Non-debt Tax Shield Research Articles

Financial factors influencing Profitability of Banque Pour Le Commerce Exterieur Lao Public (BCEL)

The research aimed to investigate the financial factors that influencing profitability of Banque Pour Le Commerce Exterieur Lao Public (BCEL). The objectives of this study are 1) to examine the financial factors that influencing profitability of BCEL in long-term period, and 2) to examine the financial factors that influencing profitability of BCEL in short-term period. The research target group is BCEL, and the instrument used to collect data is the financial statement of the BCEL in the period of 2011-2020 (40 quarter), including capital structure, working capital, firm size, revenue growth rate and non-debt tax shield, which is to find out the financial factors that determine BCEL's profitability. The data of the research model was tested quantitatively by using Engle and Granger method and Error Correction model, which tested its stationary by unit root in Augmented Dickey-Fuller (ADF) test and multi-collinearity by used EViews 9 Program. The results found that the data of each financial factor is stationary in First Difference, except that revenue growth rate is stationary in level order at 99% significant. And firm size variables had been multi-collinearity, thus eliminating the revenue growth rate and the firm size variables from the model. Therefore, 1) the financial factors that influencing profitability of BCEL in long-term period was influenced by three factors the working capital, which has positive relationship with profitability of BCEL; the non-debt tax shield which has positive relationship with profitability of BCEL, capital structure which has negative relationship profitability of BCEL, 2)the financial factors that influencing profitability of BCEL in short-term period was influenced by three factors such as: the change of working capital which has positive relationship with the change of profitability of BCEL, the change of the non-debt tax shield which has positive relationship with the change of profitability of BCEL, the change of capital structure which has negative relationship with the change profitability of BCEL, and the short-term equilibrium deviates to the long-term equilibrium with a velocity of 88.64%.

Long-term tax strategy and corporate acquisition payment structure: An analysis based on the book-tax tradeoff theory

This study examines the relationship between corporate acquirers’ long-term tax strategy (i.e., past behavior) and their subsequent choice of an acquisition payment method (i.e., future behavior) based on a book-tax tradeoff analysis. We find that acquirers with a high (low) level of long-term tax avoidance are more likely to have cash (stock)-financed acquisitions. Political influence attenuates the significance of the above relationship. Among the acquirers who use cash-financed payment method, those who are less tax aggressive tend to include debt to finance their acquisitions, suggesting that debt and non-debt tax shields are substitutes for each other in acquisitions.

Firm-specific and country-level determinants of commercial banks capital structures: evidence from Ethiopia

Since the seminal work of MM irrelevance theory, there has been a long history of controversy among academicians both in developed and developing nations regarding the determinants of capital structure. To this end, the main aim of this study was to investigate firm-specific and country-level determinants of the capital structure of Ethiopian commercial banks. The study adopted an explanatory research design with a quantitative research approach. A panel dataset was obtained from 14 commercial banks, which range from 2010 to 2022. A random effect panel regression result revealed that tangibility, non-debt tax shields, growth, and interest rate had a positive and significant effect, while the gross domestic product had a negative and significant effect on leverage which is used as a measure of capital structure. Among the independent variables tested, ROA, liquidity, effective tax rate, risk, and inflation have an insignificant effect on the capital structure of the selected commercial banks. The study will have implications for managers of commercial banks, legislators, regulators, and other interested parties that can use the study's conclusions to help them make well-informed capital decisions and implement the necessary measures to enhance the financial performance of Ethiopian banks with an optimal ratio of debt to equity.

Determinants of Capital Structure: A Case of Nepalese Non-Financial Firms

This study examines the determinants of capital structure in the context of Nepalese non-financial firms. Short term debt ratio and long term debt ratio are selected as the dependent variables. The selected independent variables are assets tangibility, liquidity, non-debt tax shields, firm size, profitability, Tobin’s q and firm’s age. The study is based on secondary data with 105 observations from 7 hydro power firms, 3 hotel industries and 4 manufacturing firms listed in Nepal Stock Exchange (NEPSE). The data were collected from annual reports of the selected non-financial firms. The correlation coefficients and regression models are estimated to test the significance and importance of determinants of capital structure in the context of Nepalese non-financial firms. The study showed that assets tangibility has a positive impact on long-term debt ratio and short-term debt ratio. It indicates that higher the assets tangibility, higher would be the long-term debt ratio and short-term debt ratio. Similarly, liquidity has a positive impact on long-term debt ratio and short-term debt ratio. It indicates that increase in liquidity leads to increase in long-term debt ratio and short-term debt ratio. Likewise, non-debt tax shields has a positive impact on long-term debt ratio and short-term debt ratio. It indicates that increase in non-debt tax shields leads to increase in long-term debt ratio and short-term debt ratio. Further, firm size has a positive impact on long-term debt ratio and short-term debt ratio. It indicates that increase in firm size leads to increase in long-term debt ratio and short-term debt ratio. In addition, profitability has a positive impact on long-term debt ratio and short-term debt ratio. It indicates that increase in profitability leads to increase in long-term debt ratio and short-term debt ratio. Likewise, Tobin’s q has a positive impact on long-term debt ratio and short-term debt ratio. It indicates that higher the Tobin’s q, higher would be the long-term debt ratio and short-term debt ratio. Moreover, firm’s age has a negative impact on long-term debt ratio and short-term debt ratio. It indicates that higher the firm’s age, higher would be the long-term debt ratio and short-term debt ratio.

Climate risks and corporate tax shields

ABSTRACT This study investigates the influence of climate risks on the tax shields of US-based firms. The findings show a significant negative correlation between climate risks and debt-related tax shields (DTS), indicating reduced reliance on debt financing due to potential financial risks and regulatory uncertainties. Conversely, non-debt tax shields (NDTS) demonstrate a positive relationship with climate risks, highlighting firms’ proactive efforts to seek tax benefits from alternative sources. Additionally, the study uncovers distinct dynamics for high and low-leveraged firms in utilizing tax advantages. The research contributes valuable insights into the intricate interplay of climate risks, tax benefits, and corporate financing decisions.

DETERMINANTS OF CAPITAL STRUCTURE IN ENERGY SECTOR: EVIDENCE FROM BORSA İSTANBUL

This study aims to examine the determinants of capital structure in the energy sector of Turkey and their relation to relevant theories. The panel data analysis method was used to analyze annual data from 8 energy companies operating in Borsa Istanbul between 2014 and 2021. Results of the analysis showed that while the median debt ratio on a sector basis affects leverage positively; asset structure, growth opportunities, profitability, liquidity, industrial production and distribution index, and GDP annual growth variables negatively affect leverage. No significant relationship was found between the size of the business, non-debt tax shield, inflation, tax revenue, and leverage. It has been noted that the findings are in line with the previous studies, and the capital structure of the Turkish energy sector is generally compatible with the pecking-order theory.

Analisis Determinan Struktur Modal pada Perusahaan Property dan Real Estate

The aim of this research is to determine the influence of asset tangibility, liquidity, non-debt tax shield, business risk, growth and firm size on the capital structure of property and real estate sector companies listed on the Indonesia Stock Exchange in 2014-2021. A dynamic panel data regression model with the Generalized Method of Moment (GMM) estimator is applied in this research. The results show that determinants simultaneously influence capital structure. Asset tangibility, growth and firm size partially have a significant effect on capital structure, while liquidity, non-debt tax shield and business risk partially have no effect on capital structure. Therefore, the formation of an optimal capital structure is expected to take into account tangible assets, growth rate and company size in order to maximize company value.

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.

Unveiling the Changing Capital Structure Dynamics in the Oil and Gas Industry: Evidence from Pakistan

Firm-specific considerations impact decisions about capital structure. A few investigations have been done in Pakistan's oil and gas sector. Most studies have examined the effect on non-financial firms and the textile industry. As this sector is very attractive for investors, The influences on capital structure decisions must be considered. In this study, only firm-specific factors are considered for analysis. The effect of asset structure, financial distress (earning volatility), non-debt tax shield, liquidity, firm size, profitability, and firm growth on capital structure decisions are examined. For this, data ranging from 2007 – 2021 of the firms working in Oil and Gas sector of Pakistan was used. The pool regression approach was applied. As per the results, tangibility and liquidity have an inverse relationship; non-debt tax shields and firm size directly affect profitability, and growth does not impact the capital structure.

Analisis Determinan Struktur Modal Perusahaan Manufaktur Sektor Aneka Industri yang Terdaftar di Bursa Efek Indonesia (BEI) Tahun 2016-2022

The purpose of this study was to analyze the effect of profitability, tangibility, growth opportunity, non-debt tax shield (NDTS), uniqueness on the company's capital structure. The data used in this research is panel data taken from the financial reports of manufacturing companies in the various industrial sectors listed on the Indonesia Stock Exchange (IDX) from the 2016-2022 period. By using non-probability sampling method with purposive sampling technique, a sample of 20 companies was obtained. The method used is panel data regression analysis method. In this research, testing and selection of the best model was carried out using the Chow test and Hausman test, and the result is that the Fixed effect model is the best model. The results showed that profitability, non-debt taxshield (NDTS) and uniqueness had a negative and significant effect on capital structure, with each value of the coefficient of profitability, non-debt taxshield (NDTS) and uniqueness, tangibility has a positive and significant effect while growth opportunity has a positive and insignificant effect with each tangibility coefficient value, growth opportunity by testing using a significance level of 5%. Simultaneously, profitability, tangibility, growth opportunity, non-debt tax shield (NDTS), uniqueness significantly influence the capital structure with a coefficient of determination of 82.7746%.

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.

Corporate Leverage Decisions in Malaysian Property Sector: Before and During Pandemic

Financial constraints and leverage decisions have challenged the survival and expansion of property businesses, especially during unfavorable economic conditions. This study aims to investigate the factors of corporate leverage in the Malaysian property sector from 2015 to 2021, covering the coronavirus disease (COVID-19) pandemic. The sample size of this study consists of 55 top-listed property companies in Bursa Malaysia. Six pre-determined factors from the current literature include profitability, firm size, tangibility of assets, liquidity, growth opportunities and non-debt tax shields. On top of the full-period test, this paper examines the possible changes in the relationship before and during the COVID-19 pandemic. Overall, our panel data analysis shows that firm size and growth opportunities significantly positively affect leverage, while liquidity negatively correlates with leverage. In our sample, profitability and non-debt tax shields do not exhibit significant roles in the relationship with corporate leverage. Our conclusion is robust across the periods of study and regression models. It contributes updated empirical evidence to the already scarce studies of financing decisions in the sector, which plays a crucial role in driving the nation’s economic growth.

Factors influencing capital stucture on F&B company which implementing sustainable environmental green practise in Indonesia

The application of green practices in food and beverage service aims to create a clean environment. Green practice can be defined as a practice that consists of using energy and water efficiently, recycling, sustainable food, reducing waste and pollution. Not all F&B sector companies in Indonesia that are listed on the stock exchange implement Sustainable Environmental Green Practices. This article will look at factorsprofitability, non-debt tax shields, company’s size, and asset tangibility on capital structure pada Perusahaan F&B yang menerapkan Sustainable Environmental Green Practise This study uses annual data from food and beverage companies which implementing Sustainable Environmental Green Practise in Indonesia obtained from Indonesia Stock Exchange. The companies are cautiously selected with purposive sampling method. This research reveals that profitability and non-debt tax shields exhibit a notable negative influence on capital structure, whereas company size shows a positive effect. Intriguingly, the findings indicate that asset tangibility does not exert a significant impact on the capital structure. To conduct our analysis, we used the panel data regression method in EViews. Our research provides valuable insights for managers of food and beverage companies in Indonesia, assisting them in making informed decisions on their capital structure.

Analyzing the Impact of Employee Perks on Organizational Turnover in the Pharmaceutical Sector of Bangladesh

This study explores the impact of employee benefits on organizational earnings within the pharmaceutical sector in Bangladesh, an emerging economy. To conduct this investigation, researchers gathered pertinent data from the annual reports of 26 pharmaceutical companies listed on the Dhaka Stock Exchange (DSE), spanning the period 2017–2021. The primary variable under scrutiny is the employee benefits ratio (EBR), calculated by dividing the total benefits, excluding regular salaries and wages, by the total revenue. Additionally, the study examines the association between the salaries and wages ratio (SWR) and firm turnover. Focusing on these two key variables, the research also incorporates various control factors— namely, leverage, firm age, tangibility, liquidity, firm size, growth, and non-debt tax shield—to enhance the model's robustness. Organizational turnover are measured using return on assets (ROA) and return on equity (ROE) as the dependent variables. The panel-corrected standard error regression analysis reveals that the employee benefits ratio (EBR) and salaries and wages ratio (SWR) exert a significant positive influence on ROA. This implies that increased salaries and additional benefits serve as motivational factors for employees, fostering job satisfaction and enhancing performance. However, these variables do not demonstrate a significant association with ROE. Furthermore, factors such as firm age, leverage, tangibility, liquidity, and firm size exhibit a notable impact on firm performance. These findings collectively contribute to a comprehensive understanding of the relationship between employee benefits, organizational turnover and will help organizations to design their incentive programs effectively.

INVESTIGATING DEBT RATIOS AND THEIR DETERMINANTS IN THE CAPITAL STRUCTURE OF INDIAN FMCG COMPANIES: AN EMPIRICAL STUDY

This research paper investigates the determinants of capital structure within Indian FMCG companies, utilizing a representative sample of firms listed on the Bombay Stock Exchange (BSE) over a decade (2011–12 to 2020–21), sourced from the CMIE Prowess database. Employing a panel data methodology, the study evaluates indices of corporate financial leverage, including short-term debt, long-term debt, total debt, and the debt-equity ratio. The findings indicate that firm-specific variables such as size, asset tangibility, sales growth, profitability, and non-debt tax shields (NDTS) exhibit significant relationships with financial leverage in the Indian FMCG sector. Specifically, determinants of the short-term debt ratio (SDR) include firm size, age, NDTS, profitability, tangibility, and liquidity. The debt-equity ratio (DER) is significantly influenced by profitability and the effective tax rate, while total debt ratio (TDR) is associated with firm age, size, effective tax rate, asset turnover ratio, and liquidity. Additionally, long-term debt ratio (LDR) is significantly linked to firm size, asset turnover ratio, tangibility, and liquidity. The statistical analysis demonstrates that fixed effects panel regression models are the most suitable for representing SDR, LDR, TDR, and DER. Consequently, this study contributes to the existing body of knowledge on capital structure, offering empirical insights that are particularly relevant for Indian FMCG firms as they navigate financial decision-making processes informed by recent data through 2020–21.

Determinants of Debt Financing Decision in Sri Lankan Listed Companies

The primary objective of an organization is to maximize wealth for its shareholders, and for this purpose, the finance manager makes several financial decisions. Financing for its assets is one of the significant financial decisions that concentrates financing with owners' equity or debt from external parties. Several factors influence the financing decision, even though determinant factors of debt financing decisions may differ from time to time due to the changing internal environment of organizations. Therefore, the study aims to identify the internal factors determining the debt financing decisions in Sri Lankan listed companies. Colombo Stock Exchange (CSE) consisted of 294 listed companies in 2022, and data were collected from selected 100 non-financial companies from 2008/09 to 2020/21. The dependent variables are a total debt to total assets (Debt ratio), and long-term debt to total assets, and the independent variables are profitability, non-debt tax shield (NDTS), tangibility, growth, size, reputation, liquidity, and risk. Descriptive statistics, correlation, pooled, fixed, and random effect models were used to prove the objective. The results reveal that NDTS and growth are positive, and profitability, tangibility, size, reputation, liquidity, and risk negatively influence total debt decisions. The size of the firm negatively influences the long-term debt decision. Therefore, the study concludes that internal factors are essential to determining the debt decision, and the study will benefit the finance managers for the financing decision and to select the optimum capital structure.

ANALYSIS OF THE VALIDITY OF TRADE-OFF AND PECKING ORDER THEORIES IN CAPITAL STRUCTURE DECISIONS OF SUSTAINABLE COMPANIES

In the study, it is aimed to test the validity of the Pecking Order Theory and Trade-Off Theory, which are among the theories on which the capital structure decisions of companies, which are extremely important in terms of firm value, are based, on sustainable companies included in the BIST Sustainability Index, since they carry out activities to reduce the cost of capital. In the study, the total indebtedness ratios, long-term indebtedness ratios and short-term indebtedness ratios of 40 companies included in the BIST Sustainability Index between 2015-2021, as well as liquidity, asset structure, non-debt tax shield, tax, profitability ratio, change in assets, firm size and the relationship between firm risk is examined. In general, the capital structure preferences of sustainable firms support the Trade-Off Theory. In addition, it was revealed that the dummy variable created for the periods when companies entered the BIST Sustainability Index was statistically significantly and positively related to their borrowing behavior. This result is interpreted in the direction of an increase in the borrowing rates of the companies after they are included in the index.

Firm Structural Attributes and Capital Structure Adjustments among Listed Manufacturing Firms in Nigeria using Static and Dynamic Approaches

The study examined the effect of firm structural attributes on capital structure adjustments of Nigerian listed manufacturing companies. Out of the 56 listed firms 35 listed manufacturing firms were selected using the purposive sampling approach. Dynamic and static estimation techniques were applied. The results from both static and dynamic panel data revealed that assets tangibility had a positive and significant effect on capital structure adjustments with (t= 4.463; t = 2.965; p <0.05). Non-debt tax shields (t= -2.831; t= -4.478; p <0.05) had negative but significant effect on capital structure adjustments. Furthermore, static result showed that firm size (t= -5.617; p <0.05) had negative but significant while dynamic results revealed firm size (t=6.956; P<0.05) had a positive and significant effect on capital structure adjustments. This study concluded that structural attributes serve as firm-level determinants to understanding of factors influencing the capital structure and speed of adjustments of listed companies in Nigeria. It was recommended that management of firms need to expand in size and investing in tangible assets to enhance their profit level, this will enable them to enjoy large profit levels with a large reduction in debt ratio.

Determinants of the Capital Structure of the Oil and Gas Industry in Malaysia: The Moderating Role of Earnings Volatility

This paper examines the relationship between firm-specific factors and the capital structure of the oil and gas (O&G) industry in Malaysia.. In addition, this paper adds to the literature by investigating the moderating effect of earnings volatility on the relationship between firm-specific factors and capital structure. Random effect models with cluster-robust standard errors were used to analyze this relationship. Using the secondary data from 30 O&G firms listed on the main market of Bursa Malaysia collected between 2010 and 2019 (10 years), the results show that profitability, asset tangibility, liquidity, and firm size significantly impact the capital structure of the O&G industry in Malaysia. However, growth opportunities, non-debt tax shields, and firm age had no significant impact. In addition to this, earnings volatility significantly moderated the relationship between asset tangibility and leverage. In short, when earnings volatility acts as a moderating variable, the relationship between asset tangibility, which is otherwise positive without moderation, turns negative. This study is useful for policymakers in the O&G industry in Malaysia and will help their managers to decide on capital structure for sustainable growth.