Short-term Debt Ratio Research Articles

Determinant Factors of Profitability in Fintech Lending Companies in Indonesia from 2019 to 2022 Using Principal Component Analysis (PCA)

This reserach examines factors influencing the profitability of Fintech lending companies in Indonesia. A purposive sampling method was employed to select 45 companies annually. The data for this research are cross-sectional, comprising the years 2019, 2020, 2021, and 2022. The methods in this research are Principal Component Analysis (PCA) and multiple linear regression. Findings reveal that current ratio, cash ratio, working capital turnover, debt to assets ratio, short-term debt ratio, equity multiplier, total assets turnover, fixed assets turnover, tangible assets ratio, and effective tax rate significant determinants of profitability for Fintech lending companies in Indonesia. This reserach can help Fintech lending companies improve their profitability.

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.

The Influence of the Composition of a Company's Capital on Financial Performance

In the aftermath of a pandemic, companies struggle with survival and expansion issues. Companies are increasingly paying attention to their capital structure, which is vital for competitiveness, profitability, and financial stability. This paper looks at how long-term debt ratio (LTDR) and short-term debt ratio (STDR) affect return on equity (ROE) and return on assets (ROA). This paper wants to untangle the complex interactions among the financial profiles of S&P 500 firms covering the years 2010 to 2023. The findings suggest that while STDR adversely influences both, OLS regression shows LTDR's favorable relationship to ROA and ROE. Including firm size and liquidity (LQDT) improves the model's explaining ability. In the post-crisis age, financial stability and performance improvement depend on strategic capital structure decisions. Considering all factors, this article contributes to the ongoing discussion by examining how enhancing capital structures can boost businesses' resilience and performance in the wake of global events.

Tác động của cấu trúc vốn đến suất sinh lời trên tổng tài sản của các doanh nghiệp ngành dầu khí

The study analyzes the impact of capital structure on the Return on Assets (ROA) of oil and gas industry enterprises during the period from 2014 to 2022. Based on data from 44 oil and gas enterprises in Vietnam with 396 observations, the research employs the Pooled Ordinary Least Squares (OLS), Fixed Effects Model (FEM), Random Effects Model (REM), and Generalized Least Squares (GLS) models. Specifically, the revenue growth rate (SGROWTH) has a positive impact on ROA, while the short-term debt ratio (STD) and the period of oil and gas industry crisis (T) have a negative impact on the Return on Assets of oil and gas industry enterprises in Vietnam. This study provides information on the impact of capital structure on oil and gas industry enterprises in Vietnam during the crisis period, aiming to assist business managers in identifying potential risks during the crisis period and proposing appropriate and timely measures.

Leverage ratio and corporate performance: Do marginal cost and marginal benefit of debt matter

This study examines leverage ratio and firm performance considering marginal benefits and marginal costs of debt to a firm. A total of 16 non-financial firms over a 15 year period (2001-2015) were randomly selected for the study. The panel data were subjected to Panel Least Square, Fixed Effects, and Random Effects regression estimations to test the formulated models in the study. Also the study employed Hausman Test to ascertain whether random effects model is the appropriate model or if fixed effects model is the appropriate model. The results shows that long term debt ratio (LTDR) have positive and significant influence on performance of Nigerian firms measured by Return on Asset (ROA) and Return on Equity (ROE). Short term debt ratio (STDR) on the other hand, established negative and significant effect on ROA, and negative and insignificant impact on ROE. STDR accounting for 75% mean value of the total debt ratio of the sampled firms, the researcher therefore, infer that financial structure has negative and significant influence on the performance of Nigerian firms. This outcome is attributed to mismatch of funds and high risk investment (asset substitution effect) resulting to marginal benefits of monitoring and bonding activities less than the marginal costs as noted by agency cost theory. The study therefore concludes that debt is valuable in reducing the agency costs of equity in professionally managed firm but at the same time debt is costly as it increase the agency cost of debt.

Impacts of Corporate Structural Changes on Performance of Banks and Non-Bank Financial Institutions in Nigeria, 2005-2019

This study investigated the impacts of corporate structural changes on performance of banks and non-bank financial institutions in Nigeria covering a period of 15 years (2005-2019). The capital structural change was captured with absolute change in debt equity ratio, total debt ratio, long-term debt ratio short-term debt ratio while the performance was measured with dividend per share and gross earnings. The study adopted ex-post facto research design which provides empirical solutions to research problems by using already existing data. The secondary data was extracted from the published financial report of the sampled firms. Population of the study included all the 14 quoted Deposit Money Banks (DMBs) and 25 Insurance Companies in operation in Nigeria. The sample size of the study is delimited to 10 quoted DMBs and 10 Insurance firms in Nigeria and this was achieved through random sampling technique. The collected data were analyzed using quantitative econometric techniques such as descriptive analysis, correlation analysis and panel regression analysis. It was discovered that when the model was controlled with firm size and asset tangibility, absolute changes in total debt ratio, absolute changes in long term debt ratio and absolute changes in short term debt ratio have a positive but insignificant effect on gross earnings of deposit money banks and insurance companies in Nigeria. Also, it was disclosed that there is a significant effect of absolute changes in the components of capital structure on dividend per share.

Capital Structure Impact on Firm Performance: An Empirical Study of the Pharmaceutical Sector in India

"The paper seeks to study the impact of capital structure on the profitability of the top twenty pharmaceutical companies based on market capitalization. Only companies listed on the National Stock Exchange (NSE) were selected for the analysis purposes. In this study, we collected five years (2018-2022) data for the empirical investigation using panel data regression analysis. Four dependent variables (return on equity, return on assets, earning per share, and Tobin’s Q) and three independent variables (long-term debt ratio, short-term debt ratio and total debt ratios) were selected to measure financial performance and capital structure, respectively. Size is a control variable. The results indicated that firm performance, which was measured by return on asset, return on equity, and earnings per share, has a significant negative relationship with short-term debt ratio, long-term debt ratio, and total debt ratio. Tobin’s Q showed no relationship with short-term debt and long-term debt. The paper adds to the emerging body of literature on capital structure and financial performance relationship in the Indian context using a newer data set."

Assessing the Impact of COVID-19 on Capital Structure Dynamics: Evidence from GCC Economies

This study seeks to investigate the potential effects of the recent pandemic (COVID-19) on capital structure dynamics. The Gulf Cooperation Council (GCC) is a fascinating topic for this study because of its distinct economic characteristics. The analysis draws upon a cross-country dataset covering 208 non-financial listed firms across five GCC countries, with data spanning the years 2010 to 2022. Capital structure is a dependent variable and is measured by total debt to equity, equity multiplier, and short-term debt ratios, while the COVID-19 pandemic, firm size growth, return on assets, tangibility, and growth were applied as independent variables. Using the generalized least squares (GLS) method, findings demonstrated that COVID-19 has a significant and positive influence on debt-to-equity and equity multiplier ratios but a negative one on short-term debt ratio. Thus, non-financial firms increased their debt financing and transferred debt from short-term to long-term funding. In addition, firm-specific factors, such as firm size, tangibility, and macroeconomic factors, such as GDP growth, positively and significantly impact capital financing. Conversely, profitability has a negative relationship with financial leverage. There is a lack of empirical research on how COVID-19 affects the financial structure of non-financial listed companies in GCC nations. Consequently, by filling the previously specified gaps, this study provides proof to support the idea of using debt financing to raise capital for economic recovery. GCC policymakers need to give priority to ensuring that firms have convenient access to inexpensive finance in light of the financial consequences caused by COVID-19. This will guarantee that companies have the resources necessary to bounce back and support economic growth.

DETERMINANTS OF CAPITAL STRUCTURE IN THE AGRICULTURAL SECTOR: EMPIRICAL EVIDENCE FROM LISTED COMPANIES

This study investigated the capital structure of 18 publicly traded agricultural companies over a 10-year period (2012-2022), specifically focusing on short-term debt to total liabilities (SHTDTL). Employing a dataset of 121 observations, the strategic financing decisions of these firms in the Republic of Srpska’s stock market were analyzed. The study examines the impact of various factors, including total debt to total equity (TDTC), tangible assets (TOA), company size (CS), current assets ratio (CR), current assets to total assets (CAA), return on equity (ROE), and return on assets (ROA), on capital structure choices. Results reveal that TOA, CAA, and ROE significantly positively influence the short-term debt ratio, while CS and ROA have a significant negative impact. This research sheds light on the financial decision-making of agricultural enterprises, offering insights that can inform their financing strategies and improve financial performance.

Determinants of Capital Structure: Evidence from Securities Companies

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

Peer Effects on Capital Structure Decisions: Empirical Evidence from Selected Listed Companies of DSE

In the dynamic landscape of corporate finance, the effect of social dynamics on decision-making processes is a subject that deserves closer examination. This study attempts to capture effects of peer firms on capital structure decisions on listed firms of DSE from Food & Allied, Power & Fuel, Cement and Ceramic sectors during 2014-15 to 2021-22. We have used industry median leverage to measure peer firm’s capital structure decision. Results of Fixed effects model using a panel of 280 firm-year data suggest absence of peers’ effects on capital structure decisions of firm. The key variable of interest – industry median Total Debt ratio (TDR), Short term debt ratio (STDR) and long term debt ratio (LTDR) ratio have positive but statistically insignificant effects on firm’s TDR, STDR and LTDR respectively. Consequently, this study rejects the peers’ influence on capital structure decisions, concluding that capital structure is independent of peer dynamics. The finding further reveals cash generating efficiency and liquidity to be negatively associated with leverage. Asset growth rate exhibits significant positive association with leverage. Firms possessing more tangible assets prefer long term debt. Debt servicing capacity has significant positive effects on STDR. Total assets growth rate is positively associated with debt. The findings suggest that Bangladeshi managers emphasize on firm-specific aspects when making capital structure decisions. They should prioritize the firm’s strengths, opportunities, risks, weaknesses, conditions, and strategy over peer decisions.

The Impact of Capital Structure on Firm Performance: Case of Listed Firms in Food and Beverage Industry in Vietnam

The authors aim to examine the impact of capital structure on the performance of food and beverage companies listed on the stock exchange in Vietnam. The paper investigates the different effect of capital structure on firm performance in food and beverage companies listed on the Vietnam stock market. The panel data of research sample includes 31 food and beverage companies listed on the Vietnam stock market for a period of 5 years, from 2019 - 2023. Through the FGLS model, the study found that the ratio of short-term debt to total assets (STDA) and the ratio of long-term debt to total assets (LTDA) have a negative impact on the performance expressed through return on assets (ROA). The two control variables GROWTH and SIZE both have a positive impact on ROA and return on equity (ROE). Based on findings, some recommendations for food and beverage companies to enhance their profitability in the future.

Capital structure, business model innovation, and firm performance: Evidence from Chinese listed corporate based on system GMM model.

This paper aims to verify the impact of capital structure on business model innovation and firm performance and the mediating effect of business model innovation. We use the data of the Chinese growth enterprises market (GME) listed high-tech firms from 2016 to 2022 as a dynamic panel data model with the system-generalized method of moments (sys-GMM), adopting return on asset and earning per share as firm performance. Our results show that capital structure has a lag effect on firm performance. The total debt ratio in the last period has a significant non-linear impact on the performance and business model innovation level of nowadays, presenting a U-shaped relationship. The first-order lag short-term debt ratio positively improves firm performance. Business model innovation significantly promotes better firm performance, and business model innovation does exist in the mediating effect between enterprise capital structure and its performance. These results remain robust to different sample sizes or proxy variables. This paper proposes some suggestions for firm operations and government policies based on the findings.

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.

THE IMPACTS OF CORPORATE GOVERNANCE MECHANISMS AND OWNERSHIP STRUCTURE ON CAPITAL STRUCTURE OF CHINESE DUAL-LISTED COMPANIES

This research aims to assess how the mechanisms of corporate governance and ownership structure affect the capital structures of Chinese dual-listed companies that list their shares in the China A-share market and the Hong Kong market simultaneously from 2003 to 2019. A binary variable of state control firm attribute is introduced to proxy the political connection to the Chinese government. Both the independent director ratio and CEO duality are negatively and significantly associated with the long-term debt ratio. The board size negatively and significantly relates to the short-term debt ratio. Evidence of board members’ avoidance of investors’ pressure to use more debt and escape from debt lenders’ monitoring is observed in this research. Both foreign ownership and state ownership are significantly and negatively associate with the short-term debt ratio, but significantly and positively associate with the long-term debt ratio. Thus, both foreign investors and the Chinese government prefer the companies to achieve rapid growth through the use of more long-term debts. The binary variable of state control firm attribute has a significant positive association with the short-term debt ratio alone. However, evidence of declining use of long-term debt financing due to political connections, such as the issuance of equity, is not observed.

The Impact of Capital Structure on Financial Performance of Agricultural Listed Companies in China Based on Multiple Linear Regression Model and Data Mining

Background: With the transformation and upgrading of the economy, the market capitalization scale of agricultural listed companies has become larger and larger, but the problems caused by the unreasonableness of their capital structure have become increasingly prominent. This study aims at examining the relationship between capital structure and financial performance of agricultural listed companies in China.
 Methods: Secondary data are obtained from annual financial statements of the sampled firms over the period 2018-2022, and analyzed statistically using multiple regression models. The capital structure indicators refer to total debt ratio (TDR), short-term debt ratio (STDR), and long-term debt ratio (LTDR), and return on assets (ROA) and return on equity (ROE) are the performance proxies.
 Results: The results reveal that TDR and STDR have strong negative relationships with ROA and ROE, while LTDR has insignificant correlations with financial performance.
 Conclusion: The outcomes imply that agricultural companies should pay regular attention to the gearing ratio and strive to maintain good capital mix. They should depend less on short-term debt and could properly employ more of long-term debts in financing to improve profitability and promote sustainable development.

Effect of Financial Leverage on Financial Performance of Listed Consumer Goods Firms in Nigeria

This study examined the effect of financial leverage on financial performance of listed consumer goods firms in Nigeria. Data were collected from audited annual reports and accounts of 8 listed industrial goods firms in Nigeria from 2013-2022. Ex-post facto (after-the-fact) research design was adopted. Data were analyzed using Random Effect Regression. Results indicated that debt-equity ratio and long term debt ratio hade had significant negative effect on financial performance while short term debt ratio had negative insignificant effect on financial performance. Over all, the study found that financial leverage has negative effect on cash value added of listed industrial goods firms in Nigeria. Recommendations are also made.

Effects of monetary policy uncertainty on debt financing: Evidence from Korean heterogeneous firms

This study investigates the combined effects of monetary policy uncertainty (MPU) and firm characteristics on Korean heterogeneous firms' capital structures in the short- and long-terms. The results reveal that while both MPU and firm characteristics play a key role in short-term debt financing, they appear to be less significant in long-term debt financing. Such asymmetric responses are mainly attributed to different business strategies and debt maturities. Firms make decisions on long-term debt financing based on their internal plans rather than interest rates or MPU. In contrast, firms can choose the appropriate timing to refinance or issue debts at a more favorable interest rate when financing through short-term debts. We find that the marginal effects of firm characteristics on short-term debt ratios vary with the level of MPU. Furthermore, the marginal effects of MPU differ across heterogeneous firms because of distinct firm characteristics. However, an increase in MPU leads to a decline in short-term debt ratios over the sample period. Our results provide some insights into the design of monetary policies to manage highly leveraged firms especially with short-term debts.

Covid-19 Pandemic and Capital Structure: Evidence from West Africa

The question of whether the Covid-19 pandemic is a predictor of firms’ capital structure has remained unanswered following limited empirical studies. The financial structure of every business is its lifeblood which is the most important decision-making at any stage of the business’s operation. This study investigated the effect of covid-19 on the capital structure of non-financial firms listed on the Ghana stock exchange (GSE). The study focused on long-term debt, short-term debt and total debt ratios as a measure of capital structure. The study adopted the ex-post facto research design, the population consisted of 23 listed non-financial firms out of which 21 were sampled. Data was sourced from audited annual financial reports of the selected companies. Panel regression and ANOVA were used to analyze the data. The findings of the study revealed that covid-19 pandemic showed an insignificant effect on capital structure measured as long-term debt. This implies that the pandemic did not cause significant volatility to the long-term debt of non-financial firms in Ghana within the period of the study. Furthermore, the covid-19 pandemic showed no significant effect on short-term debt. This indicates that short-term borrowings for non-financial firms listed on GSE were not significantly affected by the covid-19 pandemic. The findings of the study further revealed that the covid-19 pandemic does not have a significant effect on the total debt of listed non-financial companies in Ghana. The study recommends that the capital structure policy of non-financial firms listed on the Ghana Stock Exchange should be maintained. This is because the study revealed that the severity of the covid-19 pandemic on business operations did not significantly affect the capital structure of the firms as measured by long-term debt, short-term and total debt.

The effect of capital structure on the financial performance of companies listed on the Algerian stock exchange: Case of the Saidal group

The present study aims to shed light on the impact of capital structure determinants on the financial performance of a public economic firm listed on the Algerian Stock Exchange, represented by the Saidal Group, during the period from 2010 to 2021. Furthermore, the study relied on the financial statements (balance sheet and income statement table) published on the official website of the stock exchange to collect the financial data of the firm. In pursuance of this aim, three multiple models were estimated in which dependent variables expressing financial performance were represented in each of the return on assets (ROA), return on equity (ROE), and earnings per share (EPS), while the independent variables expressing the determinants of the capital structure were represented in each of the ratio of medium and long-term debt to total assets (MLTDTA), the ratio of shortterm debt to total assets (STDTA), and the self-financing capacity (SFC). In addition to this, the control variables were used in the models to represent the liquidity and size of the firm, which was measured in the Neperian logarithm of its total assets. The study reached a set of results, the most important of which are the presence of a statistically significant positive relationship between the capital structure, as measured by the firm's self- inancing capacity, and the financial performance with its three indicators, as well as the existence of a statistically significant negative relationship between the ratio of medium- and long-term debt to total assets and financial performance. As for the ratio of short-term debt to total assets, it has a negative and statistically insignificant impact on both the return on assets and the return on equity, but also has a negative and statistically significant impact on earnings per share. In light of this, the study recommends that the firm should rely on internal financial sources rather than external financial sources to finance its various investments in order to improve its future financial performance