The capital structure of the Sofia municipal hospitals – a key indicator for effective corporate governance

Abstract

Abstract. Optimizing the capital structure of public medical establishments is among the top priorities of management and corporate governance. Currently, there is a lack of research on its relationship with corporate governance. The purpose of this study is, based on an analysis of the capital structure of six Sofia municipal hospitals for the period 2019-2023, to outline the participation of the principal, the Sofia Municipality (SM), in its maintenance. The publicly available annual financial statements of the hospitals were studied, as well as the decisions made by the Sofia Municipal Council related to the capital structure for the analysed period. The summarized results show an optimal combination of the provided capital sources, but low overall liquidity at some hospitals. The significant role of the principal in maintaining the capital structure of the hospitals is expressed, on the one hand, in increasing the capital in the six hospitals through non-cash contributions. On the other hand, there is support provided by the Sofia Municipality through the transformation of debt into capital at one of the hospitals, as well as the granting of a loan to repay accumulated overdue liabilities at another. In conclusion, despite the recovery measures taken and the loans granted by the principal, one of them shows negative trends in basic financial indicators and is currently undergoing a transformation procedure through a merger with another municipal hospital.