An empirical test of the agency problems and capital structure of South African quoted SMEs

2006 ◽  
Vol 20 (1) ◽  
pp. 51-65 ◽  
Author(s):  
J Abor ◽  
N Biekpe
Keyword(s):  
Capital Structure ◽  
South African ◽  
Empirical Test ◽  
Agency Problems

Farm capital structure choice: theory and an empirical test

2014 ◽  
Vol 74 (1) ◽  
pp. 115-132 ◽  
Author(s):  
Feng Wu ◽  
Zhengfei Guan ◽  
Robert Myers
Keyword(s):  
Theoretical Model ◽  
Capital Structure ◽  
Credit Risk ◽  
Choice Theory ◽  
Empirical Test ◽  
Theoretical Framework ◽  
Comparative Statics ◽  
Content Type ◽  
Structure Choice ◽  
Capital Structure Choice

Purpose – The purpose of this paper is to provide a unified theoretical framework that explains farm capital structure choice. Design/methodology/approach – The framework accommodates different credit access scenarios and heterogeneous risk profiles of borrowers. It recognizes that the costs of capital are endogenously determined, reflecting the degree of credit risk and accessibility to credit markets. Based on the proposed model and the comparative statics derived thereof, the paper empirically tests the impacts of different factors on capital structure choice. Findings – Based on the theoretical framework, the paper derived the impacts of different factors on capital structure choice using comparative statics. Results suggest that the potential determinants of capital structure have varying effects at different ranges of leverage. Empirical evidence supports the theoretical model. Originality/value – Despite all of previous work on various aspects of farm capital structure choice, a framework that encompasses each of the different assumptions and scenarios is still lacking. The theoretical model integrates credit risk models and accommodates endogenous cost of capital, providing a comprehensive framework for studying farm capital structure choice and its determinants. The results provide insights that could help policy makers and lenders develop effective instruments to manage, monitor, and influence the financial leverage of farms at different quantiles of debt ratio.

scholarly journals Capital structure and profitability: An empirical study of South African banks

2016 ◽  
Vol 14 (1) ◽  
pp. 8-19 ◽  
Author(s):  
Kudzai Raymond Marandu ◽  
Athenia Bongani Sibindi
Keyword(s):  
Capital Structure ◽  
Credit Risk ◽  
South African ◽  
Time Series Data ◽  
Emerging Market ◽  
Strong Relationship ◽  
Capital Adequacy ◽  
Series Data ◽  
Bank Capital ◽  
The Relationship

The bank capital structure debacle in the aftermath of the 2007-2009 financial crises continues to preoccupy the minds of regulators and scholars alike. In this paper we investigate the relationship between capital structure and profitability within the context of an emerging market of South Africa. We conduct multiple linear regressions on time series data of big South African banks for the period 2002 to 2013. We establish a strong relationship between the ROA (profitability measure) and the bank specific determinants of capital structure, namely capital adequacy, size, deposits and credit risk. The relationship exhibits sensitivity to macro-economic shocks (such as recessions), in the case of credit risk and capital but is persistent for the other determinants of capital structure.

scholarly journals The impact of operating leverage on the capital structure of Johannesburg Stock Exchange-listed firms before and after the 2008 global financial crisis

2018 ◽  
Vol 11 (1) ◽  
Author(s):  
Matabane T. Mohohlo ◽  
Johan H. Hall
Keyword(s):  
Financial Crisis ◽  
Capital Structure ◽  
South African ◽  
Global Financial Crisis ◽  
Stock Exchange ◽  
Johannesburg Stock Exchange ◽  
The Global Financial Crisis ◽  
Operating Leverage ◽  
The Impact ◽  
The Capital Structure

The financial leverage-operating leverage trade-off hypothesis states that as financial leverage increases, management of firms will seek to reduce the exposure to operating leverage in an attempt to balance the overall risk profile of a firm. It is the objective of this study to test this hypothesis and ascertain whether operating leverage can indeed be added to the list of factors that determine the capital structure of South African firms. Forty-six firms listed on the Johannesburg Stock Exchange between 1994 and 2015 are analysed and the impact of operating leverage is determined. The results are split into two periods, that is, the period before the global financial crisis (1994–2007) and after the global financial crisis (2008–2015). The impact of operating leverage during these two periods is then compared to determine whether a change in the impact of operating leverage on the capital structure can be observed especially following the crisis. The results show that the conservative nature of South African firms leading up to 2008 persisted even after the global financial crisis. At an industry level, the results reveal that operating leverage does not have a noticeable impact on capital structure with the exception of firms in the industrials sector of the South African economy.

South African Capital Structure Decisions: A Survey of Listed Companies

2016 ◽  
Vol 17 (2) ◽  
pp. 167-187 ◽  
Author(s):  
Lambert H. de Wet ◽  
Sean Joss Gossel
Keyword(s):  
Capital Structure ◽  
South African ◽  
Listed Companies

An analysis of cost of capital, capital structure and capital budgeting practices: a survey of South African listed companies

2008 ◽  
Vol 16 (2) ◽  
pp. 31-52 ◽  
Author(s):  
C. Correia ◽  
P. Cramer
Keyword(s):  
Capital Structure ◽  
South African ◽  
Cost Of Capital ◽  
Emerging Market ◽  
Capital Budgeting ◽  
Listed Companies ◽  
Sample Survey ◽  
The South ◽  
Equity Ratio ◽  
Finance Theory

This study employs a sample survey to determine and analyse the corporate finance practices of South African listed companies in relation to cost of capital, capital structure and capital budgeting decisions.The results of the survey are mostly in line with financial theory and are generally consistent with a number of other studies. This study finds that companies always or almost always employ DCF methods such as NPV and IRR to evaluate projects. Companies almost always use CAPM to determine the cost of equity and most companies employ either a strict or flexible target debt‐equity ratio. Furthermore, most practices of the South African corporate sector are in line with practices employed by US companies. This reflects the relatively highly developed state of the South African economy which belies its status as an emerging market. However, the survey has also brought to the fore a number of puzzling results which may indicate some gaps in the application of finance theory. There is limited use of relatively new developments such as real options, APV, EVA and Monte Carlo simulation. Furthermore, the low target debt‐equity ratios reflected the exceptionally low use of debt by South African companies.

scholarly journals An Empirical Test of Capital Structure Theories for the Vietnamese Listed Firms

2019 ◽  
Vol 12 (3) ◽  
pp. 148 ◽  
Author(s):  
Nguyen ◽  
Ho ◽  
Vo
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Empirical Test ◽  
Empirical Studies ◽  
Order Theory ◽  
Asia Pacific ◽  
Method Of Moment ◽  
Pecking Order Theory ◽  
Factors Affecting ◽  
Listed Firms

Raising capital efficiently for the operations is considered a fundamental decision for any firms. Since the 1960s, various theories on capital structure have been developed. Various empirical studies had also been conducted to examine the appropriateness of these theories in different markets. Unfortunately, evidence is mixed. In the context of Vietnam, a rising powerful economy in the Asia Pacific region, this important issue has been largely ignored. This paper is conducted to provide additional evidence on this important issue. In addition, different factors affecting the capital structure decisions from the Vietnamese listed firms are examined. The Generalized Method of Moment approach is employed on the sample of 227 listed firms in Ho Chi Minh City stock exchange over the period from 2008 to 2017. Findings from this study suggest that the Vietnamese listed firms follow the trade-off theory to determine their capital structure (i.e., to determine the optimal debt level). In contrast, no evidence has been found to confirm that the pecking order theory can explain the financing decisions of the Vietnamese listed firms, as previously expected. In addition, findings from this study also indicate that ‘Fund flow deficit’ and ‘Change in sales’ are the most two important factors that affect the amount of debt issued for the Vietnamese listed firms. Implications for academics, practitioners, and the Vietnamese government have also been emerged from the findings of this paper.

scholarly journals Pecking order, earnings management and capital structure

Accounting ◽  
2021 ◽  
Vol 7 (6) ◽  
pp. 1389-1394 ◽  
Author(s):  
Novi Swandari Budiarso ◽  
Winston Pontoh
Keyword(s):  
Capital Structure ◽  
Earnings Management ◽  
Stock Exchange ◽  
Agency Problem ◽  
Agency Problems ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Corporate Capital Structure ◽  
Debt Capacity

Most of studies imply that firms decrease or increase their debt capacity in context of pecking order theory or agency problems. On this point, the setting of this study is based on two main problems related to capital structure: the first is determining the source of funds for financing investments, and the second is solving the conflict between shareholders and managers, or the agency problem. The objective of this study is to provide evidence about how firms establish their capital structure in relation to pecking order theory and the agency problem by controlling earnings management in the context of Indonesian firms. This study conducts logistic regression on 28 firms in the consumer goods industry listed on the Indonesia Stock Exchange from 2010 to 2017.This study finds that pecking order theory determines the capital structure of most Indonesian firms with high debt. The results imply that agency problems are unable to explain corporate capital structure and earnings management is not effective for motivating Indonesian firms to establish corporate governance.

scholarly journals KAJIAN EMPIRIS TERHADAP STRUKTUR MODAL PERUSAHAAN DI INDUSTRI MANUFAKTUR.

2020 ◽  
Vol 5 (2) ◽  
pp. 27-36
Author(s):  
Dwi Astutik ◽  
Hesti Ristanto ◽  
Hani Krisnawati
Keyword(s):  
Capital Structure ◽  
Manufacturing Industry ◽  
Empirical Test ◽  
Investment Decision ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Investment Decision Making ◽  
Combination Of Methods ◽  
Managerial Level

Tujuan dari penelitian ini adalah melakukan pengujiann empiris mengenai pengaruh antara profitabilitas dan likuiditas terhadap struktur modal. Objek penelitian dilakukan pada perusahaan-perusahaan yang telah go public dan termasuk dalam industri Manufaktur. Pengambilan data menggunakan penggabungan metode by firm dan by years, dan diperoleh 589 data. Hasil pengujian membuktikan bahwa secara parsial,profitabilitas dan likuiditas berpengaruh negatip dan signifikan terhadap struktur modal. Saran yang dapat direkomendasikan bagi para akademisi dapat dijadikan acuan sebagai pengembangan pengujian terhadap pecking order theory. Bagi para pihak yang ada di jajaran manajerial perusahaan, menjadi rambu-rambu dalam pengambilan keputusan dalam menyusun struktur modalnya. Bagi calon investor dan investor, hasil penelitian ini dapat dijadikan sebagai salah satu bahan pertimbangan dari aspek fundamental dalam pengambilan keputusan investasi.   The purpose of this study is to conduct an empirical test of the effect between profitability and liquidity on capital structure. The object of research is conducted on companies that have gone public and are included in the Manufacturing industry. Retrieval of data using a combination of methods by firm and by years, and obtained 589 data. The test results prove that partially, profitability and liquidity have a negative and significant effect on capital structure. Suggestions that can be recommended for academics can be used as a reference as the development of testing of pecking order theory. For the parties in the managerial level of the company, they become the guidelines in making decisions in preparing their capital structure. For potential investors and investors, the results of this study can be used as a material consideration from the fundamental aspects of investment decision making.

scholarly journals Financial crisis and capital structure: perspectives from an emerging market economy

2013 ◽  
Vol 11 (4) ◽  
pp. 789-799
Author(s):  
Annalien de Vries
Keyword(s):  
South Africa ◽  
Panel Data ◽  
Financial Crisis ◽  
Capital Structure ◽  
South African ◽  
Market Economy ◽  
Emerging Market ◽  
Negative Effects ◽  
Global Recession ◽  
The Capital Structure

World economies experienced one of the worst recessions in recorded history in 2008. South Africa, as an emerging economy, did not escape the negative effects of the global recession, and, as a result, experienced its first recession in almost two decades. During a recession, firms may need to adjust their capital structure in response to the adverse circumstances. The purpose of this study was to investigate the effect of the South African recession on the capital structure of firms listed on the Johannesburg Securities Exchange (JSE). Panel data methodology was used for this study. The results indicate that the 2008-2009 South African recession did have a significant impact on the capital structure of South African firms and that financial managers actively managed their capital structure to adapt to the new environment and circumstances they were exposed to

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