Non-debt Tax Shield Research Articles

Influence of Capital structure on Firm Performance: Empirical Evidence from Indian Manufacturing Industry

The study is an attempt to examine empirically the impact of capital structure on firm performance using a data sample of 56 Indian manufacturing firms listed on Bombay Stock Exchange, National Stock Exchange or both during 2010-2022. The study uses three financial performance measures namely return on assets, return on capital employed and earnings per share as dependent variables. The eight capital structure measures such as long-term debt, short-term debt, interest coverage ratio, current ratio, growth, tangibility, non debt tax shield and size are used as independent variables. The data are divided into three sectors including steel, cement and automobile. The correlation analysis and multiple regression analysis are used in the study to estimate the impact of capital structure on firm performance. The empirical result shows that firm performance has a negative relationship with short and long term debt in most of the studied sectors. In the automotive sector, long-term debt is positively related to return on capital employed. Liquidity is negatively related to firm performance in the cement and automotive industries. Non-debt tax shield is positively related to firm performance as measured by return on capital employed and earnings per share in the cement and automotive industries, respectively, while interest coverage ratio is positively correlated with firm performance in the cement industry.

DETERMINANTS OF CORPORATE GROWTH: EMPIRICAL INVESTIGATION OF THE SOUTHEAST EUROPEAN COMPANIES

The growth of companies is always a current and challenging topic for corporate managers who tend to maximize growth. In order for companies to grow they need to undertake investment projects with a positive NPV that will increase production capacity, output and sales. But, on the other hand, the financing of new assets should be in a way that will not deplete financial resources and will enable sustainable growth. In this paper, we investigate the internal company-specific determinants of corporate growth in Southeast Europe on a sample of 791 companies. We found that SEE companies achieved moderate annual growth of 6.73% per year. This is primarily and mostly due to the small volume of capital investments, which in turn is a result of poor operating performance and low profitability. Retained earnings are the primary internal source of investment financing along with additional borrowing for these companies that have no other financing opportunities available, operating in underdeveloped financial market. The growth of the companies in SEE is positively affected by capital investments, financial leverage, operating cash flow, ROA, ROE, firm’s size, net profit margin and assets turnover. The growth of the companies in SEE is negatively affected by non-debt tax shield, tangibility, account receivable collection period, inventory conversion period and cash conversion cycle. Companies in SEE need to improve working capital management practices, to increase its effectiveness and efficiency, in order to generate greater profitability and consequently greater company growth.

Pengaruh Kepemilikkan Manajerial, Ukuran Perusahaan, Perisai Pajak Non Hutang, dan Leverage Operasi terhadap Struktur Modal

This research aims to analyze the effect of managerial ownership,firm size, non debt tax shield and operating leverage on capital structure. This research uses a quantitative approach with a causal associative research type. The data used in this study are annual reports of sector manufacturing listed on the Indonesia Stock Exchange in 2017-2020. Using purposive sampling method we obtained by 272 sample from 68 companies conducted observations from 2017 – 2020. This research using multiple linear regression analysis on the hypothesis testing. The result showed that the managerial ownership, firm size, and operating leverage has a negative and significant effect on capital structure. However, the non-debt tax shield variable has no effect on the capital structure.

Determinants Of Capital Structure On Property And Real Estate Companies Listed On The Indonesia Stock Exchange For The Period Of 2015-2020


 
 
 
 This study aims to determine the effect of profitability, firm size, firm age, non-debt tax shield, tangibility, growth opportunities, and earnings volatility on the capital structure of the property and real estate sector companies listed on the Indonesia Stock Exchange for the period of 2015-2020. Independent variables used in this study are profitability, firm size, firm age, non-debt tax shield, tangibility, growth opportunities, and earnings volatility. The Dependent variable used is the capital structure (DER and DAR). This study also uses a control variable, namely institutional ownership. The sampling technique used in this study is purposive sampling with as many as 43 property and real estate companies that matched the sample criteria in the study. This study uses panel data regression analysis techniques using the Common Effect Model (CEM) and Random Effect Model (REM) approaches. The results of this study indicate that profitability, firm age, non-debt tax shield, growth opportunities, and earnings volatility have a negative and insignificant effect on capital structure (DER), while firm size has a positive and significant effect on capital structure (DER). The results of the robustness check with the Debt to Assets Ratio as a proxy for capital structure show that profitability, firm size, firm age, and growth opportunities have robust results, while non-debt tax shields, tangibility, and earnings volatility have not robust results. Therefore this research supports the trade-off theory, pecking order theory, and signaling theory.
 
 
 

Tekstil ve Hazır Giyim Firmalarında Sermaye Yapısının Belirleyicileri Üzerine Ampirik Bir Çalışma

This study aims to analyse the factors that influence the capital structure decisions of Turkish listed textile and apparel firms over the period from 2010 to 2019. The results of Driscoll and Kraay’s (1998) panel regression model show that the leverage ratio is significantly and negatively affected by firm size, profitability, liquidity, asset tangibility, and is positively affected by non-debt tax shields, growth opportunities, earnings volatility, and GDP growth. The pecking order theory seems to be the most successful in explaining the determinants of the capital structure of Turkish textile and apparel firms.

FAKTOR-FAKTOR YANG MEMPENGARUHI CAPITAL STRUCTURE PADA PERUSAHAAN MANUFAKTUR

The purpose of this study is to determine the effect of profitability, firm size, asset tangibility, non-debt tax shield, and business risk on the capital structure of manufacturing companies listed on the Indonesia Stock Exchange (IDX) for the 2017-2019 period. The sample selection technique used in this study was purposive sampling with a total sample size of 198 samples. Data processing from this sample is assisted by the Statistical Package for Social Science (SPSS) software version 23. The results obtained from this study indicate that profitability has a significant negative effect on capital structure, while firm size, asset tangibility, non-debt tax shield, and business risk do not have a significant effect on the capital structure.

Investigating the capital structure determinants of energy firms

The ongoing energy crisis has turned into a major bottleneck for economic growth and has had a long-lasting impact on the performance of energy firms. However, recognizing capital structure determinants helps these firms construct an ideal capital structure and attain their target of profitability. Thus, this study is an attempt to identify capital structure determinants for whole energy firms that are operating in dissimilar regions and countries. The 14-year balance panel data of 281 energy firms, i.e., 2007–2020, is used to perform the analysis. The debt-to-asset ratio is nominated as a dependent, whereas sales, current ratio, asset tangibility, non-debt tax shield, return on equity, inflation, gross domestic product, and energy consumption are selected as independent variables. The Panel Data Static models and Dynamic models via the Generalized Method of Moments (GMM) are executed to perform the inquiry. The results indicate that lagged dependent variables, sales, tangibility, return on equity, inflation, gross domestic products, and energy consumption are the main capital structure determinants of energy firms. The significant lagged dependent variable, tangibility, sales, and the existence of speed of adjustment point towards the practice of the Dynamic Trade-off theory by energy firms to maintain capital structure at all times. The results obtained by this empirical analysis are a new addition to the financial literature and will help policymakers develop similar policies regarding the capital structure-maintaining practices of energy firms that will enhance energy-related ties among countries.

The Role of Creditor Protection in Lending and Tax Avoidance

AbstractWe examine how creditor rights affect the trade-off between non-debt and debt tax shields. Using four bankruptcy reforms and a panel of private and public firms from Italy, we show that laws empowering creditors reduce tax avoidance and increase debt financing, consistent with firms substituting non-debt tax shields with debt tax shields. We corroborate the validity of our findings using a panel of public firms across 33 countries. Additionally, we document that the impact of creditor protection laws is mitigated by tax system characteristics, which significantly reduce the incentives to substitute tax avoidance with debt.

Determinan Struktur Modal: Perspektif Pecking Order Theory dan Trade-off Theory

This study aims to determine how much influence the asset structure, non-debt tax shields, firm size and profitability have on the capital structure of the Food and Baverages Sub-Sector Companies listed on the Indonesia Stock Exchange. The method used in this study is a quantitative method. The data analysis technique used in this research is multiple regression analysis. Asset structure has a positive and significant impact on the capital structure of companies listed in the Food and Beverage Industry Sector on the IDX for the 2014-2018 period. With the value of the beta coefficient included in the low category, the results of this study are in accordance with the Trade-off theory. Non-debt tax shields have no significant effect on the capital structure of companies listed in the Food and Beverage Industry Sector on the IDX for the 2014-2018 period. With the value of the beta coefficient being very low, the results of this study are not in accordance with the trade-off theory. Firm size has a significant effect on the capital structure of companies listed in the Food and Beverage Industry Sector on the IDX for the 2014-2018 period. With a low beta coefficient value. The results of this study are not in accordance with the pecking order theory. Profitability has a positive and significant effect on the capital structure of companies in the Food and Beverage Industry Sector Listing on the IDX for the 2014-2018 period. With the value of the beta coefficient is included in the low category. The results of this study are in accordance with the pecking order theory.

First-Order Determinants of Capital Structure among Listed Manufacturing Companies in the United States of America

Capital structure plays a critical role which enables manufacturing firms address the dilemma of whether or not an optimal capital structure can be achieved. The total capital of a firm is composed of both debt and equity which makes up firm’s capital structure. The capital structure of manufacturing firms is made up of a combination of internal financing and external financing of the firm. Internal financing composed of equity, preference share capital and shareholder's funds and external financing composed of long term debt and short term debt of the firm. Internal financing using profits as a source of capital for new investment rather than obtaining capital elsewhere distributed as dividends to firm's owners or other investors. External financing is the phrase used to describe funds that firms obtain from outside of the firm. The decade since the onset of the global financial crisis has brought about significant structural changes in the manufacturing sector in USA. This study thus sought to assess the first-order determinants of capital structure among listed manufacturing companies in the United States of America through literature based study methodology. The study found that the manufacturing industry in USA is an industry that dominates companies listed on the New York Stock Exchange, it can be seen from the number of companies listed on NYSE increasing every period. The companies not only required to produce products, but also must be able to manage their capital structure. The study established that the first order determinants of capital structure for listed manufacturing firms in USA consist of financial situation, growth opportunities, size of the firm, product uniqueness, business risk, tax shields, dividend Policy. Furthermore, the first order determinants of capital structure consist of firm size, tangibility, growth opportunities, the non-debt tax shield, the bankruptcy risk, profitability and risk. The study concludes that listed manufacturing firms with the highest asset liquidity may increase debt capacity only when the bond covenants impose restrictions on the disposition of assets. The fact that a company possesses fixed assets to a large extent can be considered by its creditors as a guarantee that will allow them to recover their funds in the case of financial distress experienced by the borrower corporation. If a high-risk company is experiencing a decline in sales, the resulting profit will decrease due to the amount of the fixed costs. Because there is a decrease in profits, the company is not available enough funds to pay off the debt and interest so that it threatens the occurrence of bankruptcy. Keywords: First order determinants, capital structure, listed manufacturing companies, USA.

Faktor-Faktor Penentu Kebijakan Hutang: Studi pada Perusahaan Barang Konsumsi di Indonesia

This study aims to examined the effect of asset stucture, liquidity and non-debt tax shields to debt policy on consumer goods companies listed on Indonesia stock exchange since 2018-2020. This study method used was descriptive quantitative and 49 selected companies observated by using the purposive sampling method. Data processing in this study was carried out using the eviews 12 application. The results of this study showed that all independent variables asset stucture, liquidity and non-debt tax shields have a significant affect on debt policy.

Impacts of Firm Characteristics on Mining Companies Capital Structure

This research is made with the main purpose of analyzing the impacts of firm-level determinants of capital structure that include profitability, firm size, liquidity, non-debt tax shield, as well as asset tangibility. The objects of this research are mining companies listed on the Indonesian Stock Exchange for the period 2012-2020. The sample of this research comprises of 7 companies that have been selected through the use of purposive sampling method and uses multiple regression with panel data approach as the method of data analysis. The result of this research shows that all variables except for firm size have an impact on capital structure. Profitability, liquidity, non-debt tax shield, asset tangibility are found to negatively impact capital structure.

Testing the validity of capital structure theories with the dynamic panel data analysis: the case of Borsa Istanbul

In this study, factors affecting capital structure are investigated and the validity of capital structure theories is tested within the scope of these factors. In the study, the data of the enterprises included in the BIST DIVIDEND (XTMTU) index between the years 2010-2019 were tested with dynamic panel data analys The study uses the leverage ratio as the dependent variable; whereas it uses the tangible fixed asset structure ratio, asset profitability, tax level, size, current ratio, liquid ratio, and non-debt tax shield as independent variables. At the end of the study, it has been determined that there is a negative and significant relationship between leverage ratio and tangible fixed asset structure, current ratio, and return on assets. On the other hand, it has been observed that there is a positive and significant relationship between leverage ratio and size and liquid ratio. In addition, it has been determined that there is no significant relationship between the leverage ratio and the tax level or the non-debt tax shield. Finally, the findings obtained in the study are evaluated within the scope of capital structure theories.

Financial Policy and Companies’ Sustainable Growth

Abstract This paper investigates the intercompany-specific characteristics as a determinant of the sustainable growth rate. We researched a sample of companies listed on the Macedonian stock exchanges. We found that the average actual growth rate for the 2010-2019 period is only 0.38%, while the sustainable growth rate was 1.42%. This is because of the poor operating performance of the companies, moderate leverage, and average retention ratio of 82.5% for the whole sample. The actual growth rate in specific years is drastically higher than the sustainable growth rate, while in certain years it is negative. The sustainable growth rate is positively affected by the profit margin, retention ratio, asset turnover, financial leverage, and ROE, and it is negatively affected by the operating cash flow, company size, growth opportunities, and non-debt tax shield.

DIRECTOR'S EXPERTISE, EXECUTIVE'S EXPERTISE, AND FIRM LEVERAGE IN MANUFACTURING INDUSTRY: EVIDENCE FROM TWO-TIER BOARD SYSTEM IN INDONESIA

This empirical research analyzes the director's and executive's expertise on the leverage of Indonesian manufacturing companies listed on the Indonesia Stock Exchange from 2014 to 2018. Ordinary Least Squares were used to answer the research problems and test the hypotheses. The leverage was measured using Total Short-Term Debt (STD), Total Long-Term Debt (LTD), and Total Debt in Book Value (TDBV). At the same time, the director's and executive's expertise is proxied by postgraduate and professional degrees in finance or accounting. This study finds that a director's professional degree in finance or accounting influences leverage by LTD but does not significantly affect leverage proxied by TDBV and STD. Then, an executive's postgraduate degree significantly impacts leverage proxied by TDBV and STD but does not significantly influence leverage proxied by LTD. Furthermore, the director's postgraduate degree and executive's professional degree in finance and accounting do not affect leverage in all proxies. In control variables, significant influences were found in the effects of firm size on LTD and STD, profitability proxied by ROA on LTD, profitability proxied by ROE on STD, and growth on LTD. Meanwhile, firm age, Non-Debt Tax Shield (NDTS), Earnings Volatility (EVO), and Tangibility (Tang) do not affect leverage in all proxies.

Do Determinants Influence the Capital Structure Decision in Bangladesh? A Panel Data Analysis

More than two decades, capital structure decision marked as variation from optimal decisions as determinants are not properly considered due to the collapse of corporate governance. This study examines the impact of determinants on capital structure decisions in Bangladesh using Fixed-Effect Model (FEM) and Panel Corrected Standard Error (PCSE). The study revealed that debt structure is considerably influenced by liquidity, firm size, asset structure, non-debt tax shield, and operational age of companies. The study also indicates that the companies, which are not financially, sound, but used more debt because the owners of such companies are politically empowered in stock market. The firms that hold less fixed assets (as a percentage of total assets, particularly the family-run and politically affiliated firms used more debt regardless of their tax bracket, profitability and growth—showed a greater capacity for increased debt. This study primarily focused on financial framework to make capital structure decision based on related determinants.

Firm level determinants of capital structure in Algeria

This study analyzes the capital structure determinants in a sample of 207 non-financial Algerian enterprises (2013-2017).The Tobit-panel random effects model gives the following results: the firm-level determinants at the 1% level are : the profitability, the tangibility, the debt-tax shield DTS and the non-debt tax shield NDTS . A profitable company can easily take on debt at a low interest rate. The tangible assets are used as a collateral. The Algerian enterprises take on debt in order to benefit from the debt-tax deductibility. The positive impact of the DTS variable confirms the positive impact of the profitability variable. The debt-tax deductibility is useful when a company is profitable. The NDTS is an alternative funding source for the enterprises. For the state-owned subsample, the debt ratio decreases when the firm size increases. The small state-owned enterprises have a low self-financing. These enterprises are financed by the debt. For the services field subsample, the liquidity is used as a collateral.

DETERMINANTS OF CAPITAL STRUCTURE: AN EMPIRICAL STUDY OF LISTED TEXTILE COMPANIES IN INDIA

Purpose --This paper aims to empirically investigate the capital structure determinants of Textile Industries of India listed on NSE (National Stock Exchange) during the Year of 2014-18 with a particular focus on short-term debt Ratio and long-term debt Ratio. Design/methodology/approach –Fixed affect panel data regression were used to analyze a sample of 18 Indian Textile Companies listed on NSE (National Stock Exchange) for which complete financial information was available for a Five year period, i.e. the 2014-2018. Findings – The results indicate that there is a significant and negative relationship between profitability, Short-Term, and Long-Term Debt Ratio. Moreover, The Short-Term Debt ratio is significant with Tangibility of the firm and Net Commercial Trade Position, Where Tangibility of the firm is negatively related and Net Commercial Trade Position is positively related. Short-Term Debt Ratio is not significant with Current ratio, Net Commercial Trade Position, Number of Non-Executive Members, Number of Executive Members Number of Audit Meetings, Number of Board Meetings and Quick Ratio, These all variable are having positively related except Quick Ratio. Whether Quick Ratio is negatively related. Practical implications – As debt policy influences Current Ratio, Net commercial Trade Position, Non-debt Tax Shield, Number of Non-Executive Members, Number of Executive Members, Number of Audit Meetings, Number of Board Meeting, Quick Ratio, Return on Assets, Tangibility of Firm financial institutions and managers may benefit from studies considering a relatively large number of capital structure determinants, several of which are linked to short- and long-term debt in various ways.

DETERMINANTS OF CAPITAL STRUCTURE: EVIDENCE FROM THE LISTED NATIONALIZED BANKS OF INDIA

Purpose – The purpose of this research is to find out the determinants that have an impact on the capital structure of nationalized banks of India during the year 2014-2018. Design/methodology/approach – A Fixed Effect Panel Data Regression Model has been used in this research; the sample period ranges from 2014 to 2018 for 20 nationalized banks in India. Findings – The results largely suggest that the Return on Assets, Firm Size and Number of Audit Committee Meetings are positively significant towards the Debt-to-Equity Ratio while Return on Equity and Assets Tangibility is negatively significant. This research also finds the results with another dependent variable which is the Financial Leverage Ratio, it shows that Return on Equity and Numbers of Auditors are negatively significant while Firm Size is positively significant and the other variables are insignificant towards the Financial Leverage which is Return on Assets, Number of Executive Directors, Number of Non-Executive Director, Number of Board Meetings, Number of Audit Committee Meetings, Non-debt Tax Shields and Assets Tangibility. Research limitations/implications – This research is limited to the 20 nationalized banks of India and for a period of only five years starting from 2014 till 2018. It may not be applicable across the banking sector in India or around the world. Originality/value – The main value of this research is to analyze the determinants that have an impact on capital structure decisions of nationalized banks of India.

Valuing the Interest Tax Shield in the Central European Economies: Panel Data Approach

Capital structure is one of the most frequently discussed issues within Corporate Finance Theory. Optimizing the capital structure and value of the tax shield through the evaluation of its interests can lead to the increasing value of the enterprise, followed by the rising competitiveness and flexibility. The aim of this study is to provide a novel look at the value of the interest tax shield and its determinants in the emerging economies of the Visegrad Four. The model was created on a net sample of nearly 7,000 profitable enterprises between 2015 and 2019 using a one-way fixed effects model of panel data. Regional model results show five main determinants of the debt tax shield (Tangibility, Current Ratio, Gearing, Cost of debt and Size). Others, such as non-debt tax shield, business growth or profitability, are regional, and their impact varies depending on the economic conditions of the countries. The direction of influence of the main determinants indicates that, contrary to the assumed trade-off theory, profitable companies manage the capital structure and the value of tax shield according to the pecking order or modified pecking order theory. The tax shield is made up mostly of interest on short-term loans, which increases the risk of financial distress. There is a hierarchy of funding sources, from trade credit, through shortterm loans, to long-term loans, which are used in the analysed firms to the smallest extent. The structure of liabilities may be considered another determinant of the debt tax shield.