Capital Structure Composition Research Articles

ANALYSIS OF THE COMPOSITION OF CAPITAL STRUCTURE BY USING ECONOMIC VALUE ADDED (EVA) APPROACH IN TFD A COMPANY

This research uses case study and aims to evaluate the capital structure of TFD A Company which is a company in the agribusiness industry sector and within the scope of a medium-sized company. During Covid-19 pandemic in 2020-2021, TFD A Company experienced billing difficulties to the manufacturer (buyer). The results of this study show that the EVA value of TFD A Company recorded an increase in negative value but the company still achieved an increase in its net profit. Based on the research of the two comparative companies, it is concluded that the composition of capital structure has its own risks. The implication of this research is that the TFD A Company should consider publicly listing its company, assessed by the composition of the capital structure, the company’s obligations to its shareholders, and the ability to record net income.

Maximizing Value - A Look Back at FGV Holdings Berhad

This paper explores a number of relevant capital structure theories that may help explain the real market occurrence. The debt-equity ratio is commonly utilized as a variable of interest by many to evaluate the viability of company’s capital structure. Based on Modigliani-Miller Trade-Off theory (1958), their major goal is to examine how firm-specific capital structure determinants may impact the company's capital structure choice. It is essential to comprehend how firm-specific factors could exert a direct impact on a company's share price in both the short and long run. In the case of FGV Holdings Berhad, its capital structure composition has shifted from equity-weighted to debt due to FGV's improved cash flow situations, allowing them to secure wider options of financing from the capital markets. As a result, the company's total debt to total assets ratio has risen dramatically to 76.4 percent. However, it is vital to note that FGV's debt interest payments are not adequately supported by profits before interest and tax (EBIT). Debt financing invariably requires interest payments, regardless of whether it is provided through the bond or banking markets. The net result could jeopardize the company’s value through declining share price. The Trade-off theory is seen ideal in explaining the financial conditions in FGV. It is important to balance out the benefits of debt against the costs of debt at all times. Overall, FGV's top management should consider conducting a thorough review on its entire capital structure since the debt levels have climbed dramatically since 2014, along with a declining cash level in mid-2014.

RELATIVE ROLES OF DEBT TO EQUITY RATIO AND TECHNOLOGY IN TOLL ROADS OPERATION MANAGEMENT

The purpose of this research is to analyze toll road’s efficiency performance in Indonesia within 2018-2022 period.Using the Data Envelopment Analysis (DEA) method, the efficiency of operating costs and maintenance costs is assessed for 20 toll road sections in Indonesia. Additionally, the study employs the Tobit regression technique to examine the impact of Capital Structure (proxied by Debt-to-Equity Ratio) and technological sophistication (proxied by Gross Domestic Product - GDP) on the efficiency of Toll Road Companies. The analysis reveals that the efficiency level of Toll Companies remains relatively constant during 2018-2020 but experiences a significant decline in 2021-2022. DER is found to have a significant positive effect on Toll Road Companies’ efficiency, suggesting that BUJT management should carefully consider debt and equity costs when determining the capital structure composition. Conversely, the sophistication of corporate technology exhibits a significant negative effect on Toll Road Companies’ efficiency. This outcome arises from the high costs associated with the procurement and maintenance of advanced technology. Moreover, the implementation of new technology may temporarily reduce efficiency due to the time and resources required for employee training and adapting to new work processes and systems. This research aims to provide the management authorities for toll road’s performance assesment indicators by investigating toll road efficiency.

The Determinants of Capital Structure: Evidence from Indonesia

Purpose: This paper aims to examine the determinants of capital structure. Theoretical framework: There is an essential gap in modern finance theory on the issue of corporate debt policy, where contemporary theory cannot explain the company’s choice of capital structure composition (Myers, 1977). Myers (1984) claimed that we have a limited understanding of capital structure. We have no idea how corporations determine whether debt, equity, or hybrid securities to issue. Furthermore, Thies & Klock (1992) claimed that capital structure is one of the most divisive topics in finance. Design/methodology/approach: A hundred and three companies were observed 618 times, applying multiple regression to find out the determinants of capital structure in manufacturing companies in Indonesia from 2011 to 2017. Findings: This study disclosed that five capital structure determinants (firm size, profitability, debt tax shield, growth, and liquidity) significantly affected capital structure. Firm size, debt tax shield, and growth positively correlated with capital structure, while profitability and liquidity negatively correlated with capital structure. Firm size was inequivalent with expectations, indicating that managers take advantage of firm size to increase their debt. Likewise, growth was not analogous with expectations, indicating that the company was taking advantage of its growth opportunities to increase debt. On the other hand, profitability, debt tax shield, and liquidity had the desired direction of the relationship. Furthermore, the other two variables, firm age and business risk, had no significant effect on capital structure, alluding that they were improper variables to explain variations in the sample companies’ capital structure. Research, Practical & Social implications: The study focused on manufacturing companies listed on the Indonesia Stock Exchange, consisting of various industrial sectors and sub-sectors or heterogeneous. Thus, recruiting homogenous samples is recommended to generalize Indonesians’ sub-sector companies. In addition, the findings suggested that the management needed to pay attention to firm size, profitability, debt tax shield, growth, and liquidity to determine the composition of its capital structure. Originality/value: Manufacturing companies listed on the Indonesia Stock Exchange were recruited as the sample of the study. However, the controversies and inconsistencies of the results are still debatable.

Nilai Perusahaan pada Struktur Modal Optimal PT. Trans Marga Jateng dan PT. Jasamarga Surabaya Mojokerto Tahun 2020

In order to maintain the company's ability to fulfill its liabilities, PT. Jasa Marga (Persero) Tbk will takes a corporate action strategy to strengthen capital structure for the Toll Road Subsidiaries (/APJT). APJT selected are PT. Trans Marga Central Java (/PT. TMJ, is the operator of Semarang-Solo toll road) and PT. Jasamarga Surabaya Mojokerto (/PT. JSM, is the operator of Surabaya-Mojokerto toll road) because of its capability to fulfill their solvents. Corporate action strategy done by analyze related with company performance baluation, optimal capital structure analysis. For Company performance valuation, analyze is done with company's financial ratios. From the calculation and analysis of profitability ratios; liquidity ratios and solvency ratios, PT. TMJ and PT. JSM during year 2015-2019 showed fair good performance. The composition of the capital structure to obtain optimal value for PT. TMJ and PT. JSM are range from 60:40 to 30:70 for the composition of debt and equity. The results of the company valuation using Discounted Cash Flow (DCF) method show that the company value of PT. TMJ, with a capital structure composition of 60:40 worth IDR. 25,862,- /share and with a capital composition of 70:30 share value of PT. TMJ in the amount of IDR.10,418,- /share. As for PT. JSM with a capital structure composition of 60:40 is IDR. 2,709,- /share and with a capital composition of 70:30 the share value of PT. JSM is IDR. 911,- /share. From analyze result, Management should pay more attention in capital expense due it’s effect in Optimizing Capital Structure, then from that Optimal Capital structure, APJT can reduce debt portion dan increasing uts equity portion through several strategy

The influence of recession and macroeconomic variables on sectorial capital structure

Abstract The aim of this paper is to analyze the influence of the recent recession and of macroeconomic variables over the indebtedness in Brazilian industry sectors. The gap derives from the preference for investigating the reaction of capital structure according to economic sectors. However, it has to be considered that industry sectors react differently to variations in the economic context, since they have different optimal points of capital structure composition. The relevance of the chosen topic lies in carrying out a sectorial analysis of the effect of recession and of macroeconomic variables on capital structure composition, identifying the most sensitive sectors. It is also relevant in terms of being based on classical financial theories applied to the current context, in order to help predict the proportion of debt given fluctuations in a set of macroeconomic variables. Standing out among the main contributions of this article are the analysis of the level of indebtedness of Brazilian companies given the occurrence of recession and variations in the macroeconomy, identifying sectors that are most exposed to modifying their capital structure due to these factors. Six research hypotheses were formulated and tested using multiple linear regression, with two-stage fixed effects based on panel data collected from 211 companies, classified into six sectors, with data relating to the first quarter of 2010 up to the first quarter of 2018. The results revealed that the recent Brazilian recession was relevant for the capital structure of the sectors studied, with inflation only being significant for the health sector. The level of indebtedness of the basic materials sector was shown to be the most dependent on economic fluctuations and that of telephony and utilities was shown to be the least dependent. In addition, it was verified that the company-specific variables have greater relevance in determining capital structure compared to the macroeconomic ones.

Does corporate groups accrue higher leverage: Emerging Market Evidence

This article explores the capital structure composition of group-affiliated firms. We find that group member firms choose to accrue higher debt ratios compared to non-group counterparts. Further disentangling the higher debt ratios of group-affiliates, we find risk-sharing or co-insurance effect whereby business groups enable member firms to share risks through income-smoothing and intra-group reallocation of resources. Our results suggest that business groups act as internal capital markets, assist affiliated firms overcome financial constraints, and ease access to external capital. Lastly, our study shows that group affiliations positively contribute to firms’ better financial performance relative to the non-group firms.

Capital Structure Determinants in Property and Real Estate Company in 2013 to 2018

This research is to recognize the factors supporting the property and real estate company in determining the capital structure composition. The population of this research is all the property and real estate company listed on the Indonesia Stock Exchange 2013 to 2018. There are 48 companies listed until 2019. The data analysis employs a stratum test. The results of this research are the company’s performance, profitability influencing the capital structure, growth that does not influence the capital structure, nondebt tax shield influencing capital structure, and liquidity does not influence capital structure. In the company’s risk, the collateral value of assets influences capital structure; on the other hand, the business risk does not influence the capital structure. In the company’s characteristics, company size does not influence the capital structure.

CAPITAL STRUCTURE ANALYSIS TO OPTIMIZE THE PROFITABILITY OF MSMES (CASE STUDY ON MSMES HIKMAH IN SIDOARJO, EAST JAVA, INDONESIA)

This study aims to analyze the capital structure used to optimize profitability in MSME embroidery shoes. This study uses descriptive research with a qualitative approach. The analytical method is used Weighted Average Cost Of Capital (WACC). The techniques of data collection in this research used interview, observation, documentation and triangulation methods. The data that used are financial transaction records and financial statements issued by the company itself. The results showed that UD. Hikmah used the composition of the capital structure consisting of debt of 20%, 80% own capital with a ROE rate of 170%. Optimization results obtained the optimal capital structure composition on the composition of debt 23% and own capital 77%. By generating a level of profitability that can provide a favorable return for business owners, with the highest calculation of ROE that is equal to 173% and the cost of capital to be borne is Rp.18.238.000 every year.

Capital Structure Composition and Financial Performance of Food and Beverage Firms in Nigeria

The study examined capital structure composition and Financial performance of Food and Beverage firms using Secondary data obtained from Nigeria stock exchange. Leverage composition; Short term debt to total Asset, Long Term debt to total asset and debt-equity ratio were regressed against market performance proxies earnings yield, price/earnings ratio and Tobin Q. Variables were subjected to Hausmann test for selection of appropriate model. Findings indicate Significant positive relationship between short term debt over total asset ratio and Tobin Q, Long term debt to total asset relate significantly positively with Tobin Q and earnings yield Also, there is Significant positive relationship between Debt Equity ratio and Earnings yield. We also found significant negative relationships between Short term debt and Earnings yield, Long term debt and P/E ratio, and between Debt Equity ratio and Tobin Q. Additionally, we found insignificant negative relationship between Short term debt and Price earnings ratio and between Debt equity ratio and P/E ratio. Also, a shift in capital structure composition from STD/TA to LTD/TA has a positive effect on TBQ which is statistically significant and a Shift from LTD/TA to STD/TA still maintains an equally positive effect on TBQ. However, it is more rewarding for the firm to shift to more long-term debt in its capital structure as it has higher effect on TBQ. A shift from TD/TA to LTD/TA has a significant positive effect on Earnings Yield and a shift from LTD/TA to STD/TA has a positive insignificant effect on EY. It will be rewarding for the firms to increase their earnings yield by shifting from STD to LTD. Based on findings, we conclude different compositions of leverage have different effects on market valuation of firms. We recommend Firms should optimally use LTD to increase market valuation. And should also examine capital structure composition to ascertain which of the combination maximises firm value Keywords: Capital Structure Composition, Tobin Q, Earnings Yield, Debt/Equity ratio, Price Earnings Ratio DOI : 10.7176/EJBM/11-24-01 Publication date : August 31 st 2019

Determinants of Capital Structure : An Exclusive Study of Passenger Car Companies in India

Capital structure decision is one of the core financial decisions in a firm. Theoretically, composition of capital structure has a significant stake in determining the earnings available to equity holders and thereby, the market value of a firm. If it is so, a better understanding about the determinants of capital structure is inevitable to manage the decisions of a firm. This study attempted to identify the determinants of capital structure of passenger cars companies listed on the Bombay Stock Exchange (BSE) of India. The long-term debt to total capital ratio was considered as the dependent variable representing the capital structure. The determinants of capital structure which were considered as the independent variables are : (a) size of the firm, (b) profitability, (c) tangibility, (d) growth in assets, (e) non-debt tax shield, (f) debt service capacity, and (g) dividend payout ratio. A panel regression was run to identify the determinants by following a logical procedure for establishing the relationship. Though the independent variables were sensibly and carefully chosen from the existing literature, none of these determinants were found to have a statistically significant relationship with capital structure in the case of passenger car companies in India. However, the overall F - statistics confirmed that the specified model with the above explanatory variables had more predictability power and could explain more than what the intercept only model could explain.

An Analytical Study on Determinants of Capital Structure Composition During the Post Liberalization Period in India

This paper analyzed the capital structure composition of firms during the post financial liberalization period in India. The study used data of 41 Indian listed firms excluding financial services firms listed on Nifty indices on National Stock Exchange over a time frame of 14 years. The dependent variables taken for financial leverage were EBITDA to interest expense, equity to total assets, and long - term debt to total assets. The capital structure composition was studied across various dimensions, that is, profitability, tangibility, growth, size, volatility, ownership pattern, etc. along with other external dimensions such as taxation policy. Data analysis was done using descriptive statistics, correlation, and stepwise regression analysis. Three different models were constructed for analysis through stepwise multiple regression to deduce a unique set of explanatory variables that affected the leverage measure of firms. These models helped to analyze the maximum number of significant factors that had an impact upon the capital structure composition during the post liberalization period in India. The findings of this study suggested that all the explanatory variables studied in the three models were statistically significant with leverage. The results showed that there was an impact of financial liberalization on capital structure composition. ln(EBITDA to interest expense) explained the maximum variation in the capital structure composition after liberalization followed by ln(equity to total assets).

Sector and Firm Specific Variance Composition of Capital Structure: A Panel Data Analysis on Indian Chemical Industry

Sector and Firm Specific Variance Composition of Capital Structure: A Panel Data Analysis on Indian Chemical Industry

Capital Structure and The Profitability of Listed Retail Firms

The South African retail sector continues to experience a decline in sales and returns amidst growing external competition and a drop in consumer confidence stemming from the recent credit downgrades in the country. Yet, firms in this sector appear to maintain high debt to equity levels. This study investigated whether the capital structure practices of these firms influence their profitability. A Panel data methodology, using three regression estimators, is applied to a balanced sample of 16 retail firms listed on the Johannesburg Securities Exchange (JSE) during the period 2008-2016. The analysis estimates functions relating capital structure composition with the return on assets (ROA). Results reveal a statistically significant but negative relationship between all measures of debt (short-term, long-term, total debt) with profitability, suggesting a possible inclination towards the pecking order theory of financing behaviour, for listed retail firms. Additionally, retail firms are highly leveraged yet over 75% of this debt is short-term in nature. Policy interventions need to investigate the current restrictions on long-term debt financing which offers longerterm and affordable financing, to boost returns. While this study’s methodology differs slightly from earlier studies, it incorporates vital aspects from these studies, and simultaneously specifies a possible model fit. This helps to capture unique but salient characteristics like the transitional effects of debt financing on firm profitability. It therefore delivers some unique findings on the financing behaviour of retail firms that both in form policy change, while stimulating further research on the phenomenon.

Capital Structure and The Profitability of Listed Retail Firms

The South African retail sector continues to experience a decline in sales and returns amidst growing external competition and a drop in consumer confidence stemming from the recent credit downgrades in the country. Yet, firms in this sector appear to maintain high debt to equity levels. This study investigated whether the capital structure practices of these firms influence their profitability. A Panel data methodology, using three regression estimators, is applied to a balanced sample of 16 retail firms listed on the Johannesburg Securities Exchange (JSE) during the period 2008-2016. The analysis estimates functions relating capital structure composition with the return on assets (ROA). Results reveal a statistically significant but negative relationship between all measures of debt (short-term, long-term, total debt) with profitability, suggesting a possible inclination towards the pecking order theory of financing behaviour, for listed retail firms. Additionally, retail firms are highly leveraged yet over 75% of this debt is short-term in nature. Policy interventions need to investigate the current restrictions on long-term debt financing which offers longerterm and affordable financing, to boost returns. While this study’s methodology differs slightly from earlier studies, it incorporates vital aspects from these studies, and simultaneously specifies a possible model fit. This helps to capture unique but salient characteristics like the transitional effects of debt financing on firm profitability. It therefore delivers some unique findings on the financing behaviour of retail firms that both in form policy change, while stimulating further research on the phenomenon.

ANALISIS STRUKTUR MODAL YANG OPTIMAL PADA PT. TELEKOMUNIKASI INDONESIA, Tbk PERIODE 2004-2008

<p>Capital structure is one of the most important elements in a company. Decision-making errors in the capital structure may cause a very big impact and it can force the company into bankruptcy. Therefore, in order to continue operating, a company should have an optimal capital structure. Optimal capital structure is achieved at the lowest cost level and the highest level return on equity. The research objective is to measure the financial performance of PT Telekomunikasi Indonesia, Tbk by analyzing the composition of capital structure, ACC, ROE, and whether the capital structure by the years 2004-2008 were optimal or not. From the results of the research, capital structure of PT Telekomonikasi Indonesia, Tbk during the years 2004 -2008 showed an optimal capital structure. The result can be seen as the ROE produced by the company is bigger compared to Weighted Average Cost of Capital (WACC) for each period.</p><p>Key words : Capital structure, return on equity, Weighted Average Cost of Capital</p>

Capital structure, corporate performance, and life cycle: Evidence from Indonesia

This study aims to investigate firstly, the influences of company life cycle (i.e., pioneer, growth, mature, and decline) and set of control variables (i.e, tax level, interest rate, institutional ownership, and managerial ownership) on capital structure; secondly, the influence of capital structure on company performance; and thirdly, the moderating role of each stage of the company life cycle on the relationship between capital structure and company performance. Implementing quantitative approach by using OLS Regression Analysis and Moderated Regression Analysis (MRA) on a set of the sample that consists of 157 Indonesian non-financial listed firms for 2010-2015 periods (942 firm years), findings show that company life cycle has a significant influence on capital structure. While for control variables, tax level and institutional ownership have a positive influence on the capital structure, wherein interest rate and managerial ownership have a negative effect on capital structure. Moreover, capital structure ratio influences positively on company performance. Finding also documents that pioneer and growth stages have a moderating role in strengthening the influence of capital structure on company performance, while mature and decline stages have a moderating role in weakening the influence of capital structure on company performance. This study provides important implications for corporations and business practitioners with regard to the best choice in the composition of capital structure which is able to improve company performance. On the best of our knowledge, it is the first study testing the moderating role of company life cycle on the relationship between capital structure and company performance.

Analysis of The Factors Affecting The Capital Structure of Oil Exploration And Production Companies: Comparative Analysis of TP And The Five Major Oil Exploration And Production Companies in The World

Oil and gas companies are still the most powerful and profitable companies in the world. Knowing the factors that affect the preferences for forming a capital structure of such a critical sector will provide a substantial contribution to the field of capital structur theory which is understated in thef literature. Besides, determining capital structure composition and financing decisions of the oil and gas companies are important issues for national and international investors who are considering to invest in the oil and gas sector, for suppliers providing services to the sector and for banks providing funds to the sector. In this context, for analyzing the factors affecting the capital structures of EXXONMOBIL, BP, SHELL, PETROBRAS, LUKOIL and Turkish Petroleum (TP), linear regression and panel data regression analysis are perfomed by using the data of these companies for the years 2006-2014 (covering 36 quarter period). Empirical results revealed that capex, operating profit, risk and quick ratio have negative relation with leverage, whereas operating net cashflow-growth opportunities-size (all together forming an independent variable) has positive relation with leverage. Additionally, our empirical results mostly support the pecking order theory.

Capital structure and the profitability of listed retail firms

The South African retail sector continues to experience a decline in sales and returns amidst growing external competition and a drop in consumer confidence stemming from the recent credit downgrades in the country. Yet, firms in this sector appear to maintain high debt to equity levels. This study investigated whether the capital structure practices of these firms influence their profitability. A Panel data methodology, using three regression estimators, is applied to a balanced sample of 16 retail firms listed on the Johannesburg Securities Exchange (JSE) during the period 2008-2016. The analysis estimates functions relating capital structure composition with the return on assets (ROA). Results reveal a statistically significant but negative relationship between all measures of debt (short-term, long-term, total debt) with profitability, suggesting a possible inclination towards the pecking order theory of financing behaviour, for listed retail firms. Additionally, retail firms are highly leveraged yet over 75% of this debt is short-term in nature. Policy interventions need to investigate the current restrictions on long-term debt financing which offers longerterm and affordable financing, to boost returns. While this study’s methodology differs slightly from earlier studies, it incorporates vital aspects from these studies, and simultaneously specifies a possible model fit. This helps to capture unique but salient characteristics like the transitional effects of debt financing on firm profitability. It therefore delivers some unique findings on the financing behaviour of retail firms that both in form policy change, while stimulating further research on the phenomenon.

Credit Availability and Capital Structures: Does Size Matter? An Analysis of the U.S. Lodging Industry

Capital structure composition decisions are considered as very crucial for the overall success of firms. Lodging industry warrants an even greater emphasis on these decisions for the nature of this industry. This study empirically investigates the effect of credit availability on the leverage of large and small lodging firms in the United States using multivariate analysis of variance (MANOVA). This study uses the Case-Schiller home price index to identify the three time points of differing credit availability to businesses in the United States. Leverage, net leverage, and short-to-long-term debt ratios of large and small U.S. lodging firms were analyzed at these differing credit availability time points to assess any significant differences. Significant effects of credit availability were found on the leverage and net leverage of both large and small lodging firms, but no significant effect was found on the short-to-long-term debt ratio of U.S. lodging firms. Interestingly, the leverage levels were found...