Determinants Of Capital Structure Research Articles

Determinants of Capital Structure from Malaysian Shariah-Compliant Food and Beverages Firms

This paper addresses the dearth of empirical research on the capital structure of Shariah-compliant food and beverage (F&B) firms in Malaysia. Despite the industry's dynamic growth, specific financing needs, and adherence to Shariah principles, a comprehensive investigation into the determinants of their capital structure choices is lacking. By exploring factors such as profitability, tangibility, growth opportunities, liquidity, and firm size, this paper aims to provide valuable insights into the financial strategies of these specific entities and fill crucial knowledge gaps in empirical evidence. The study employs panel data, a combination of cross-sectional and time-series data, with a sample comprising 24 Shariah-compliant F&B firms listed on Bursa Malaysia, totalling 240 observations. Quantitative methods are applied using secondary data sourced from the Eikon database and financial statements in the annual reports of Bursa Malaysia-listed companies from 2013 to 2022. The findings reveal that profitability, tangibility, liquidity, and firm size significantly impact the capital structure choices of Shariah-compliant F&B firms, while growth opportunities emerge as an insignificant factor. These results support the application of the trade-off theory for profitability and the pecking order theory for tangibility, liquidity, and firm size, shedding light on the nuanced financial decision-making processes within this sector.

FACTORS INFLUENCING CAPITAL STRUCTURE IN THE FIRST YEAR OF THE COVID-19 PANDEMIC

Several previous studies on the factors that influence the capital structure of manufacturing companies on the Indonesia Stock Exchange show that the determination of capital structure is proven to be significantly influenced by several factors. The Covid-19 pandemic has had a very significant impact on the Indonesian economy, starting from changes in world supply chains to a decline in foreign investment into Indonesia. Factors that affect a manufacturing company in determining its capital structure in the first year of the Covid-19 pandemic could be very different from when the Covid-19 pandemic had not yet hit Indonesia. Initially, the sample used in this study covered 193 manufacturing companies, but later 23 companies were excluded because of data outliers. The independent variables in this research are profitability, liquidity, asset structure and company size. Meanwhile, the dependent variable is capital structure. The collected data will be analyzed using multiple regression analysis at a significance level of 5%. Profitability has a significant negative effect on capital structure. While partially, firm size and liquidity has a negative effect on capital structure, but it is not significant. Asset structure has a positive effect on capital structure, but it is not significant. Simultaneously, profitability, liquidity, asset structure and company size have a significant effect on capital structure

Internal and External Determinants of Capital Structure and Firm Value: Empirical Evidence from Property and Real Estate Firms in Indonesia

Houses, land, and property are vital human requirements, with increasing demands year after year. This is mostly due to Indonesia’s favorable population growth and economic development, which leads the demand for land and property to be even higher. However, this industry also experienced difficulties during the COVID-19 pandemic, which affected macroeconomic conditions. Therefore, this study aims to reinvestigate the role of internal and external factors on the capital structure and firm value of property and real estate firms listed on the IDX for the 2017-2021 period. In this study, the partial least squares structural equation modeling was used for the data analysis, whereas purposive sampling was used for company selection. The results showed that internal factors had a significant effect on capital structure and firm value, whereas external factors did not significantly impact capital structure and firm value. Lastly, capital structure is also proven to have no significant effect on firm value. These findings validate the signaling theory, where internal factors managed by the firm might produce a positive signal in the form of the firm’s future prospects so that it can become essential information for stakeholders. This study contributes to helping policymakers with various considerations and sets realistic expectations about the role of internal and external factors on the capital structure and firm values.
 Keywords: financial performance, macroeconomic, capital structure, firm value, signaling theory

Capital Structure Determinants in Pakistan's Textile Industry Unravelling the Pecking Order vs. Trade-Off Debate

Capital Structure Determinants in Pakistan's Textile Industry Unravelling the Pecking Order vs. Trade-Off Debate

What explain capital structure determinants choices of Shariah firms?

This study aims to discover key capital structure determinants for the entire Shariah firms operating in dissimilar contexts. Moreover, it also estimates the adjustment speed for these firms to maintain targeted capital structures at all times. For this purpose, 321 Shariah firms that are operational in Saudi Arabia, Pakistan, the UAE, and Indonesia are nominated. The empirical analysis is conducted using 11 years, i.e., 2011-2021, of balanced Panel Data. The debt-to-asset and debt-to-equity ratios are used as variables of interest, whereas the asset tangibility ratio, current ratio, return on equity, size, non-debt-tax shield, inflation, and gross domestic product are used as explanatory variables. The robust estimator, i.e., Generalized Method of Moments (GMM), is executed to perform the analysis. The results show that the most important factors for Shariah-tagged firms are inflation, the gross domestic product, the asset ratio, the return on equity, the non-debt tax shield, and the lagged dependent variables. The important role of asset tangibility, lagged variables, and the presence of adjustment speed postulate that Shariah-tagged firms are following the provided guidelines of Dynamic Trade-Off theory to preserve capital structure. The findings are a new contribution to the limited empirical inquiries of Shariah firms’ capital structure and a fresh addition to Islamic Finance literature. Besides, the outcomes are also helpful for policymakers and assist them in developing an optimal model of capital structure for Shariah-tagged firms that decreases overall capital costs and enhances these firms’ market value.

Capital Structure Determinants of Listed Private and State Companies

Purpose. The purpose of this paper is to determine and analyze the determinants of the capital structure of joint-stock companies in Bosnia and Herzegovina that are listed on the Banja Luka Stock Exchange. This study will answer the question as to which factors determine the capital structure of BiH companies and whether existing financial theories of the capital structure hold true in that context. The main research objective is to estimate the effects of a firm’s level determinants on its capital structure measures in different ownership structures. Those findings will certainly advance our understanding of listed companies financing behavior. Methodology. For the research, we took into account firm-specific characteristics and divided joint-stock companies into private and state-owned. The results of the research show that the capital structure of these two groups of enterprises is differently affected by individual determinants. Findings and implications. While state-owned enterprises rely more on borrowed resources to finance both short-term and long-term assets, private enterprises even finance part of their short-term assets with their own capital. However, the most important determinant in both groups of enterprises is the share of inventories in short-term assets, which confirms that short-term liabilities, i.e. free sources of financing in the form of liabilities to suppliers are the determinant that most positively affect the indebtedness of all enterprises. Unlike previous research that observed enterprises according to their size or affiliation to individual industries, the focus of our research is enterprises of different ownership structures. The empirical statistical results provide basis for logical conclusion and appropriate policy implications. The study points to the specifics of the capital structure in private and publicly listed joint-stock companies. The stated opposite influence of certain ratios on the indebtedness of the enterprises is explained by a number of factors. Limitations. This study focuses only on the presentation of the recent indicators of capital structure of listed companies - listed on the Banja Luka Stock Exchange, which is one of its major limitations. The limitation of this search is the sample size which can be considered low. Further research may be conducted by using other capital markets to explore more information regarding the effect of the variables affecting the capital structure. In addition, further research may also be conducted by using other proxies or by adding more variables, sample size, and research period to get a better result. Originality. The study is an original research paper. It has not been published in any other peer-reviewed journal not under consideration for publication by any other journal. The paper adds to the existing literature on Bosnia and Hezegovina by giving an overview of recent developments in the flexi purity concept, pointing out the areas that require policy response.

Dynamic Capital Structure Adjustment: An Integrated Analysis of Firm-Specific and Macroeconomic Factors in Korean Firms

This research investigates the factors influencing the capital structure of 271 non-financial firms listed on the Korean Stock Exchange (KSE) over a broad period from 1995 to 2021, encompassing both stable and crisis conditions. Employing a dynamic panel data model and the generalized method of moments (GMM) estimation, we address the endogeneity issue introduced by the inclusion of lagged dependent variables. Our research integrates firm-specific internal factors with macroeconomic external variables to provide a comprehensive understanding of the influence of varying economic environments on capital structure. Our study suggests that in times of economic stability, the capital structure decisions of a firm are more influenced by internal factors such as profitability. However, in periods of economic downturns, it is the external macroeconomic market conditions that tend to have a greater impact on these decisions. It is also noteworthy that both book leverage (BL) and market leverage (ML) exhibit quicker adjustments during stable periods as opposed to periods of crisis. This indicates a higher agility of firms in adapting their capital structures in stable, normal conditions. Our findings contribute to the existing literature by offering a holistic view of capital structure determinants in Korean firms. They underscore the necessity of adaptable financial strategies that account for both internal dynamics and external economic conditions. This study fills a gap in current research, presenting new insights into the dynamics of capital structure in Korean firms and suggesting a multifaceted approach to understanding capital structure in diverse economic contexts.

Determinants of Capital Structure: Evidence from Securities Companies

The objective of the paper is to explore the factors that tend to affect the debt-equity choice of securities companies in Pakistan. Data on the variables used in the study was extracted from income statements and balance sheets of various securities companies registered with the SECP over a period of 14 years from 2008 to 2021. Panel data analysis is based on the use of econometric techniques (fixed effects and random effects models) for estimation of results. Results of the study demonstrate that securities companies prefer to finance their assets with equity which denotes 72.15% of their total assets. In contrast, the total liabilities designate 27.85% of their assets. Profitability appears to be positively related to total and long-term debt ratios. The firm size is positive while tangibility is inversely associated with total and short-term debt ratios. Liquidity is negatively linked to all proxies of capital structure while the firm efficiency appears to have a positive connection with the short-term debt ratio. Results of the study are consistent with the predictions of trade-off and pecking order models. The empirical outcomes of the research offer some useful policy implications for regulatory authorities, managers and shareholders of the Securities Companies in Pakistan.

Determinants of Capital Structure and their Effect on Firm Value: Evidence on Food and Beverage Companies in Indonesia

Objectives: In this study, capital structure is used as an intermediary variable to examine how liquidity, profitability, and company size affect firm value. This study is anticipated to serve as a resource for future research as well as help businesses and investors make a variety of decisions.Methodology: This study uses secondary data and is quantitative. These facts were gathered via documentation methods. All of the firms in the food and beverage sectors that are listed on the IDX 2020–2021 make up the study's population. Purposive sampling was used to collect samples from 158 observations.Finding: According to the study's findings, liquidity, profitability, firm size, and capital structure had an impact on share value while only partially having an impact on capital structure. The outcomes of the path analysis demonstrate that while profitability has an impact on share value mediated by capital structure, liquidity, and company size do not have an impact on share value.Conclusion: Future researchers are urged by the findings of this study to include other variables, including external variables like inflation, interest rates, and taxes which may have an impact on business value

자동차산업의 자본구조 결정요인 연구

자동차산업의 자본구조 결정요인 연구

Internal Determinants of Capital Structure of Islamic Banks: Evidence from the Middle East

This study aimed to determine the factors affecting the capital structure of Islamic banks for a sample of the Middle East for the period 2011-2021. The study used a panel data method by pooling ordinary least squares, fixed effects, and random effects to determine the relationship between book leverage and internal variables such as profitability, size, non-debt tax shield, growth opportunity, tangibility, liquidity, and earnings volatility. The descriptive statistics indicate that Islamic banks are highly leveraged. The results of regression showed that the impact of profitability, size, and growth opportunity is positive on book leverage. In contrast, the results indicated a negative impact of non-debt tax shield and liquidity on book leverage. The results also showed no impact of tangibility and earnings volatility on book leverage. Based on the results, Islamic banks in the Middle East enjoy a special method of choosing capital structure depending on their competitive advantage derived from the concentration of a large proportion of Muslim people dealing with them. Nevertheless, the management of Islamic banks must take the mentioned variables into consideration.

Determinants of capital structure in Nigeria’s quoted consumer goods firms

Although the factors that influence capital structure have been the subject of numerous prior studies, the topic of what determines the best financing combination to maximize a firm's value is still one of the most contentious in corporate finance. Furthermore, a large number of earlier research paid little attention to emerging countries and instead concentrated mostly on developed markets. To fill the gap, this study examined the factors that influence capital structure decisions in quoted Nigerian consumer goods companies that are publicly traded. The study used secondary data from the annual reports of 15 of the mentioned corporations, spanning ten years from 2011 to 2020. The association between the leverage ratio and the five explanatory variables in the model was investigated using the Panel Least Square regression approach. The study's findings showed that while growth is not statistically significant, firm size, non-debt tax shield, and firm growth all positively and significantly affect leverage. Furthermore, tangibility and profitability are negative and have a large impact on leverage. Based on the study's findings, it can be said that the capital structure of listed consumer products companies in Nigeria is significantly influenced by factors such as size, non-debt tax shield, profitability, and tangibility. The study then suggested that financial managers of listed firms in Nigeria should deploy effective measures to boost these important variables to have an optimum financing mix for their firms.

Cultural determinants of capital structure in Indonesian banking

Capital structure decisions play a crucial role in shaping the financial landscape of companies, especially in developing countries. This study examines the cultural determinants of capital structure in Indonesian banking within the macroeconomic context from 2013 to 2022. The capital structure represents the mix of various company funding methods, impacting its value and influencing stakeholders. The debate on how the interplay of debt and assets affects a company's value continues, with the determining factors of capital structure still being explored in financial studies. Using STATA V.17, this research analyzes 30 banking companies listed on the Indonesia Stock Exchange, with leverage as the dependent variable. Financial ratios, including liquidity ratio, profit volatility, growth opportunities, bank size, and external macroeconomic variables such as inflation and Gross Domestic Product (GDP), are examined as potential influencers on the capital structure. The results reveal high leverage in Indonesian banks, with variations in financial approaches. Return on assets, growth opportunities, and inflation exhibit a positive and significant relationship with leverage, while profit volatility, tangibility, bank size, and GDP show a negative and significant relationship. The research suggests limitations in scope, recommending including all Indonesian banking companies and additional external macroeconomic variables like exchange and interest rates.

Regulatory quality and corporate leverage: Evidence from a large international sample

Corporate leverage is strongly related to firm characteristics. However, this relationship varies across country-level institutions. In this study, we investigate whether country-level regulatory quality indirectly affects corporate leverage by moderating the effects of firm-level determinants of capital structure. Using a sample of 46,184 firms from 70 countries, we show that regulatory quality mitigates the positive influence of firm size and asset tangibility on leverage, while the negative influence of growth opportunities, R&D intensity, and profitability is similarly moderated. These results highlight the benefit of robust regulatory quality in facilitating the access to debt financing of small, R&D-intensive, and growth-oriented firms with few tangible assets.

Unveiling Capital Structure Determinants, Business Characteristics and High-Growth Performance of Small and Medium-Sized Enterprises: Evidence from Nigeria

Recent interest among both SME operators and academics/professionals in determining what factors influence the capital structure and performance of SMEs has increased. Possible cause includes increased focus on the role that small and medium-sized enterprises (SMEs) play in driving economic growth. This research evaluated the factors that influence small and medium-sized enterprises' capital structures, as well as their performance predictors, financial accessibility factors, firm characteristics that predict their capital structures, and the impact of capital structure on SMEs' profitability. It was decided to conduct a survey study, with the help of a properly designed questionnaire. The population included both small and medium-sized enterprise (SME) owners and operators in the study area (South-West, Nigeria). Four hundred small and medium-sized enterprises (SMEs) purposefully chosen using purposive and proportionate procedure from each state in the region and asked to fill out an online questionnaire (Google Form) to collect the data. This study found a significant relationship between capital structure and the performance of small and medium-sized enterprises (SMEs) in Nigeria's Southwest region. Formal strategic plans, consistent operational procedures, positive work relationships, and the presence of formal business plans were found to have a significant impact on the financial decisions of SMEs, thereby improving overall business performance. Furthermore, the factors influencing SMEs' capital structure decisions include both strategic and organisational components, emphasising the importance of formal strategic planning, consistent operational procedures, positive work relationships, and formal business plans.

Determinants of Capital Structure in the Banking Sector: Lessons from the Western Balkans

The study examines the capital structure of the Western Balkan banking industry across the period 2015 - 2020. Forty-seven of the total Western Balkan-based commercial banks were included in the study. By constructing a balanced panel, this study uses pooled ordinary least squares, fixed and random effects regressions, to assess the relationship between bank book leverage as the dependent variable and the set of bank-specific explanatory variables that include profitability, leverage ratio, bank size, earnings volatility, collateral, growth opportunities, and liquidity. The study shows a significant positive relationship between profitability and book leverage for the period studied. In contrast, leverage ratio, earnings volatility, collateral, growth, and liquidity significantly negatively impact the book leverage of Western Balkan banks. An extensive and comparative study of banks operating in Western and Eastern Balkan countries is recommended. The findings have practical implications for bank executives. They will assist them in identifying the bank-specific factors that influence the capital structure and selecting values that promote optimal capital structure. The findings of this study can help regulators develop an effective prudential framework. This study opens up new avenues for further research in this area for academics, researchers, and analysts.

The Determinants of Capital Structure of Islamic Banks in Indonesia, Malaysia, and Brunei Darussalam

This study is to determine the effect of Profitability, Liquidity, Asset Growth, Bank Size, and Asset Structure on the Capital Structure of Islamic banks in Indonesia, Malaysia, and Brunei Darussalam. The type of research used is descriptive quantitative, which is a descriptive approach with a quantitative approach. The analysis technique used is panel data regression with fixed effect model is the selected model. The population used in this study is Islamic banks in Indonesia, Malaysia, and Brunei Darussalam. The data was collected from Asian Banker website for 27 banks. The sample selected using purposive sampling method was 22 Islamic banks in Indonesia, Malaysia and Brunei Darussalam which consistently published annual reports during 2015-2021 period. Data collection was carried out using secondary data in the form of annual reports of 22 banks during the 2015-2021 period. The results showed that the Profitability and Asset Growth variables had a positive and insignificant effect on Capital Structure, Liquidity had a negative and significant effect on Capital Structure, and Bank Size and Asset Structure had a significant positive effect on Capital Structure.

INTERNAL DETERMINAN STRUKTUR MODAL PADA PERUSAHAAN TAMBANG BATUBARA DI BURSA EFEK INDONESIA

Companies in carrying out operations and developing business certainly require capital and additional capital. The purpose of this study was to determine the internal determinants of capital structure. This research was conducted on coal mining sub-sector companies on the Indonesia Stock Exchange for the period 2016 – 2020. In this study, five independent variables were used, namely profitability, company size, liquidity, non-debt tax shield, and company growth, while the dependent variable was structure capital. The sample used was determined by purposive sampling method and obtained 22 companies as a sample of a total of 24 listed companies. The data in this study were collected using the non-participant observation method by making observations on the company's financial statements. The data analysis technique used is multiple linear regression analysis. The results of multiple linear regression analysis show that profitability and liquidity have a significant negative effect on capital structure, firm size and firm growth have a significant positive effect on capital structure, but the non-debt tax shield variable does not have a negative effect on capital structure.

Determinants Of Capital Structure In Manufacturing Companies In Emerging Stock Market

This study aims to examine and obtain empirical evidence that business risk, profitability, tangibility, firm size, liquidity, and asset growth rate, affect the capital structure of manufacturing companies listed on the Indonesia Stock Exchange in the 2017-2021 period. The study was conducted on 95 manufacturing companies listed on the Indonesia Stock Exchange for the period 2017 – 2021. The data used in this study is panel data. The method used in this research is explanatory with a quantitative approach and the sampling used is simple purposive sampling.analysis Explanatory is used to explain the relationships between the variables of capital structure, business risk, profitability, tangibility, firm size, liquidity, and asset growth rate. The results show that profitability and liquidity have a negative effect on capital structure, tangibility and asset growth rate have a positive effect on capital structure, while business risk and firm size have no effect on capital structure. The results also show that the simultaneous test concludes that all independent variables affect the dependent variable.

Impact of the Global Financial Crisis and the Tunisia’s Jasmine Revolution on the Corporate Capital Structure: Evidence from Four Arab Countries

This paper provides new evidence on capital structure determinants in the Arab world with special focus on the impact of the 2008 global financial crisis and the Jasmine Revolution on four different corporate leverage ratios. The sample consists of 440 non-financial listed companies from four Arab- Mediterranean countries (Egypt, Jordan Morocco and Tunisia) and the panel data are analyzed from the period 2003–2019. Statistical analysis of results are carried out by using the ordinary least squares ; three dummy variables are included (time, country and industry). The results indicate cross-country variations in four different leverage ratios. Moroccan firms, contrary to those in Tunisia and Jordan, show lower leverage ratios. By contrast, they report higher levels of « size », « profitability » and « growth opportunities ». The results also show that the Jasmine Revolution as well as the 2008 global financial crisis affects the impact of firm-specific determinants : After crisis and Jasmine Revolution, the positive and the negative effects of « size » and « profitability », respectively, become more important. Profitability is the most significant explanatory factor of corporate capital structure in Arab countries. During the two sub-periods, the growth opportunities and their negative impact on the corporate financial decisions depend on the choice of the leverage ratio (total debt versus long term debt – book values versus market values). Asset tangibility is the most critical factor : its positive effect on capital structure is more important before the Jasmine revolution and/or the global financial crisis. The effect is initially positive but becomes negative when leverage ratio is calculated using total values of debt (book and market values of debt). Results on capital structure determinants in the Arabic context not depend only on the choice of the leverage ratio, but also on the period considered.