with different costs. The capital structure is the ratio of the financing sources, which have different accessibility for different companies. The capital structure directly affects the company’s operation indicators and financial effectiveness. Proper use of debt financing should allow increasing the effectiveness of using own capital. The objective of the study is to investigate how small Russian construction companies use leveraged capital and the opportunities to increase their effectiveness by its use. As a result, the strong debt dependence of small construction companies was identified. This fact promotes high level of financial risk for both the companies and their counterparties. Companies which use short-term sources are more at risk, as this type of financing is more sensitive to economic situation in the country.