Impact Of Capital Structure Research Articles

The Impact of Capital Structure on Profitability of XYZ Limited

The Impact of Capital Structure on Profitability of XYZ Limited

The Impact of Capital Structure on Stock Return of Selected Firms in the Pharmaceutical and Chemical Sector in Bangladesh

The purpose of this study is to investigate whether there is any statistically significant relationship between capital structure and stock return for the selected firms of pharmaceutical and chemical sector which are listed in Dhaka Stock Exchange of Bangladesh. To examine the relationship this study selects twenty one firms of pharmaceutical and chemical sector. The data collected for the time period from 2010 to 2018. This study considers Hausman specification test to select the appropriate model in order to analyze the balanced panel data. According to the results of Hausman specification test the fixed effect model becomes appropriate in order to determine the relationship between capital structure and stock return. This study considers debt to equity ratio as independent variable and stock return as dependent variable. The control variables are the return on equity, earnings per share, firm size, times interest earned and price-to earnings ratio. The result of this study suggests that debt to equity ratio has statistically significant negative relationship with stock return. Furthermore, from the control variables return on equity, earnings per share and firm size has statistically significant positive relationship with stock return. But times interest earned and price-to-earnings ratio has no statistically significant relationship with stock return.

The impact of capital structure on the market value of energy sector companies on the example of companies from Poland

The focus of this article is to analyse the impact of capital structure on the value of energy sector companies listed on the Warsaw Stock Exchange. The proposed study will cover the last four years, i.e. 2014-2017, in quarterly terms. In addition to the mentioned capital structure parameter, the analysis also covers such indicators as return on equity (ROE) and return on assets (ROA). The study will use multiple regression based on the deltas of the respective parameters describing their changes quarter-to-quarter. The author of this publication assumes that capital structure may have an impact on the value of energy sector companies. The assumption is based on the market phenomenon whereby capital structure seems to reflect to a certain extent the risk incurred by investors: on the one hand, the higher the share of borrowed capital in financing an enterprise’s operations, the higher the risk; on the other hand, the higher the proportion of equity in the financing of corporate operations, the lower the chance for dividends to be paid to investors in the respective companies. Investigating the mentioned phenomenon will make it possible, to a certain extent, to answer the question of whether Polish investors are more willing to accept investment risk in exchange for a higher return on investment or whether they would rather limit investment risk and yield lower profit from the capital invested in a given enterprise.

Impact of capital structure over profitability in Indian telecom sector

The capital structure decision is crucial for any business organization. The decision is important because of the need to maximize returns to various organizational constituencies, and also because of the impact such a decision has on a firm‘s ability to deal with its competitive environment. The capital structure of a firm is actually a mix of different securities. This paper seeks to investigate the relationship between capital structure and profitability of telecom industry by selecting 4 major players of the sector for a six-year period i.e., 2011–12 to 2016–17. Regression analysis is used in the estimation of functions relating the profitability in relation to capital structure. The results reveal a significantly positive relation between profitability and the 3 variables and ratio of i.e., NOP, Ke and Kd in telecom industry.

Capital Structure and Financial Performance of Malaysian Construction Firms

This study investigated the impact of capital structure on financial performance of Malaysian construction firms. The empirical data was taken from 41 construction firms listedon the main board of Bursa Malaysia and observed from 2011 to 2015. Capital structure is the financing decision on the proportion between debt and equity. The right proportion leads to optimal capital structure. This study adopts two theories namely trade-off theory and pecking order theory, to explain the concept of optimal capital structure. Capital structure is the independent variable and is measured by short-term debt (STD), long-term debt (LTD), total debt (TD), meanwhile the dependent variable, financial performance, is proxy by return on asset (ROA) and return on equity (ROE). The results indicated positive and significant association between LTD and ROE. However, STD was significant but negatively correlated with ROE. Meanwhile, TD was positive but insignificantly associated with ROE. Nevertheless, STD, LTD and TD were negatively and insignificantly associated with ROA. The findings suggested that financing decisions are influenced by the objective of the firms. If the goal of the firms was to maximize return on asset, the pecking order theory was employed, however if the firms’ objective was to maximize return on equity then the trade-off theory was appropriate to explain the concept of optimal capital structure. The concentration on one industry and the relatively narrow five-year period for data collection were the main limitations of this study. The findings of the research will contribute towards capital structure literature.

Impact of Debt Financing on Performance: Evidence from Textile Sector of Pakistan

This research study aimed to determine the impact of capital structure mainly debt financing on firm performance incorporating panel data of 70 textile companies in Pakistan from year 2010-2015 respectively. Balance Sheet Analysis issued by State Bank of Pakistan was used for data collection. Variables for political uncertainty and sub sector/industrial effect is also incorporated in order to identify their impacts on firm performance. Fixed Effects Model was used to find the relationship between firm performance (ROA) and capital expenditure (DTA, LDA and STD). Statistical results present a positive relationship among return on assets and debt-to-asset ratio. This suggests that firms mainly rely on financial leverage for their performance. As the debt-to-asset ratio increases, the return on assets increase. Almost 64.4% of firm’s assets are financed through debt either short term (39.2%) or long term (23.8%). Further it holds a negative relation between short term debt and firm performance measure (ROA) still resulting more short term borrowing because of lower interest rate. The results also showed positive relationship between Long-term debt to assets and Return on assets. These results imply that the textile firms which are heavily trapped in debt must bear huge interest costs. Firm’s sales growth and interest rates have positive and significant effect whereas the firm size has negative but significant impact on its return on assets. It was proved that capital structure has impact over firm performance so managers should adopt necessary carefulness while taking decisions regarding capital structure.

Capital Structure and Financial Efficiency: Evidence from Ho Chi Minh Stock Exchange of Vietnam

Capital structure and its utilization is one of the most crucial determinants to the growth and development of a business Thomas (2013). However, the level of financial leverage varies across firms and periods of time due to differences in business culture, administration, industry, or business strategy. In principle, there is no theoretically fixed perfect level for the proportion of financial leverage in a firm’s capital structure (Modigliani and Miller, 1958). Various capital structure theories have been mentioned in the literature such as trade-off theory (Miller, 1977) and the pecking order theory (Myers and Majluf, 1984). However, they always come with specific assumptions and contexts which cause the issue of empirical capital structure to remain debatable, especially in terms of an emerging market. Vietnamese stock markets, with a history of less than two decades of development, rapid growth, and with the establishment of derivative market in 2017 (The State Bank of Vietnam, 2017) is regarded as a typical one. Thus, this research aims to investigate the impact of capital structure on firm financial efficiency in Vietnamese listed companies. The panel data were collected from 85 firms listed on the Ho Chi Minh Stock Exchange (HSX) during the period 2006 to 2017 (excluding the financial sector). The results reveal that short term leverage of listed firms is significantly positively correlated with its financial efficiency.

Effects of Capital Structure on Profitability of the Manufacturing Industry: Testing the Fixed and Random Effect Model on Selected Firms in Ghana

One of the most complicated fields of financial decision-making is capital structure. Capital structure is the composition of debt and equity capital which involves the funding of a company's assets and can be interpreted as the amount of net value plus preferred stock plus long-term debts. The relationship between capital structure and profitability cannot be underestimated because it is necessary for the company's long-term survivability to improve its profitability. This research sets out to assess the impact of capital structure on the competitiveness of the manufacturing industry in Ghana using some selected firms as the case study for the period between 2005-2012 to provide a critical assessment of the need and value of capital structure. Utilizing a mixed research approach as methodology, thus descriptive statistics and correlation analysis amidst the fixed effect model, the findings revealed that short term debt and long term debt had a negative impact on productivity whilst equity was positively related to profitability. The study recommends that Ghanaian-based manufacturing companies use equity such as retained earnings to expand their business rather than debt financing.

Correlation between Corporate Zakat, Capital Structures and Firm’s Performance: Case Study of Jakarta Islamic Index, Indonesia

The most important issue in corporate finance are how firms dealing with the structure of their capital and related to his performance. However, zakat payment and corporate tax will exist into the consideration of combination of debt and equity of the firms. In addition, there is an impact of capital structure on the performance of financial and non-financial firms operating in Indonesia for the period between 2013 an 2017. The data sampling taken from Jakarta Islamic Index companies, who has the report of zakat payment in their annual report.

Impact of Capital Structure on Profitability in the Fertilizer Sector of Pakistan

The present study relates to the impact of capital structure on profitability and the study is focused on the fertilizer sector of Pakistan. This study aims to examine whether the debt and equity financing used for financing operations impacts a company’s profitability in the fertilizer sector of Pakistan. Data from four large companies in the fertilizer sector of Pakistan representing about 89 percent of the market share is used for analysis. Data is collected from published Annual reports of these four companies. Data for eight years from 2006 to 2013 is used for analysis. SPSS is used for analyzing the data and linear regression is applied to generate the results. Regression analysis is used to analyze the relationship between capital structure and the profitability of a company. The output of regression analysis is created in the form of a scatter diagram and tables to interpret the results of the regression. Results suggest that there is no significant relationship between capital structure and profitability of a company in the fertilizer sector of Pakistan. Results also show a significant relationship between current liabilities and the profitability of the company in the fertilizer sector of Pakistan.
 JEL Classification Code: E22, G32, M49

Pengaruh Variabel Determinan terhadap Struktur Modal dan Dampak Struktur Modal terhadap Nilai Perusahaan (Studi Empiris pada Perusahaan Sektor Manufaktur yang Terdaftar di Bursa Efek Indonesia).

This study aims to analyze determinant variables of capital structure and impact of capital structure on firm value. The determinants of capital structure such as tangibility, profitability, non-debt tax shields, uniqueness, and shares price performance are used as independent variables. Capital structure and firm value are used as dependent variables. Data analysis in this research uses regression analysis. The sample s are 62 manufacturing firms listed on Indonesian Stock Exchange from 2012 to 2016. The result shows : 1) tangibility has a positive and significant impact on capital structure; 2) profitability has a negative and significant impac t on capital structure ; 3) non-debt tax shields, uniqueness and shares price performance do not impact on capital structure ; 4) capital structure has a negative and significant impact on firm value https://doi.org/10.26905/jmdk.v6i2.2210

Impact of Capital Structure on Financial Performance: A Study of Select Automobile Companies in India

There exists a debate as to whether capital structure variables and financial performance are associated or not. This study aims to understand the movement of shareholders return in the context of capital structure composition. With fifteen years data and sixteen automobile companies, both pooled regression and panel regression (Fixed effects and Random effects models) have been used and the best fitted model have been selected through Hausman test and Wald Test. The best fitted model was found to be the Fixed Effects model and according to that equity and short-term debt affects return on equity (ROE) positively and negatively respectively and both are highly statistically significant. The model explained almost 57% variation in ROE with no autocorrelation problem in error term. The study is of high significance to the investors as well as firms for decision making as the study reveals ROE is fairly explained by Capital Structure composition.

PENGARUH STRUKTUR MODAL TERHADAP NILAI PERUSAHAAN PADA PERUSAHAAN TEKSTIL DAN GARMEN

Purpose - The purpose of this research are to descript of capital structure and firm value, and to analyze the impact of capital structure to firm value at textile and garment companies for the period 2011-2015.Design / methodology / approach - Method in this research used descriptive and verification methods. Data that used are secondary data from fact book years 2011-2015 with analysis technique using simple linear regression. Sampling in this research use purposive sampling.Findings - The result showed that the capital structure has a positive effect to firm value.Originality -The difference of this research with previous research is on research object, population and research sample, research period, measuring instrument and research result.

The Impact of Capital Structure on Corporate Performance in Nigeria: A Quantitative Study of Consumer Goods Sector

This study examined the impact of capital structure on corporate performance in Nigeria with special focus on consumer goods firm sector of the economy. Multiple regression of ordinary least square (OLS) analytical technique was used to analyse the data. The results from the study showed a negative and insignificant impact of capital structure on corporate performance of the consumer goods firm sector of Nigeria.

Impact of financial leverage on profitability of listed manufacturing firms in China

PurposeThe purpose of the study is to explore how financial leverage influences profitability of 1,503 listed manufacturing firms in China.Design/methodology/approachThe sample of the study is composed of the listed manufacturing firms in China. For the manufacturing firms, the annual financial information from 2008 to 2016 is obtained from the ORBIS database. In this study, initially a simultaneous equation approach is used to control for potential endogeneity. Then, additional regression analyses are conducted with panel data over the period of 2008-2016 using OLS, Fixed-effects, First-difference, Random-effects and Arellano and Bond’s (1991) two-step Generalized Method of Moments (GMM) methods.FindingsThe results reveal that the impact of leverage on profitability is inverted U-shaped. In this inverted U-shaped relationship, the positive impact of financial leverage on profitability could be attributed to tax shield, whereas the negative impact might be because of bankruptcy cost, financial distress, severe agency problems and information asymmetry that the listed Chinese firms suffer from because of some institutional characteristics of China.Research limitations/implicationsFirst, this study focuses on only listed manufacturing firms in China. Second, ownership types are not taken into account in this study.Practical implicationsFirst, the Chinese government should direct its efforts toward developing the bond markets and promoting alternative privately owned loan creditors to state-owned banks. Parallel to this, the transformation process toward market economy should be accelerated to facilitate the privatization of state-owned enterprises (SOEs). In addition to this, development of the bond market and privatization of SOEs will also mitigate the agency conflict between creditors and managers and between shareholders and managers.Originality/valueTo the best of the author’s knowledge, this is the first study which investigates the impact of capital structure on profitability of the listed firms in China.

Impact of Capital Structure on Shareholder Value in Indian Pharmaceutical Industry: An Empirical Approach Through Created Shareholder Value

Enhancing shareholder value is one of the primary goals along with the profitability in the competitive world. Top-level management is striving for creating the higher shareholder value by making efficient decisions. Shareholder value as the key objective of the firm and measures such as economic value added, market value added, shareholder value added and created shareholder value (CSV) have gained popularity in measuring the shareholder wealth creation. Among various financing decisions, capital structure decision plays a vital role, that is, mix of debt and equity. Considering the optimal capital structure with the right balance between equity and debt is always a challenge for the financial managers, and also to run the business successfully by gaining higher profits and enhancing shareholder value. An attempt has been made to analyse the capital structure impact on shareholder value by considering CSV as a shareholder value measure in 77 Indian pharmaceutical firms listed in BSE over a period of 9 years from 2007 to 2015. Using the balanced panel data and regression models, we found that determinants such as debt–equity ratio, long-term debt ratio and short-term debt ratios have positive correlation with CSV and negatively related to total debt ratio in the absence of tax.

Impact of Capital Structure on Profitability:An empirical analysis of listed firms in India

This study aims to empirically examine and analyze the impact of capital structure decision on the firm’s profitability by using a sample of 35 Indian pharmaceutical companies listed on Bombay Stock Exchange (BSE) during the period of 5 years from 2012 to 2016. Regression Analysis is used to measure the extent and nature of the relationship. Capital structure variables used in the study are ratio of long-term debt to total assets (LDA), ratio of short-term debt to total assets (SDA) and ratio of Total debt to total assets (DA) while profitability has been measure by Return on Equity (ROE). Firms Size (SIZE)and Salesgrowth(GROW) are also used as control variables. Results reveal a positive effect of SDA and DA on ROE, while a weak-to-no effect was found of LDA on ROE.

Influence of Capital Structure on Profitability: Empirical Evidence from Listed Nigerian Non-Financial Firms

Sound and effective capital structure is important for sustainable growth and development of any firm. This research work investigates the impact of capital structure on the financial performance of firms in Nigeria. A total of one hundred and six (106) non-financial firms listed on the Nigerian Stock Exchange between 2012 to 2016 were used as sample. Panel data for the selected firms were generated and analyzed using fixed effect model as a method of estimation. The dependent variable for the study is profitability which was measured as Return on Assets (ROA). The independent variables on the other hand are total debts to total assets (TD), total long term debts to total assets (LTD) and short term debts to total assets (STD) used independently. Sales Growth, Firm Growth and Firm Age are used as control variables. Results indicates a negative significant relationship between Total Debt to Asset, and short term debt with return on assets (ROA), on the other hand, an insignificant relationship between long term debt and return on assets.

AN EVALUATION OF THE IMPACT OF CAPITAL STRUCTURE ON FIRMS' PERFORMANCE : A QUANTITATIVE STUDY OF SELECTED NON-FINANCIAL FIRMS LISTED ON THE INDONESIA STOCK EXCHANGE DURING THE PERIOD 2005-2012

Capital structure is an important element for every company and directly affects the firms' performance and financial position. This study aims to evaluate the impact of capital structure on the performance of non-financial firms listed on the Indonesia Stock Exchange during the period 2005-2012. The data consist of 150 publicly listed non-financial firms from 8 non-financial industries in Indonesia. Panel data for the selected firms were generated and analyzed using both fixed effect model and random effect. The result shows that capital structure (DAR) has a significant impact on firms' performance (ROA, ROE, and GPM) and has no significant impact of capital structure on firms' performance caused by industry differences. Infrastructure, utilities, and transportation industry has the strongest industry effect on the impact of capital structure on firms' performance.

An Assessment of the Impact of Capital Structure on Corporate Performance of Nigerian Manufacturing Companies

An Assessment of the Impact of Capital Structure on Corporate Performance of Nigerian Manufacturing Companies