scholarly journals Money Matters: An Examination of the Impact of Financial Structure on Nascent Venture Performance; Evidence from the Kauffman Firm Survey

2020 ◽  
pp. 1-11
Author(s):  
Augustine Y. Dzathor ◽  
Semere Haile ◽  
Donald White
Keyword(s):  
Capital Structure ◽  
Financial Structure ◽  
Enterprise Performance ◽  
Equity Financing ◽  
Pecking Order ◽  
Venture Performance ◽  
Kauffman Firm Survey ◽  
Trade Financing ◽  
The Impact ◽  
Firm Survey

This study was carried out to empirically test the impact of financial structure on nascent enterprise performance. The study used a centralistic nomothetic longitudinal methodology to examine a panel data derived from the first four years of the Kauffman firm Survey (KFS). The result revealed that financial structure (equity financing, debt financing, and trade-financing) influenced nascent enterprise performance, but inconsistently over the first four years of business existence. The average capital structure of the sample was supported by the literature and followed the pecking order of equity, debt, and trade financing. Results suggested that capital structure has an important ramification for nascent enterprise performance, but the capital mix of successful nascent enterprises do not necessarily follow an orthodox format.

scholarly journals Testing the pecking order theory of capital structure: the case of Islamic financing modes

2020 ◽  
Vol 6 (1) ◽  
Author(s):  
Moncef Guizani
Keyword(s):  
Capital Structure ◽  
Random Effect ◽  
Order Theory ◽  
Equity Financing ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Corporate Financing ◽  
Financing Decisions ◽  
Executive Managers ◽  
The Capital Structure

AbstractThe purpose of this paper is to examine whether or not the basic premises according to the pecking order theory provide an explanation for the capital structure mix of firms operating under Islamic principles. Pooled OLS and random effect regressions were performed to test the pecking order theory applying data from a sample of 66 Islamic firms listed on Kingdom of Saudi Arabia stock market over the period 2006–2016. The results show that sale-based instruments (Murabahah, Ijara) track the financial deficit quite closely followed by equity financing and as the last alternative to finance deficit, Islamic firms issue Sukuk. In the crisis period, these firms seem more reliant on equity, then on sale-based instrument and on Sukuk as last option. The study findings also indicate that the cumulative financing deficit does not wipe out the effects of conventional variables, although it is empirically significant. This provides no support for the pecking order theory attempted by Saudi Islamic firms. This research highlights the capital structure choice of firms operating under Islamic principles. It explores the implication of the relevant Islamic principles on corporate financing preferences. It can serve firm executive managers in their financing decisions to add value to the companies.

LONG-TERM ADJUSTMENT OF CAPITAL STRUCTURE: EVIDENCE FROM SINGAPORE, HONG KONG AND TAIWAN

2012 ◽  
Vol 57 (04) ◽  
pp. 1250027
Author(s):  
TERENCE TAI-LEUNG CHONG ◽  
DANIEL TAK-YAN LAW ◽  
LIN ZOU
Keyword(s):  
Hong Kong ◽  
Capital Structure ◽  
Stock Price ◽  
Pecking Order ◽  
Price Performance ◽  
Growth Opportunity ◽  
Timing Effects ◽  
The Impact ◽  
Internal Fund

This paper examines the impact of profitability, stock price performance and growth opportunity on the capital structure of firms in Singapore, Taiwan and Hong Kong. In contrast to Kayhan and Titman (2007), it is found that firms in these three Chinese-dominated economies strongly prefer debt to equity or internal fund financing. They also take advantage of stock price appreciation by issuing more shares. An adjustment model for debt ratios is estimated. The results suggest that the leverage ratios of these firms slowly adjust toward their target levels. Deviations from the target due to the pecking order and market timing effects are found to be significant.

The effects of the global financial crisis on the capital structure of EPRA/NAREIT Europe index companies

2015 ◽  
Vol 8 (1) ◽  
pp. 3-23 ◽  
Author(s):  
Giacomo Morri ◽  
Andrea Artegiani
Keyword(s):  
Financial Crisis ◽  
Real Estate ◽  
Capital Structure ◽  
Global Financial Crisis ◽  
Pecking Order ◽  
Trade Off ◽  
Content Type ◽  
The Global Financial Crisis ◽  
The Impact ◽  
The Capital Structure

Purpose – The purpose of this paper is to test whether the financial crisis has affected the capital structure of real estate companies in Europe and whether these impacts can be studied utilizing the variables traditionally used by the trade-off and pecking-order theories to explain the capital structure of companies. Design/methodology/approach – The study uses a fixed-effect panel regression analysis and a sample composed of companies included in the EPRA/NAREIT Europe Index. The effect of the financial crisis has been accounted for within the model by means of a dummy variable. Findings – The global financial crisis did have an impact on the capital structure of companies and the main variables traditionally used by the trade-off and pecking order theories proved to be suitable in explaining the capital structure of real estate companies. Real estate investment trusts are, on average, more leveraged than traditional real estate companies due to their special regulatory status. Research limitations/implications – The study is limited to the European market and UK companies in particular account for a large part of the sample. In addition, major regulatory differences between the various European countries are not taken into account in the model. Originality/value – Similar studies have been performed for the US and Australian market. However, the impact of the global financial crisis has not been traditionally considered in these studies.

scholarly journals Debt Capacity and Tests of Capital Structure Theories

2010 ◽  
Vol 45 (5) ◽  
pp. 1161-1187 ◽  
Author(s):  
Michael L. Lemmon ◽  
Jaime F. Zender
Keyword(s):  
Capital Structure ◽  
Good Description ◽  
High Growth ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Growth Firms ◽  
Debt Capacity ◽  
Financing Behavior ◽  
The Impact

AbstractWe examine the impact of explicitly incorporating a measure of debt capacity in recent tests of competing theories of capital structure. Our main results are that if external funds are required, in the absence of debt capacity concerns, debt appears to be preferred to equity. Concerns over debt capacity largely explain the use of new external equity financing by publicly traded firms. Finally, we present evidence that reconciles the frequent equity issues by small, high-growth firms with the pecking order. After accounting for debt capacity, the pecking order theory appears to give a good description of financing behavior for a large sample of firms examined over an extended time period.

scholarly journals ANALYSIS OF CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE IN THE JORDANIAN INSURANCE SECTOR

2020 ◽  
Vol 8 (3) ◽  
pp. 1310-1320
Author(s):  
Zelhuda Shamsuddin ◽  
Al Majali Muhammad Ahmad Kamel ◽  
Wan Mohd Nazri Wan Daud ◽  
Wan Sallha Yusoff
Keyword(s):  
Capital Structure ◽  
Financial Performance ◽  
Insurance Companies ◽  
Tobin’S Q ◽  
Short Term ◽  
Equity Financing ◽  
Tobin's Q ◽  
Return On Equity ◽  
Insurance Firms ◽  
The Impact

Purpose of the study: This paper aims to examine the impact of capital structure and financial performance of listed insurance companies in Jordon. Methodology: This study used secondary data that was collected from Amman stock exchange and annual report of the selected insurance companies from the year 2007-2017. The static panel data analysis technique is used to examine the impact of capital structure on firm’s performance. The capital structure is measured using short-term debt, long-term debt, and equity financing. Whereas financial performance is measured using Return on Asset (ROA), Return on equity (ROE), and Tobin’s Q. Main Findings: The study findings suggest that capital structure influence the profitability of the listed insurance firms in Jordan. The results also reveal a significantly positive relation between long-term debt to total assets to profitability indicators, namely, return on assets (ROA), return on equity (ROE) and Tobin’s Q. On the other hand, the results also reveal a short-term debt has a significant positive relationship with return on equity (ROE) and returns on assets (ROA). However, a relationship between short-term debt and Tobin’s Q is not statistically significant. Applications of this study: The result of this study may assist the insurance sector in Jordon in making decisions regarding capital structure, which is to significantly rely on equity financing or debt financing to reduce financing risk such as agency cost that borne by the equity holders of the Jordanian insurance firms. Novelty/Originality of this study: The study noted that insurance firms generally play a crucial role in the economic development of every country. This study provides evidence that Jordanian insurance firms need to diversify their sources of financing and not rely significantly on debt financing, as the results prove that equity financing is a profitable source of financing.

scholarly journals Financial Performance as Mediator on the Impact of Capital Structure, Wealth Structure, Financial Structure on Stock Price: The Case of The Indonesian Banking Sector

2020 ◽  
Vol 5 (5) ◽  
Author(s):  
Herman Sjahruddin ◽  
Andi Mansyur ◽  
Abd. Rahman Mus ◽  
Zainuddin Rahman ◽  
Suriyanti Suriyanti
Keyword(s):  
Capital Structure ◽  
Financial Performance ◽  
Stock Prices ◽  
Stock Price ◽  
Structural Equation ◽  
Banking Sector ◽  
Financial Structure ◽  
Model Testing ◽  
The Impact ◽  
The Capital Structure

This research examines the financial performance as a mediating variable in analyzing the capital structure, wealth structure, and financial structure of stock prices by using trade-off theory and signaling theory. This study uses 145 secondary data in the form of bank financial reports listed on the Indonesia Stock Exchange (IDX). Model testing uses structural equation (SEM) through the SmartPLS version 3.0 programs. The results of model testing show that capital structure and financial structure can reduce financial performance, wealth structure can improve financial performance. High financial performance cannot increase stock prices. The capital structure does not lower the stock price, the wealth structure raises the stock price, and the financial structure lowers the stock price. Financial performance does not mediate the effect of capital structure, wealth structure, and financial structure on stock prices.

scholarly journals Análisis empírico en México de estructuras de capital y su relación con las inversiones significativas (Empirical analysis of capital structures in Mexico and its relation with major investing decisions)

2018 ◽  
Vol 14 (28) ◽  
Author(s):  
Miguel Calzada Mezura
Keyword(s):  
Capital Structure ◽  
Corporate Finance ◽  
Equity Financing ◽  
Pecking Order ◽  
Optimal Capital Structure ◽  
Financing Decisions ◽  
Funding Sources ◽  
External Sources ◽  
Study Support ◽  
Optimal Capital

Las Teorías del Pecking Order (Financiamiento Selectivo) y la Estructura Óptima deCapital, mencionan diferentes teoremas para las decisiones de financiamiento. El estudio busca comprender cómo las empresas en México consideran las diferentes fuentes de financiamiento para realizar inversiones significativas. La técnica de estudio de eventos es utilizada para analizar estas decisiones en empresas mexicanas. Las conclusiones del presente estudio apoyan la Teoría del Pecking Order, estableciendo que las inversiones significativas, en el corto plazo, se financian principalmente por fuentes externas y que el financiamiento de capital sólo se observa en las empresas que están limitadas financieramente. Esta postura conlleva a la búsqueda dediferentes contextos para la aplicación o rechazo de la Teoría de la Estructura Óptima de Capital.Palabras clave: estructura de capital, financiamiento, finanzas corporativas, inversiones. Abstract. This study focuses on the Theories of Pecking Order and the Optimal Capital Structure (Also known as Tradeoff Theory). In relation with the theories mentioned above, previous studies described different hypothesis on financing decisions. This study, seeks to understand how companies in Mexico consider the different funding sources to invest in significant investments.The Event Study consideration is used to understand such financing decisions. The findings of this study support the Theory of Pecking Order, showing that significant investments in the shortterm are funded mainly by external sources and equity financing decisions are observed among companies that are financial constrained. This position leads to the search for different contexts in order to test the Optimal Capital Theory.Keywords: capital structure, corporate finance, financing, investments.

Target Capital Structure of Insurance Companies

2016 ◽  
Vol 5 (3) ◽  
pp. 47-53
Author(s):  
Полякова ◽  
M. Polyakova ◽  
Поляков ◽  
K. Polyakov
Keyword(s):  
Capital Structure ◽  
Insurance Market ◽  
Insurance Companies ◽  
Insurance Markets ◽  
Empirical Testing ◽  
Pecking Order ◽  
Return On Assets ◽  
Trade Off ◽  
The Impact ◽  
The Capital Structure

This article is devoted to the analysis of the existence of target capital structure of insurance companies and empirical testing of wide known capital structure theories for Russian insurance companies. Trade-off and “pecking order” theories were considered and the model that reflects the impact on the capital structure indicators various characteristics of firms was built. Traditional for insurance markets coefficients — net premium/capital ratio and liabilities/active ratio — were considered as capital structure indicators. It was shown that tradeoff theory is more adequate for Russian insurance market. The existence of target capital structure was discovered. Such indicators as firm size, the share of premiums transferred to reinsurance, return on assets, returned on capital have significant impact on the capital structure. The opportunity to grow, which was estimated as growth in premiums, and the breadth of the range didn’t has significant impact.

scholarly journals Capital Structure Theory: An Overview

2017 ◽  
Vol 6 (1) ◽  
pp. 133 ◽  
Author(s):  
D.K.Y Abeywardhana
Keyword(s):  
Capital Structure ◽  
Market Timing ◽  
Order Theory ◽  
Structure Theory ◽  
Cost Of Debt ◽  
Equity Financing ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Trade Off ◽  
Capital Structure Theory

Capital structure is still a puzzle among finance scholars. Purpose of this study is to review various capital structure theories that have been proposed in the finance literature to provide clarification for the firms’ capital structure decision. Starting from the capital structure irrelevance theory of Modigliani and Miller (1958) this review examine the several theories that have been put forward to explain the capital structure.Three major theories emerged over the years following the assumption of the perfect capital market of capital structure irrelevance model. Trade off theory assumes that firms have one optimal debt ratio and firm trade off the benefit and cost of debt and equity financing. Pecking order theory (Myers, 1984, Myers and Majluf, 1984) assumes that firms follow a financing hierarchy whereby minimize the problem of information asymmetry. But neither of these two theories provide a complete description why some firms prefer debt and others prefer equity finance under different circumstances.Another theory of capital structure has introduced recently by, Baker and Wurgler (2002), market timing theory, which  explains the current capital structure as the cumulative outcome of past attempts to time the equity market. Market timing issuing behaviour has been well established empirically by others already, but Baker and Wurgler (2002) show that the influence of market timing on capital structure is regular and continuous. So the predictions of these theories sometimes acted in a contradictory manner and Myers (1984) 32 years old question “How do firms choose their capital structure?” still remains. 

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