Non-debt Tax Shield Research Articles

Does Debt Financing Affect Firms’ Profitability in Pakistan?

본 연구는 파키스탄 카라치 증권거래소에 상장된 기업의 재무적인 의사결정에 영향을 미치는 요인은 무엇이며 또한 이러한 재무적인 의사결정이 적절한지를 연구하는 데 그 목적이 있다. 이러한 연구목적을 위해서 2003년부터 2014년 까지 금융회사, 파산회사, 신설회사, 자본잠식회사 등을 제외한 276개의 기업의 표본을 선택하여 실증분석을 실시하였다. 실증분석 결과에 의하면 이들 기업의 유동성, 고정자본비율, 감가상각비율, 판매액 증가율은 부채액과 음(-)의 관계가 있는 것으로 나타났고, 이와 반대로 기업규모는 부채액과 정(+)의 관계가 있는 것으로 나타났다. 아울러 2개의 더미변수를 이용하여 부채와 이윤과의 관계를 분석해 보았다. 규모가 크고 위험성이 적고 성장성이 큰 기업은 부채가 이윤에 큰 영향을 미치지 않고 있어서 이들 기업의 부채조달에 관한 의사결정은 비교적 적절하다고 할 수 있다. 이에 비해 규모가 작고 위험성이 크고 고정자본비율이 높고 감가상각비율이 낮고 성장성이 작은 기업은 부채가 이윤을 감소시키는 것으로 나타나고 있어 이들 기업의 부채조달에 관한 의사결정은 적절하지 않다고 할 수 있다. 본 연구의 이러한 결과는 재무적 의사결정을 하는 경영자들에게 유용한 정보를 제공할 것으로 판단된다.

Research on the Factors Influencing on the Selective Tendency of Financing Method—Based on the Listed Companies’ Empirical Evidence in China

This paper use stepwise regression to do empirical analysis of the factors influencing on the selective tendency of financing method, based on the sample of China’s listed companies in 2009-2013. Research findings show that profitability, information asymmetry, operating and financing risks, non-debt tax shield and cost of equity have different corresponding significance and correlation relationships with the degree of internal, debt or equity financing. Financing risk is the most factor influencing the tendency of internal and debt financing, and Profitability influences equity financing most.

Determinants of Capital Structure for Firms that Provide High Quality Sustainability Reporting

<p>The main objective of this chapter is to understand the determinants of the capital structure of the firms that provide high quality corporate-sustainability reporting. First, all the non-financial companies quoted in Borsa Istanbul (BIST) will be studied in order to see the full picture of the market. Second, all the firms that are included in the computation of the BIST Sustainability Index (XUSRD) will be analyzed as the firms that provide high quality corporate-sustainability reporting. In line with the literature on capital structure variables such as profitability, size, risk, growth, tangibility, non-debt tax shield and ownership structure were picked as the possible determinants of capital structure. Moreover, long- and short-term debt ratios were selected as the proxies for capital structure. Our findings indicate that when capital structure is measured by long-term debt, profitability, size, tangibility, the ratio of free-float outstanding value to total assets, and institutional ownership percentage become the main determinants of capital structure for the whole market. For sustainability index firms, when capital structure is measured by the long-term debt ratio, the main determinants of capital structure become non-debt tax shield and tangibility. On the other hand, for the same type of firms, when capital structure is measured by the short-term debt ratio, tangibility and the ratio of free-float outstanding value to total assets become the main determinants of capital structure.</p>

Studi Eksistensi Dynamic Trade-Off Capital Structure Pada Perusahaan Non-Finansial Di BEI Periode 2002-2009

This research aims to analyze the factors which affect capital structure and also discover the existence of dynamic trade-off capital structure. Variables which use are profitability, tangibility, size, growth, non-debt tax shields, and operating risk. This research use quantitative approach by using multiple linier regression. This research use samples in the form of non-financial company which are listed in Indonesian Stock Exchange on 2002-2009. Final samples which are utilized in this research are equal to 375 observation. Research finding indicates that profitability, tangibility, and size doesn’t affect significantly to capital structure. Growth, non-debt tax shields, and operating risk give significantly negative effect to capital structure. This research also finds that the company doing adjustment exceeds the level required to achieve the optimum debt (over-adjustment) so that the company’s capital structure are not optimum.

The effect of taxes on the debt policy of spanish listed companies

This study explores the role of taxes in explaining companies’ financing decisions. We test whether the corporate tax shields explanation of capital structure is applicable to firms listed on the Spanish stock exchange over the period 2007–2013. Taxes are found to be economically and statistically significant determinants of capital structure. Our results suggest that marginal tax rates affect the debt policies of Spanish listed companies, and the existence of non-debt tax shields constitutes an alternative to the use of debt as a tax shelter. Consistent with theoretical expectations, there is a stronger relation between debt and taxation in less levered firms. Finally, we empirically estimate the impact of the new thin-capitalization rule put forth by the Spanish government in 2012 on the financing behaviour of Spanish listed companies. Our empirical evidence supports the existence of a tax reform effect, where companies affected by interest deductibility limitations reduce their leverage more than companies that are not affected.

Analisis Faktor-Faktor yang Mempengaruhi Struktur Modal Perusahaan Barang Konsumsi di BEI tahun 2002 – 2011

The objective of this empirical study is to explore factors affecting the capital structure of consumer goods manufacturing companies and to investigate whether the capital structure models based on prior researches provide convincing explanations for capital structure decisions of the Indonesian companies.We reviewed several capital structure theories (the trade-off theory, pecking order theory, agency theory, and signaling theory) to identify factors that determines capital structure for consumer goods companies in Indonesia. The research was conducted using panel data procedures for a sample of 29 companies that listed on the Indonesian Stock Exchange during 20022011.The findings suggest that profitability and tangibility are related negatively to the debt ratio, size and age are related positively to the debt ratio, while non-debt tax shields and liquidity do not appear to be related to debt ratio. The findings support mostly the pecking order theory to explain the capital structure of Indonesian consumer goods manufacturing companies. The findings of this research also clearly demonstrate the importance of capital structure decisions for financial management. This can help managers to make optimal capital structure decisions.

Determinants of capital structure choice: Empirical evidence from Vietnamese listed companies

This paper examines the impact of firm-specific and industry characteristics on capital structure during a sample period spanning from 2007 to 2013. We used panel regression with fixed effects and found strong evidence that capital structure is most affected by firm-specific factors such as tangibility, non-debt tax shields, liquidity, firm size, taxes paid, profitability, Tobin’s Q ratio, and growth assets. In addition, the empirical results indicate that firms operating in different industries have dissimilar capital structures.

The Determinants of Capital Structure: Evidence from Selected Listed Companies in Sri Lanka

This research examines the determinants of capital structure of selected listed companies in Sri Lanka. The capital structure of 55 companies listed in Colombo Stock Exchange (CSE) is empirically examined using the fixed effects model. Based on the findings of the panel data analysis during the period of 2003-2012, Profitability exhibits statistically significant of inverse relationship with leverage while firm size and growth shows statistically significant of positive relationship with leverage for selected listed companies in Sri Lanka. Non-debt tax shields and tangibility indicate insignificant impacts on leverage. The results of this empirical study shows that there is robust evidence to support the pecking order theory by manufacturing based companies on the capital structure determinant of profitability variable, and growth variable also strongly supports to the association of the pecking order theory. Though, trade-off theory also cannot be rejected because of the correct estimate of the positive sign of size variable of manufacturing based companies. Thus, implication of pecking order theory is more appropriate in Sri Lankan perspective.

Capital structure determinants: Evidence from Spanish listed firms

Using annual data that records leverage levels of 77 non-financial firms in Spain prior and during the financial crisis, we demonstrate that tangibility, size, volatility, profitability, non-debt tax shield, growth opportunities and industry effect are factors that determine the capital structure of a company. Our results show that leverage is positively and statistically significant with size, non-debt tax shield and industry-effect. Our findings illustrate that profitability; growth opportunity and volatility are negatively and statistically significant with the debt issues on the balance sheet of these public traded firms. We discuss the extent to which these results are consistent with empirical evidence illustrated by prior studies with reference to the 2008 financial crisis. Also, during the 2008 financial crisis the cost of financial distress is high, and as such when size is used as a proxy for the probability of bankruptcy a negatively relationship is inevitable. Lastly, majority of the listed firms were more attached by equity finance as a result of the reluctant behavior of the international investors and the falling Spanish economy.

企业生命周期与中小企业资本结构

生命周期对企业财务行为有着重要影响。本文以571家中小企业板制造业企业2010~2014年的数据为样本，用现金流量法界定企业所处生命周期，并对不同阶段的资本结构及其影响因素进行对比分析。实证结果表明，相对于成熟期和衰退期，成长期企业资产负债率和长期负债率更高。在企业生命周期的不同阶段，资本结构的影响因素也存在差异：成长期企业资产负债率与成长能力正相关，与非债务税盾负相关，而成熟期和衰退期企业资产负债率则受到盈利能力的负向影响；成长期和衰退期企业长期负债率受企业规模的正向影响以及成长能力和非债务税盾的负向影响，而成熟期企业长期负债率则与盈利能力负相关。 The enterprises life cycle always has a significant effect on financial behavior. In this paper, we construct a panel data containing 571 listed SMEs during 2010 and 2014 as samples. We use cash flow structure to measure life cycle of our samples, and aim at exploring and comparing the decisions of capital structure of SMEs in different life cycle. It turns out that compared with maturation and recession stages, the growth stage has higher Debt-Asset Ratio (DAR) and Long Term Debt Ratio (LTD); influencing factors of the capital structure are various among different stages. The growth has a positive effect on DAR in growth stage while non-debt tax shield has a negative one. But the probability and DAR in maturation and recession stages are negatively correlated. Besides, the firm’s size has positive effects on LTD in growth and recession stages while the non-debt tax shield and growth have negative ones. Probability is negatively correlated with LTD in maturity stage.

A Study on Impact of Leverage ON Profitability: Empirical Evidence from Select Pharmaceutical Companies in India

This empirical study evaluates the relationship between profitability and leverage of selected pharmaceutical companies in India. The study finds that by studying specific industry's leverage, one can ascertain unique attributes, which are usually not apparent in the combined analysis of many sectors. This study has analyzed 30 companies in the pharmaceutical industry, which are selected based on the consistency of the data for the period 2006 – 2015 using statistical tools like Descriptive Statistics, Multiple Correlation and Multiple Regression Analysis. Seven regressors i.e., size, growth rate, long term debt ratio, total debt ratio, tangibility, non-debt tax shield and interest coverage ratio are employed to examine their effects on different profitability indicators such as return on assets, return on equity and earnings per share. The empirical results revealed that independent variables such as, size and total debt ratios have statistically significant relationship with the different proxies of profitability and they determine the profitability to a great extent.

New evidences on determinants of capital structure from the Indian manufacturing industry

In the backdrop of Make in India push by Indian government the purpose of this study is to examine the determinants of capital structure towards a better understanding of financing decisions to be undertaken by the Indian manufacturing firms. The data for the analysis is drawn from COSPI manufacturing index of Centre for Monitoring Indian Economy (CMIE). Our sample is an unbalanced panel of 1077 firms over the period 2000-01 to 2012-13. We apply system-GMM to study different factors that affect the leverage decision of firms in India. The findings of the study reveals that the choice of optimal capital structure can be influenced by factors such as profitability, size, growth, tangibility, non-debt tax shields, uniqueness and signal. We also find the existence of both pecking order theory and static trade-off theory in the case of Indian manufacturing firms. The results thus obtained are robust across the different proxies of leverage

Capital Structure Dynamics of Listed Banks in Ghana

The aim of this paper is to provide a comprehensive review on Capital Structure Dynamics of Listed Banks in Ghana. The study examines the determinants of capital structure, the significance of performance on equity and leverage. Seven (7) Banks on the Ghana Stock Exchange were used for the periods 2005 to 2012 The fixed and random effect regression technique was used. The study found Asset Tangibility and Non-debt tax shield to have a positive relationship with equity. The study also discovered that, the size of a bank was a significant determinant of equity and also has a positive association with equity. There was a positive relationship between performance and equity. There was also a negative relation with Growth opportunity of a bank, Dividend policy and equity. Performance and size of a bank are the determinants of leverage. There was a statistically significant positive relation with leverage and a negative statistically significant relation with the size of a bank. The study found Leverage to have positive relationships with Asset Tangibility, Non-debt tax shield and Dividend ratio. The study also discovered a negative association between Growth Opportunity of a bank and Leverage.

Capital structure determinants: an empirical study in a growing economy of the emerging market

This study determines the variables influencing capital structure of firms. Firms would adapt themselves according to the economy and formulate a capital structure that would maximise their shareholder wealth. A total of 11,341 firm years from the year 2000 to 2015 are taken. This study reviews various theories (trade off theory, agency theory, pecking order theory) of capital structure. The results of this study suggest that profitability, non-debt tax shield, growth opportunity, liquidity and age of firm are negative and significant whereas size, assets tangibility is positive significant impact on the capital structure of firms. The findings allude to the reinforcement of pecking order theory which leads to establish that capital structure models forged in developed countries. It would be a helpful reference to managers/executives responsible for designing the capital structure of a company in such a corporate environment which can help to achieve the objective of shareholder's wealth maximisation.

Capital Structure of Real Estate Firms in Chinese Stock Market

This paper investigates the determinants of capital structure of real estate firms in China. An empirical study on determinants of capital structure of real estate in Chinese listed firms is conducted using a relatively regression of accounting data for 44 A-share financial listed companies over the quarter from 2008 to the third quarter of 2011. First, this paper identifies that the pecking order theory in China is different from western countries. Second, the results show that profitability, non-debt tax shields and liquidity are significant influence factors in financial sector, while others like size, growth, tangibility and non-circulating share should be judged by the size of the company. Moreover, firm size and non-circulating shares are almost positively related to the corporate leverage ratio. It is also found that Chinese institutional characteristic affects the capital choice decision and the largely state ownerships do affect capital structure choices.

Capital Structure Decisions and Its Impact on Dividend Payout Ratio during the Pre- and Post-period of Recession in Indian Scenario: An Empirical Study

In this study, an attempt has been made to investigate the influence of capital structure decisions on dividend payout ratio for the companies belonging to BSE500 in India during the pre- and post-period of the recent global recession. The pre-recession period has been taken from 2001–2002 to 2006–2007 while the post-recession period from 2007–2008 to 2012–2013. The dependent variable taken into consideration is the Dividend Payout ratio and 10 independent variables which might have some impact on the dependent variable taken into consideration are Business Risk, Size (Log Sales), Size (Log assets), Growth Rate (Assets), Interest Coverage Ratio, Degree of Operating Leverage, Financial Leverage, Return on Assets, Tangibility and ‘Non-Debt Tax Shield. Logistic regression has been utilized in this study. It is found from the study that Growth Rrate (Assets) and Profitability (Return of Assets) are significant variables influencing the dividend payout ratio in the prerecession period, while Profitability (Return of Assets) and Financial Leverage are significant variables influencing dividend payout ratio in the post-recession period.

How dynamic capital structure works in China?

We analyze the capital structure decision for 615 Chinese listed firms covering a period from 2008 to 2013. We posit that capital structure decisions are inherently dynamic. We apply both the book total debt and market total debt to formula dynamic capital structure models. Using a system GMM estimator we find: (i) firms adjust deviations from an optimal targets with the different speeds for book and market debts; (ii) total debt leverage has changed in downward trend; (3) firm size and non-debt tax shield have become the most important determinants of debt leverage; (4) dividend is not used for tunnel cash from debt-holders to shareholders; (5) human recourse factors emerged with significant influence on capital structure decision. This extension allows us to establish new evidence of determinants of capital structure from a human source perspective

Determinants of debt across sectors: Evidence from Chinese a-share listed firms

Almost all studies carried out so far in China regarding debt examinations do not recognize difference among business sectors. China completed the second split share structure reform of listed firms by the end of 2007, which converted 97% non-tradable shares into tradable shares. However, there has been no study conducted to analyze whether determinants of debt have changed since the reform. Therefore, this study aims to find determinants of debt of listed firms in China by analyzing data after the completion of reform across sectors. Data sample used in this study includes all A-share listed firms in China from 2008 to 2012. After deleting missing values, there are in total 547 firms with 2,735 observations, which are taken as the initial full data sample. The method employed by the study is a panel data model, because it has the advantage of taking both cross-section and time series into consideration. In addition, a Hausman test is employed to identify whether a model with fixed effects or random effects should be used for analysis. The main findings are: (1) Total debt is mainly dominated by short-term debt, while long-term debt is lowly financed. During 2008 - 2012, total debt as well as long-term debts increase, but short-term debt decreases; (2) Determinants have different effects on long-term and short-term debts; (3) The effects of determinants are different across different sectors, indicating that specific sectorial factors are at work; (4) The debt decision tends to follow the static trade-off theory with consideration for effects of non-debt tax shield and profits. In general, both long-term and short-term debts are affected positively by profits at different levels. Firm size is the most important determinant and is positively related to long-term debt, while non-debt tax shield contributes negatively to short-term debt. This paper presents an in-depth understanding of debt decision in listed firms in China using a joint model to test the interaction between employee productivity and debt. It, therefore, provides a new perspective on investigations of debt decisions of firms across sectors.

Capital Structure's Determinants and Financial Crisis in Spain

Using annual data that records leverage levels of 77 non-financial firms in Spain prior and during the financial crisis, we demonstrate that tangibility, size, volatility, profitability, non-debt tax shield, growth opportunities and industry effect are factors that determine the capital structure of a company. Our results show that leverage is positively and statistically significant with size, non-debt tax shield and industry-effect. Also, our findings illustrate that profitability, growth opportunity and volatility are negatively and statistically significant with the debt issues on the balance sheet of these public traded firms. We discuss the extent to which these results are consistent with empirical evidence illustrated by prior studies with reference to the 2008 financial crisis. Finally, a negative correlation between leverage and profitability is consistent with pecking-order hypothesis rather than with static trade-off models.

Determinants of capital structure: an empirical evaluation from India

Purpose – The purpose of this paper is to study the key determinants of capital structure for Indian manufacturing firms and which theory implications, i.e. trade off vs pecking order are more applicable in current Indian manufacturing sector scenario. Design/methodology/approach – A sample size of 422 listed Indian manufacturing companies on Bombay Stock Exchange has been considered to do the empirical evaluation. A ten year period from 2003-2004 to 2012-2013 and annual financial standalone data have been considered for study. Ratio analysis and panel data approach have been applied to perform the empirical evaluation. Total debt to total capital and total debt to total assets are used as the proxy for firm financial leverage. Findings – It was empirically found that size, age, asset tangibility, growth, profitability, non-debt tax shield, business risk, uniqueness and ownership structure are significantly correlated with the firm financial leverage or key determinants of capital structure in Indian manufacturing sector. Also, other variables like dividend payout, liquidity, interest coverage ratio, cash flow coverage ratio (CFCR), India inflation and GDP growth rate are empirically found to be insignificant to determine the capital structure of Indian manufacturing sector. There is no single theory implications, i.e. trade off vs pecking order which can explain the capital structure nature of Indian manufacturing sector and rather it is a mix of both the theories. Originality/value – The findings of the study would enhance the literature on capital structure and is significant for the Indian manufacturing firm’s decisions as it includes the most recent data and covers the period of both pre- and post-recession of 2008-2009.