Structure Decisions Research Articles

Analysing the Impact of Capital Structure on Firm Value: A Study in Corporate Finance

Abstract: This study investigates the relationship between capital structure and firm value across various industries. Using a cross-sectional quantitative analysis, the research examines how different levels of debt, equity, and financial leverage affect firm value, measured by market capitalization and Tobin's Q. The findings suggest that firms with moderate debt levels experience enhanced firm value, benefiting from the tax shields provided by debt without incurring significant financial distress. However, excessive financial leverage negatively impacts firm value, as firms face increased risk of financial instability. The study supports key theories such as the trade-off theory and pecking order theory, demonstrating that capital structure decisions are influenced by factors such as firm size, profitability, and industry characteristics. The implications for corporate managers and investors include optimizing debt-equity balance to maximize firm value while managing financial risk. Future research should focus on industry-specific dynamics and longitudinal analyses to further explore these relationships.

Strengthening urban deer management with structured decision making

Urban deer management (UDM) decision‐makers face social, ecological, regulatory, and economic pressures when creating an agreeable deer management plan for stakeholders. Historically, decision making techniques (e.g. consensus‐based analyses) have not effectively balanced UDM elements leading to short‐lived management progress. Structured decision making (SDM) is a formal, values‐based approach to identifying an optimal management solution. Although SDM has been applied to other wildlife management decisions, it has not been applied in UDM. We provide the first case‐study of SDM‐based UDM and streamline the process for wildlife managers. We focused on one suburban and one semi‐rural community near Atlanta, Georgia, USA. We established a problem statement to capture what decision‐makers must address in UDM programs and reviewed the primary literature and UDM plans from five states to establish four fundamental objectives. We then utilized a support–effectiveness analysis to identify acceptable UDM alternatives and gathered expert insights to calculate the consequences of alternatives on objectives. Finally, we asked each community's decision‐makers to weigh objectives against each other. Using this framework, education was the most optimal UDM technique to implement in the suburban community, and sharpshooting was the most optimal UDM technique to implement in the semi‐rural community. This paper positions SDM as a transparent, defensible, inclusive, and adaptive approach to UDM. Furthermore, our SDM framework provides managers with the means and justification to create an optimal plan of action for communities in need of UDM.

Capital structure decisions in the energy transition: Insights from Spain

The renewable energy transition depends heavily on capital structure decisions of energy firms. Most previous research has focused on the decisions of oil companies. This study investigates the financing of new investment in the Spanish renewable energy sector, including decisions about: i) equity versus debt, ii) short versus long-term debt, and iii) equity issuances versus retained earnings for new investment. Our analysis is based on data from over 22,000 energy firms from 2008 to 2021 and shows that these firms prefer debt over equity (more than 90% of changes in assets are financed through increasing debt) and have extended the term of the debt over the period studied (reaching a maximum of almost 73% long-term debt in 2021). The deployment of retained earnings is less usual than raising new equity capital. Our analysis points to a generalized use of project finance to support new investments. Policymakers should focus on increasing financing through equity and thus diversifying the financial risk of the energy transition. In addition, a supportive fiscal policy and a stable regulatory environment are desirable for achieving this goal.

Stakeholder-based management of ecosystem services in agricultural areas: Integrating the leader-follower game and a conflict resolution model

Given the substantial effects of agricultural practices on the environment, this paper introduces a novel stakeholder-based framework for assessing the ecosystem services (ESs) provided by agricultural areas. Ecosystem services include essential functions such as water supply, food production, carbon storage, soil erosion control, and habitat support. In addition to ESs, water footprint is also taken into account to evaluate the impacts of agricultural activities on water resources. Some of the mentioned ESs are assessed using the Soil and Water Assessment Tool (SWAT). Then, by extending and combining the Conflict Resolution Model with the Composition of Probabilistic Preferences (CRMCPP) method and the leader-follower game (LFG), while considering the hierarchical structure of decision-makers, the best scenario for enhancing the ESs is selected.The Zarrinehroud River Basin (ZRB) in Iran has been chosen as a case study to evaluate the performance of the proposed framework, as this basin is vital for supplying water to Lake Urmia, the largest hypersaline lake in the Middle East. In this paper, 16 Water and Environmental Resources Management (WERM) scenarios have been defined according to the Urmia Lake Restoration National Committee (ULRNC) projects. Then, the mentioned ESs have been evaluated under different WERM scenarios. Ultimately, by utilizing the CRMCPP-LFG method and taking into account the hierarchical structure of decision-makers, we can identify the optimal WERM scenario. The criteria for making this decision include various factors, such as ecosystem services and the costs involved in implementing the WERM scenarios. In the selected scenario, the average water inflow into Lake Urmia is projected to rise to 1329 million cubic meters per year, which is 6.3% more than the average inflow in the current condition. Key initiatives in this scenario include reducing cultivated areas, altering irrigation methods, changing crop patterns, and incorporating water-efficient plant species.

Capital Structure and Enterprise Market Value: An Empirical Analysis Based on S&P 500 Companies

Abstract: This study explores the impact of capital structure on enterprise market value, specifically examining the influence of the debt ratio on the market valuation of S&P 500 companies. Capital structure decisions are crucial for corporate managers and investors, as they significantly affect firm performance, risk, and market perception. The research is motivated by the need to understand how financial leverage influences market valuation, particularly in large, publicly traded companies. Utilizing two-way fixed effect panel data models spanning from 2020 to 2023, we find significant evidence that higher leverage is associated with an increase in market valuation, offering a comprehensive view of the factors that influence corporate market values. Additionally, the study reveals that the impact of leverage varies across company sizes and examines sector-specific effects and the role of long-term debt. The findings provide key insights for investors and corporate managers regarding the impact of financial structure on company valuation, emphasizing the importance of optimizing capital structure to enhance firm value and strategic decision-making.

Capital structure of special-purpose governments

PurposeThe paper examines whether special purpose governments follow the pecking order model when raising capital, replacing firm equity in the original model with local intergovernmental revenues. Special purpose governments are a relatively underexamined component of state and local governments, and their capital structure choices have important implications for America’s aggregate fiscal health. This paper seeks to illuminate special purpose governments’ choices among available forms of capital.Design/methodology/approachTo address our research inquiry regarding whether special-purpose governments adhere to the pecking order theory, we narrow our focus to a specific group of transit entities. Our investigation utilizes data sourced from two distinct repositories: the United States Census of Governments and the National Transit Database. To facilitate integration of these disparate datasets, we establish a correspondence between them using the Federal Information Processing Standard and the transit identification number. Initially, our analysis employs maximum likelihood estimation, comparing these estimates to those generated by a naïve model. Subsequently, we derive parameter estimates through the application of a bivariate probit model.FindingsThe paper supports the pecking order hypothesis where internal funds are consumed first, debt is consumed next and IGR is consumed last. The results are robust and are not influenced by simultaneity bias.Research limitations/implicationsThe paper uses transit special purpose governments as the special purpose government of interest. These transit special purpose governments have high fixed costs that may inform their capital structure decisions relative to non-transit special purpose governments. Additionally, transit special purpose governments often have a profit-maximizing objective that may not uniformly apply to other special purpose governments, such as school districts, who lack such an incentive.Practical implicationsOur research should grab the attention of state and local politicians, voters, policy experts and scholars. Special-purpose governments, a key part of our governmental system, are on the rise. Understanding them better can guide decision-making on how to allocate resources, set policies and plan strategically. This knowledge boosts financial reporting quality, transparency, accountability and public confidence. Journalists can leverage our findings to ensure accurate and thorough reporting, fostering accountability and trust. Additionally, debt markets and analysts can factor this information into their risk assessments.Originality/valueThe paper enhances our understanding of how special purpose governments interact with existing models of corporate finance when making capital structure decisions.

Unpacking Capital Structure Decisions: Analyzing Short-Term Debt to Equity Dynamics in Shariah Compliant Financially Distressed Firms

Unpacking Capital Structure Decisions: Analyzing Short-Term Debt to Equity Dynamics in Shariah Compliant Financially Distressed Firms

Unpacking the Impact of Asset Structure and Sales Growth on Capital Structure: The Moderating Influence of Profitability

This study explores the impact of asset structure and sales growth on capital structure, emphasizing the moderating influence of profitability. As firms navigate the complexities of financing decisions, understanding how these variables interact is crucial for optimizing capital structure. The findings reveal that asset structure and sales growth significantly affect capital structure, with profitability playing a critical role in moderating these relationships. Firms with substantial tangible assets are better positioned to leverage debt financing, while those demonstrating strong sales growth are viewed favorably by investors and creditors. However, the extent to which sales growth influences capital structure is contingent upon profitability; high profitability enables firms to capitalize on growth opportunities, whereas low profitability may inhibit their capacity to leverage growth potential. Empirical research supports these conclusions, indicating that asset structure, sales growth, and profitability significantly shape capital structure decisions across various industries. Ultimately, this study provides valuable insights for financial managers, highlighting the importance of balancing growth aspirations with profitability to achieve effective capital structure management. This, in turn, can lead to sustained competitive advantage, a state where a firm outperforms its competitors over a prolonged period in a dynamic economic environment.

Optimizing Education: How Dual Teacher Technology, Communication, and Decision-Making Drive Performance?

In the complex environment of academic institutions, optimizing organizational effectiveness is a paramount concern. Driven by a growing awareness of the need for tailored organizational strategies in academic settings, this study seeks to uncover the dynamics shaping the relationships among these key variables. The primary purpose of this research is to provide a comprehensive understanding of how efficiency orientation, information exchange, decision-making structures, and talent management collectively influence continuous performance improvement within academic institutions. Employing a mixed-methods approach, this study integrates quantitative surveys and qualitative interviews to capture the multifaceted nature of the studied variables. The research targets educators from Sichuan Film and Television University and Sichuan University of Media and Communications. A sample size of 435 respondents participated in the survey, and eight interviewees were selected for in-depth qualitative insights. Statistical analyses reveal intricate correlations among efficiency orientation, information exchange, localization of decision-making, talent management, and continuous performance improvement within academic institutions. Streamlined processes positively influence talent management, emphasizing the importance of organizational efficiency. Transparent communication channels play a pivotal role in effective talent management, underscoring the significance of information exchange. Decision-making structures impact talent management strategies, necessitating a balanced approach. Talent management emerges as a proactive strategy, influencing and being influenced by continuous performance improvement efforts. This research contributes to organizational theory by offering context-specific insights into the relationships among key variables within academic institutions. The study's originality lies in addressing research gaps, providing a nuanced understanding of decision-making dynamics, and uncovering the reciprocal relationship between talent management and continuous performance improvement.

Comprehensive Preview Decision Method for Direction and Speed of Intelligent Vehicle Based on Rules and Learning

Decision-making is a key part of autonomous driving systems. Human-like decision-making in complex scenarios is important for enhancing drivers’ trust in and acceptance of autonomous driving systems. In order to improve their human-like features and their adaptability to complex scenarios, this paper proposes a comprehensive preview decision method for direction and speed based on rules and learning. First, a decision-making structure including maneuvering ability judgment, motion trajectory prediction, safety judgment, legitimacy judgment, comprehensive performance evaluation, and parameters learning is presented. Second, a learning method for the longitudinal safety distance threshold based on a BP neural network is introduced. Third, inverse reinforcement learning (IRL) is used to learn the comprehensive performance evaluation weight coefficient for different driving styles. Finally, the DJI AD4CHE dataset is processed and used to train the parameters. Car-following and lane-changing scenarios are simulated to verify the effectiveness of decision-making. The simulation results show that the proposed method can reflect human-like decision-making in multiple scenarios.

Nexus of firm specific variables and capital structure decisions: an evidence from Asia Pacific region amid covid-19 crisis times

Nexus of firm specific variables and capital structure decisions: an evidence from Asia Pacific region amid covid-19 crisis times

Assessment of Decentralized Decision-Making on Livestock Management in Miombo Woodlands of Tanga and Morogoro regions, Tanzania: Bridging Acts and Practice

Despite legal reforms such as the Local Government (District Authorities) Act of 1982 and the Forest Act of 2002, which decentralize forest management in Tanzania’s villages, the persistent degradation of Miombo woodland forests, primarily due to livestock activities, raises concerns about the effectiveness of these reforms. This study compares the provisions of these acts with on-ground realities through data from 27 Focus Group Discussions (FGDs) and 45 Key Informant Interviews (KIIs). Thematic analysis using NVIVO 12 software identified four key discrepancies: decision-making structures, decision-making processes, gender involvement, and village collaboration. Findings show that villagers often unknowingly delegate legislative power to leaders, decision-making is politicized with minimal stakeholder engagement, gender inclusivity is minimal, and villages manage forests independently rather than collaboratively. These gaps have led to biased decisions, conflicts among user groups, forest encroachment, and the neglect of women's needs, exacerbating forest degradation. To address these issues, the study recommends capacity building through leadership and technical training for village councils, community education on legal rights, and improved transparency via public forums and accessible reporting. These initiatives aim to empower local communities and foster sustainable management of Miombo woodland forests

The Impact of Employee Stock Ownership Plans on Capital Structure Decisions: Evidence from China

The determination of the capital structure is a critical component of a company’s financial decision-making process. The question of how to optimize a firm’s capital structure to increase its value has been a significant topic of interest within the financial community. The employee stock ownership plan (ESOP) has developed rapidly in China’s capital market over the past decade, providing a suitable context for studying the impact of employee equity incentives on capital structure decisions. This paper employs cross-sectional ordinary least squares regression models and unbalanced panel fixed effect models to investigate the impact of employee stock ownership plans (ESOPs) on firms’ capital structure decisions. The analysis is conducted on a sample of Chinese A-share listed companies on the Shanghai and Shenzhen Stock Exchanges. The research considers both static capital structure choice and dynamic capital structure adjustment. We find that the implementation of an ESOP reduces the level of corporate debt and accelerates the dynamic adjustment of capital structure, suggesting that employee equity incentives play a role in optimizing firms’ capital structure decisions. We also find that the impact of ESOPs on the dynamic adjustment of capital structure is asymmetric. Specifically, the implementation of ESOPs markedly accelerates the downward adjustment of capital structure, yet has no impact on the upward adjustment of capital structure. Further analysis demonstrates that the impact of ESOPs on capital structure decisions is contingent upon the macroeconomic environment, industry characteristics, corporate governance, and ESOP contract designs. First, the optimization of ESOPs on capital structure decisions is more pronounced in an economic boom environment, in a poor market climate, or in competitive industries. Second, the reduction effect of ESOPs on corporate debt is more pronounced in non-state-owned companies, high-tech companies and those with lower ownership concentration. In contrast, the acceleration effect of ESOPs on capital structure adjustment is more pronounced in state-owned companies, non-high-tech companies and those with higher ownership concentration. Ultimately, ESOPs financed by loans from a firm’s major shareholders—or with a longer lock-up period, smaller shareholding size or executive subscription ratio—demonstrate a more pronounced optimization effect on capital structure decisions. This paper not only contributes to the existing literature on the relationship between equity incentives and capital structure decisions, but also provides guidance for listed companies on the reasonable design of their ESOPs and the optimization of their capital structure decisions.

Capital Structure And Earnings Per Share: An Empirical Analysis Of Selected Companies Listed On The Nigerian Exchange Group

Focussing on the moderating influence of company size, this study analyses the implication of capital structure on earnings per share (EPS) for a subset of businesses listed on the Nigeria Exchange Group. The research examines data from fifteen publicly listed food and drink firms over a certain time frame using a random effects model. According to the results, some parts of the capital structure, like LDTA and EQTA, significantly boost earnings per share (EPS), while others, like TPTA, have the opposite effect. Including company size as a moderating variable significantly improves the model's explanatory power. The modified R-squared value goes up from 7.5% to 55.8%. Firm-specific features heavily influence capital structure decisions and their influence on financial viability. Firm size should be a major aspect in financing decisions, according to the report, since larger organisations are better able to optimise their capital structure to boost profitability. Corporate managers, lawmakers, and investors can benefit from the study's new findings, which add to the current literature by demonstrating how business size affects the correlation between capital structure and profitability

Impact of Capital Structure on Profitability of Commercial Banks in Tanzania

This paper aims to examine the impact of capital structure on the profitability of commercial banks in Tanzania using panel data from 2017to 2021. Specifically, the study wants to investigate the impact debt and equity in capital structure on profitability of commercial banks in Tanzania. The study employed panel data research design and used secondary data which were extracted from audited financial statements of commercial banks. Return on assets was used as the dependent variables while independent variables were debt and equity capital as well as the debt-equity ratio. Result from the analysis indicates that initially the variables were not normally distributed which necessitate normalization of variables. Correlation analysis was performed and there was no multicollinearity problem between the variables. Based on Hausman test fixed effect model was selected as the appropriate model. The results from the analysis showed that 1% increase in debt capital increases profitability of commercial bank by 16.79%. The positive debt-profitability coefficient implies opportunities for enhancing profitability of commercial bank through debt financing. Result further revealed that 1 % increase in debt-equity ratio is associated with 18.07% decline in profitability. Which implies negative relationship between debt-equity ratio and profitability. On the other hand, increase in equity finance is associated with decline in profitability holding other factors constant. However, the study recommends a comprehensive assessment and consideration of situational factors while carrying out capital structure decision inverse relationship between debt-equity ratio also implies that excessive debt may pose financial risk and make the company less attractive to potential investors.

Capital Structure and Corporate Governance: Shaping Company Value through Dividends

Background: The dynamic interplay between corporate financial strategies, particularly capital structure and dividend policies, significantly influences firm value in the manufacturing sector.Knowledge Gap: While previous research has explored the direct relationships between capital structure and firm value, less attention has been paid to the moderating effects of dividend policy, profitability, and Good Corporate Governance (GCG) in this context. Aims: This study aims to assess the moderating roles of dividend policy, profitability, and GCG on the relationship between capital structure and firm value. Results: The findings indicate that dividend policy, profitability, and GCG significantly moderate the relationship between capital structure and firm value, suggesting that firms must balance dividend distribution with their capital structure decisions. Novelty: This research contributes to the existing literature by integrating dividend policy and GCG into the analysis of capital structure's effect on firm value, addressing previously overlooked aspects. Implications: The study underscores the importance of prudent dividend policies and robust corporate governance in enhancing firm value, offering valuable insights for managers and investors aiming to optimize financial performance in the competitive food and beverage manufacturing sector. Highlights : Moderating Effects: Dividend policy, profitability, and GCG significantly moderate the relationship between capital structure and firm value. Financial Balance: Firms must balance dividend distribution with capital structure decisions to enhance overall value. Managerial Insights: The findings provide crucial insights for managers and investors to optimize financial performance in the food and beverage sector. Keywords: capital structure, dividend policy, firm value, profitability, Good Corporate Governance

Sea‐level rise and firms' financial structure decisions

Sea‐level rise and firms' financial structure decisions

Capital structure decisions and R&D investment: The contingency role of firm size

This paper explores how the size of a firm influences the relationship between capital structure choices and research and development (R&D) investment. By analyzing data from publicly listed U.S. pharmaceutical firms between 2011 and 2020 and using an instrumental variables regression, we present evidence that the impact of capital structure on R&D investment varies depending on firm size. Our findings show that firm size plays a critical role in shaping financing decisions to support R&D. Specifically, large and small firms employ different strategies for developing and implementing R&D projects. Our results reveal that R&D investment is negatively (positively) and significantly associated with debt financing (equity financing). Moreover, we show that firm size attenuates the adverse effect of debt financing on R&D investment and accentuates the positive effect of equity financing. Our study provides a refined distinction between debt and equity financing and clarifies the importance of structural characteristics in explaining a firm’s R&D investment decisions. Our study assists policymakers and practitioners in designing effective policies to enhance the understanding of the complex relationship between capital structure decisions and R&D investment.

From ideal to reality: governance of AMR in a multi-level setting

ABSTRACT This paper asks whether, and if so how, it is possible to design a system characterised by coordination across sectors and levels of governance aimed at governing AMR. The ambition is, firstly, to analyse how coordination problems materialise in the governing of the AMR problem, and secondly, with an emphasis on the structure of decision-making and communication processes, to probe into how coordination of AMR governance is achieved. The paper’s focus is on Norway, which stands out as one of the better performing countries for AMR governance. Drawing on literature on coordination and governance, the paper argues that effective coordination of AMR governance is more likely to follow a ‘bottom-up’ sequencing pattern. It thus provides a study of the systems for governing AMR in a multi-level setting. Through public documents, literature and interviews with key officials involved in AMR management, the paper illustrates the importance of – and organisational barriers to – inter-sectoral cooperation and coordinated strategies and actions at different levels of governance.

Effect of exchange rate volatility on financial reporting of consumer goods firms in Nigeria (2019 – 2023)

This study examines the effect of exchange rate volatility (ERV) on financial reporting of consumer goods firms in Nigeria. Ex-post facto research design was adopted for this study. Data were sourced from the published annual reports of fourteen consumer goods firms listed on the Nigeria Exchange (NGX) and the Central Bank of Nigeria (CBN) Statistical Bulletin for the period 2019-2023. The analysis employed the Panel Error Correction-Generated Least Squares (EGLS) method, focusing on three key financial metrics: Earnings Per Share (EPS), Current Ratio, and Debt-to-Equity Ratio. The findings reveal that ERV has a significant positive effect on EPS. Conversely, a significant negative effect is observed on the current ratio. However, the effect on the debt-to-equity ratio is found to be insignificant, suggesting that ERV does not substantially influence capital structure decisions. The study recommends that firms should continue to develop and implement robust strategies to manage the impacts of ERV, such as hedging, strategic pricing, and cost control measures, to safeguard and potentially enhance their financial performance during periods of exchange rate fluctuations. Keywords: Exchange Rate Volatility, Financial Reporting, Earnings Per Share, Current Ratio, Debt-to-Equity Ratio, Consumer Goods Firms.