Components Of Capital Structure Research Articles

The Effect of Capital Structure on the Ho Chi Minh Stock Exchange (HOSE) Performance of Companies Listed in the Plastics Industry

The relationship between capital structure and company performance was examined in this study. From 2019 to 2023, information was gathered from 29 plastic firms that were listed on the Ho Chi Minh Stock Exchange (HOSE). Each company’s performance was gauged using three variables: ROA, ROE, and EPS. The major components of capital structure are the ratios of total debt to total assets (DA), total debt to equity (DE), short-term debt to total assets (SDTA), and long-term debt to total assets (LDTA). In addition, the model incorporates growth rate (GROWTH) and company size (SIZE) as control variables. Consequently, every performance characteristic of the company is negatively impacted by the majority of the capital structure variables. Notably, this study not only demonstrates the weak association between SDTA and SDTA but also the negative correlation between ROE and capital structure, which was considered minor in many earlier studies. Furthermore, prior research had not consistently shown ROE. Additionally, the study’s findings indicate that size and company performance are positively correlated and have no effect on growth pace.

The relationship between goodwill and capital structure and the moderating effect of financial market development

PurposeThis study empirically investigates the relationship between goodwill assets and capital structure (i.e. debt ratio) of firms and the moderating effect of financial market development on the relationship between goodwill assets and capital structure.Design/methodology/approachThis research applied a quantitative method. The article collects large samples of listed firms from 23 developing and nine developed countries and applied the panel data techniques. This research used firm-level data from the DataStream database for both developed and developing countries. The study uses 4,912 firm-level data from 23 developing countries and 4,303 firm-level data from nine developed countries.FindingsThe findings reveal a significant positive relationship between goodwill assets and capital structure in developing countries, but goodwill assets have a significant negative relationship with capital structure in developed countries. Moreover, financial market development positively moderates the relationship between goodwill assets and the capital structure of firms in developing countries. The results inform firm managers that goodwill assets serve as additional collateral to secure debt financing. Moreover, policymakers should formulate a debt market policy that recognizes goodwill assets as additional collateral for the purpose of obtaining debt capital.Research limitations/implicationsThe study has several implications. First, goodwill assets are identified as a factor of capital structure in this study. Fixed assets have been identified as one of the drivers of capital structure in previous research, although goodwill assets are seldom included. Second, this article shows that along with demand-side determinants, supply-side determinants also play an important role in terms of the firms' choice about the capital structure. Therefore, firms should take both the demand-side and supply-side factors into consideration when sourcing for external financing (i.e. debt capital).Originality/valueThe study considered goodwill as a component of capital structure. The study analysis includes a large sample of enterprises, including 4,912 big firms from 23 developing countries and 4,303 large firms from nine industrialized or developed countries, which adds to the current capital structure information. Furthermore, a large sample size increases the results' robustness and generalizability.

Modelling Optimal Capital Structure in Gas and Oil Sector by Applying Simulation Theory and Programming Language of Python (Qatar Gas Transport Company)

The goal of this study is to optimize a company’s capital structure by modelling and programming the required equations in the components of weighted average cost of capital. This process will be carried out in the programming language Python, and then Monte Carlo simulation will be applied to increase the number of combinations of debt and equity in the capital structure and obtain more accurate results on the Qatar gas transport company. Throughout various scenarios and outcomes, the study seeks to determine the ideal capital structure that reduces both the firm’s weighted average cost of capital and the risk to which the Qatar gas transport company will be exposed. The suggested method offers a practical instrument for managers and investors to make well-informed decisions when they apply financial strategies to optimize the company’s financial performance. Debt and equity are considered the main parts in the capital structure in every company, and if we can solve the problems connected to these two parts, we can optimize performance. The code of the programming language (Python) used in this study depends on logical discussion to compare different results. This research also will pay attention to the whole probabilities of debt and equity ratios in the Qatar Gas Transport Company. This research considers more variables in the analysis to obtain more accurate results about the firm’s financial status. The results in this research show that the cost of capital in the Qatar Gas Transport Company will be reduced to 5% (currently 6%) if the percentage of debt and equity in the capital structure is changed to 79% and 21%, respectively. In comparison with the other 9999 components of capital structure, this ratio (79%, 21%) will be the optimal one. The scatterplot reflects that the more repeated values of weighted average cost of capital were located around the value of 5%. This fact can enable us to conclude that the minimum value of WACC is 5%, even though there are lower values of WACC than 5%, but at a lower frequency than that of values of 5%. The study’s results are anticipated to introduce additional findings to help other authors to understand the mechanism of optimizing the capital structure and reduce the risk in the gas and oil sector.

Development of model for forecasting and controlling the debt burden in a commercial organization

The COVID-19 pandemic has had a significant negative impact on the state of commercial organizations in the real sector. Therefore, the development of new solutions in forecasting and monitoring the functioning of organizations and their implementation in practice are vital to overcome the crisis. The main purpose of this article is to specify the marginal ranges of indicators of the debt burden of a particular commercial organization characterizing the correlation between the components of capital structure and indicators characterizing the level of security of liabilities with the assets of the organization on the basis of the results of prediction of the developed training model of the behavioral theory of capital by the method of matrices. One of the main advantages of the proposed approach is the determination of marginal ranges in line with the predicted preferred variants of liabilities for the sets of indicators assessing the debt burden. Within the scope of this article, this method has been carried out for an Armenian brandy company “Proshyan Brandy Factory” LLC. Using this model will, in the future, enable to determine common marginal ranges of indicators underlying the development of financial policy for a particular commercial organization in terms of the components of solvency, liquidity, business activity, profitability and creditworthiness.

Determinants of capital structure with reference to paper industry: An explanatory analysis

Capital structure is the combination or proportion of various sources. An organization can procure funds by issuing equity shares, preference shares and debentures to the public. Apart from this, they may also borrow from the banks or financial institutions. These are the various sources available for a concern for procuring or mobilizing the capital. Whether capital is needed initially or additional fund needed for the smooth function there are various sources available for mobilizing the capital or fund. While designing the financial or capital structure manager has to consider the overall cost which will incur after constructing the capital structure. Paper industry is selected for the research. Five companies listed in the Bombay Stock Exchange were selected for the study. An attempt has been made to study the components of capital structure of paper industry.

Component Analysis of Capital Structure, Sales Growth and Profitability in Manufacturing Companies Listed on The Indonesia Stock Exchange 2019 and 2020

The implementation of policies caused by the Covid-19 pandemic also affects the performance of manufacturing companies, this is due to the decline in economic activity in the community and social activities by closing public facilities. The purpose of this study was to analyze the differences in the components of capital structure, sales growth and profitability of manufacturing companies listed on the Indonesia Stock Exchange before and during the Covid-19 pandemic. This research is quantitative research with survey method. The data used is secondary data, in the form of data taken from audited financial statements of manufacturing companies listed on the Indonesia Stock Exchange (IDX) in 2019 and 2020. Data collection uses documentation techniques with pooled data type. The data needed is in the form of short-term debt (current debt), long-term debt, total debt, equity, sales and net income after interest and taxes. Data analysis includes descriptive statistical test, normality test using the Kolmogorov-Smirnov method, homogeneity test using the Anova Levene Statistic method and hypothesis testing using the Wilcoxon test. The results showed that there were no significant differences in the components of the capital structure including Short Debt to Equity Ratio (SDE), Long-term Debt to Equity Ratio (LDE) and Total Debt to Equity Ratio (TDE). Meanwhile, sales growth and profitability have significant differences from before Covid-19 and after Covid-19.

The Effect of Capital Structure on the Profitability of Cement Industry in Nigeria

The study utilized the panel regression method of analysis to measure The Effect of Capital Structure on The Profitability of the Cement Industry in Nigeria. of 3 Cement companies in Nigeria by collecting data on the capital structure (Equity and Debt ratio) as well as on a controlled variable, between 2007 and 2019, a period of thirteen years. The Hausman test was used to determine the appropriate Model between the Fixed and Random Models, the two main methods appropriate for analysing panel data. The test affirmed the appropriateness of the Fixed Effect Model. The finding shows that capital structure has a positive and statistically significant impact on the industry's profitability. Because; each of the components of capital structure (D.R. and EQTY) is positive and significant since the respective p-values are less than the average critical value of 5% (0.05). This study recommends that managers of manufacturing companies (cement) increase the reliance on debt financing as a source of finance because they have much influence on profit generation on both returns on Equity (ROE) and return on asset (ROA), as indicated by regression results.

Impact of Capital Structure on The Financial Performance of Listed Financial Institutions in Nigeria

The influence of capital structure on deposit money bank financial performance was explored in this study. The secondary data was gathered from the annual reports and accounts of the 14 sampled Deposit Money Banks from 2014 to 2018, and generalized least square multiple regression was used to evaluate the secondary data. According to the findings, total debt to total assets, total debt to total equity, and long-term debt to total assets have little bearing on the financial performance of Nigerian banks. The study also discovered that the ratio of short-term debt to total assets has a considerable influence on a bank's financial success. In light of the findings, it is suggested that bank management strive diligently to reduce the short-term debt to total assets component of their capital structure, since this has a detrimental impact on their financial performance. They also have a tendency to enhance the ratio of total debt to total assets since it improves their financial performance. Long-term debt to total assets ratios should be reduced in capital structure components since they have a negative impact on financial performance.

Capital structure and operational self-sustainability of Vietnam microfinance institutions

This paper analyzes the impact of capital structure on the operational self-sustainability of Vietnam microfinance institutions (2006-2019). We collect data from financial reports of microfinance institutions compiled by MIX Market. Regression results with FE and System GMM models show a positive relationship between capital structure components and operational self-sustainability of Vietnam microfinance institutions (OSS). This positive relationship shows that capital structure plays a significantly important role in the operational self-sustainability of Vietnam microfinance institutions. Besides, we also find a nonlinear relationship, which shows that the main sources of financing have a positive impact on OSS with high proportions of capital structure components. In particular, equity has a significantly positive effect at both high and low ratios, while the others have weak effects. Vietnam microfinance institutions should make the maximum use of operating capital sources (especially savings and commercial loans) to increase sustainability. Although still heavily dependent on equity sources, microfinance institutions tend to focus on market capital sources (deposits, loans) in order to reduce dependence on equity. This is also the basis for us to provide some policy implications to improve the sustainability of Vietnam microfinance institutions at the end of the paper.

The behavior of capital structure: evidence from fast calibrated additive quantile regression

In finance, capital structure decisions are crucial due to their impact on the value of a firm. Some theories assert that the value of a firm is irrelevant to those decisions. However, there is a growing literature that criticizes this idea. Those studies are constructed on some modern theories which called trade-off theory, agency cost theory, signaling theory, and pecking order theory. This paper investigates the relationship between optimal capital structure and capital structure components. The annual data gathered from 195 firms traded in Borsa Istanbul for the period 2011-2020 is used. The fast calibrated additive quantile regression approach is chosen because of its superior properties. In that method, there is not a strong assumption about the functional form of the relationships between the dependent variable and the explanatory variables. The results indicate that the relationships between the debt ratios and the capital structure components differ for each quantile and these relations are nonlinear. Furthermore, evidence is found that the relationships might be explained with the modern theories of capital structure.

Short-Term Debt and Financial Performance of Small and Medium Scale Enterprises in Buganda Region, Uganda

Short-term debt is regarded as an important source of financing for Small and Medium-sized enterprises (SMEs). This is because it can be easily accessed and useful during times of emergent working capital shortage. However, short-term debt is the least researched among the components of capital structure, which explains why its contribution to the financial performance of small and medium-sized businesses still lacks empirical validation especially in the Ugandan context. This paper sought to determine the effect of short-term debt on financial performance of Small and Medium Enterprises in Uganda. The study adopted a descriptive cross-sectional research design to collect and analyse the data. Stratified random sampling technique was used to select SMEs while purposive sampling technique was used to select one key respondent from each of the sampled 453 SMEs in Uganda. Primary data was collected using survey questionnaire. Data was analysed using descriptive statistics and simple linear regression analysis. The findings indicted that short-term debt had a negative and significant effect on financial performance of SMEs as measured by return on assets. The study provides empirical evidence to support the propositions in the extant literature that short-term debt significantly hampers financial performance of SMEs. The study recommends that SMEs should adopt low cost operation procedures to improve profitability. This would lead to accumulated profits that can be used for investment purposes as a means of driving growth among the SMEs without resorting to borrowing. This paper suggests that further research should be conducted to establish the justification for the negative and significant effect of short-term debt on financial performance using qualitative approaches.

Effect of Capital Structure on Financial Performance of Listed Manufacturing Firms in Nigeria

There exists divergence of opinion in the literature on the nature and extent of relationship between capital structure and firms financial performance. Empirical studies on this have documented inconsistent and inclusive findings thereby providing an incentive for further studies to be conducted using different dataset and methodology of analysis to confirm or disprove some of the previous results. This study investigated the impact of capital structure on financial performance of listed manufacturing firms in Nigeria. The study formulated four hypotheses and used generalized least square multiple regression to analyse the panel data extracted from the annual reports and accounts of 31 sampled firms for the period 2009 to 2014. The study found that total debt, long-term debt and short-term debt have significant impact on the financial performance of listed manufacturing firms in Nigeria. The study also found that total debt to total equity has no significant effect on the financial performance of the firms. In view of the findings, the study recommended among others that the management of listed manufacturing firms should work very hard to increase the short term debt to total assets component of their capital structure, since it has positive impact on their financial performance. Also, the firms should reduce the level of total debt to total assets and long term debt to total assets in their capital structure components, because they affect their financial performance negatively.

A Review on Capital Structure Differences in Bangladeshi Firms and its Impact on their Financial Performance

The question of what should be the appropriate proportion of equity and debt capital for a firm to maximize its shareholders wealth and firm value has a long debate since there is no single optimum formula for that. This paper with the intends to provide a theoretical aspect of the chronological development of prominent capital structure theories over years along with an empirical aspect to evaluate the popular approaches of capital structure practices among financial managers in Bangladesh and to see whether there exist any significant differences in the impact of those approaches in the financial performances of those firms. The more careful choices of capital structure components with more sophisticated situation and combinations by the financial managers and considering the modern complex investment decision making influenced by psychological and/or cognitive biases of the investors and stakeholders are the policy implication of this paper.

Analysis of The Effect of Inflation, Operating Cycle and Operating Cash Flow on Debt’s Term Structure

Structure of capital is one of the important matters in every company. Choosing an appropriate capital structure is an important matter in determining the value of every company and this structure, is the combination of the company’s supply of the financial resources. Debts and the rights of the stock holder are components of capital structure. Type of debt used in the Company has influence on the company's risk. Some of the companies for the supplying required financial resources use current debts and financial risk is increased naturally, and some of them use non-current debts. Methodology: In this study the effect of operating’s cycle, operating cash flow and inflation during 1385 to 1392 is analyzed. The number of observations of this study including 98 companies and by using OLS method the hypotheses of the study is tested. Results: The results suggest there is a significant relationship between c operating cash flow and time deadline and there is no significant relation between operating cycle and inflation with the time deadline of the debts. Conclusion: Finally, there is a positive relation between operating cycle and debt’s term structure but not significant, and operating cash flow’s coefficient is 0.0893 and there is a significant and positive relation between operating cash flow and debt’s term structure, and there is an opposite relation between them, but it is not significant.

The Impact of Capital Structure Components on the Total Assets Turnover: Evidence from Amman Stock Exchange

This research examines the effect of Capital Structure Components on the Total Assets Turnover. Using information of 62 industrial firms listed on Amman Stock Exchange from 2012 through 2017. The findings of the research revealed that Capital Structure components measured by Total Debt to Total Assets of showed a positive but insignificant effect on Total Assets Turnover. While the relationship is negative and significant between capital structures measured by Debt to Equity Ratio and Total Assets Turnover.

A Review on Capital Structure Differences in Bangladeshi Firms and its Impact on their Financial Performance

The question of what should be the appropriate proportion of equity and debt capital for a firm to maximize its shareholders wealth and firm value has a long debate since there is no single optimum formula for that. This paper with the intends to provide a theoretical aspect of the chronological development of prominent capital structure theories over years along with an empirical aspect to evaluate the popular approaches of capital structure practices among financial managers in Bangladesh and to see whether there exist any significant differences in the impact of those approaches in the financial performances of those firms. The more careful choices of capital structure components with more sophisticated situation and combinations by the financial managers and considering the modern complex investment decision making influenced by psychological and/or cognitive biases of the investors and stakeholders are the policy implication of this paper.

Managerial Time Horizons and the Decision to Put Operational Workers at Risk: The Role of Debt

ABSTRACTPrevious research has established a link between the debt component of capital structure and managers making risky decisions. Literature in finance and strategy has explored the role of debt and concluded that increases in debt focus managerial decision making on short‐term financial goals, suggesting that increases in debt might also lead to managers making decisions that put operational workers and the firm at long‐term risk. Therefore this research explores if the strategic choice of a firm's level of debt predicts the firm's likelihood of breaching safety regulations. Furthermore, this study explores the short‐ and long‐term financial implications of breaching safety regulations. Secondary safety and financial data collected in the United Kingdom is used to answer the research questions using logistic models and an event study. The results show that decisions on debt are a significant predictor of a firm's likelihood of breaching safety regulation and that breaching safety regulation harms long‐term financial performance. Strategic decisions on debt levels lead to further decisions that place the workforce and profitability of the firm at risk.

Influence of Capital Structure to the Growth of Women Micro Businesses in Bugesera District

Women micro business play a great role in providing employment and contribute towards the Gross Domestic Product (GDP) of Rwanda and any other Nation (Boudreaux, Kenneth. 2007). To achieve this feat, there is a need to properly manage the available financial capital. Working Capital Management which is one of the components of capital structure is expected to play a role in this process. Frank, Murray, & Goyal, Vidhan. (2009). This study therefore examined the influence of Capital structure on the growth of women micro business in Bugesera District. The study was anchored on the research objective which was to examine influence of entrepreneurial capital structure to the growth of women micro businesses establishing whether loan accessibility, cashflow and capital stability, influence the growth of women micro business in Bugesera District. The study adopted a descriptive survey design Cooper, Donald, Schindler, Pamela, & Sun, jianmin. (2006). The target population of this study comprised of all registered women micro businesses by the district authorities as at 01st January 2017 that have been in operation with a focus on the women micro businesses. Primary data was collected by structured questionnaires. Secondary data was collected from district documents and relevant publications in referred journals. The collected data was edited, coded and entered into SPSS software for analysis. Data was analyzed using descriptive and inferential statistics. In particular, Regression Analysis was used to investigate the relationships between hypothesized variables. Analysis of Variance (ANOVA) was also used to investigate whether independent variables had combined effect on the dependent variable. Regression Models were then used. The results of the study indicated that all the components of Capital structure (loan accessibility, cashflow and capital stability) influence the growth of women micro business in Bugesera District. The study also recommends that women micro business should among other things strive to shorten the cash conversion cycle, utilize the value of relationship with suppliers and develop strong alliance, seek knowledge on stock optimization techniques, introduce more and elaborate credit terms, Government at all levels to be more involved in financing micro-enterprises and financial institution such as commercial banks should also be ready to provide loan facilities to micro business with less stringent conditionality. The findings were presented using figures and tables. The study found out that capital structure was key to making better financial decisions. Loan and capital stability management need to be addressed to keep proper growth. The study however established that, capital structure had significant and positive influence on growth of women micro businesses in Bugesera District. This study is envisaged to aid in the development of policy documents to grow women micro business in Rwanda.

Impact Of Local Accounting Standard On IFRS For Defining Firm’s Capital Structure: An Analysis Based On Indian Companies

In this study, the main purpose is to examine the impact of Indian Accounting Standard on International Financial Reporting Standards (IFRS) for defining capital structure components, which has been expressed as ratios. The study employed an innovative design known as “same firm-year” research design (2010-11) and effort is being made to understand its impact. Regression analyses were used to test the statistical significance of this impact and ANOVA were used to test the hypothesis. Main finding from the study is that Indian Accounting Standard has a great impact on IFRS for disclosing the capital structure components. IFRS and Indian Accounting Standards are interrelated for defining the capital structure components. The study found that Indian AS and IFRS are inter-related for disclosing the capital structure components.

Studying the Impact of Intellectual Capital at Industrial Enterprises on Their Market Capitalization

The study sets a task of identifying the impact of intellectual capital structure components on the significance of capitalization of industrial sector enterprises of the Russian Federation.The bottom line of the predicted data by method of indicators is:• Human capital has no significant effect on qualitative characteristics of fuel and energy, metallurgic and food industry enterprises.• Customer capital, less than other factors, has an impact on the capitalization of electric power complex, machine building and construction sectors. It is in these sectors that the negative values of variables are recorded.• Least of all structural capital components impact the indicators of mining, metallurgic and electric power enterprises. Maximum value, and hence the influence, the structural capital exerts on construction sector enterprises.This study is a great asset to make up the programmes for effective resources management of non-material character for managers of the enterprises of industrial economic sector.