Unexpected Inflation, Capital Structure, and Real Risk-adjusted Firm Performance

Purpose: A company’s capital structure is a blend of its equity and debt financing and is considered a significant factor in the valuation of any firm. The decisions related to capital structure formation play an integral role for the firms, therefore; this research tends to explore the factors of capital structure and their impact on firm performance. For this purpose, financial data for different listed companies in PSX has been gathered, and dividends and taxes are used as firm external factors. Design/Methodology/Approach: To examine the impact, the panel data has been used for the period 2016-2020 and panel least square has been applied. Findings: The findings suggest that among the variables current ratio, dividends, taxation, total debt to total equity ratio, and the firm size are statistically significant to profitability. The study also concludes that dividends and tax have a greater impact on capital structure and firm performance. Implications/Originality/Value: Managers and owners of the firms must make sure that their profits are used for future investments rather than payment of debts to avoid bankruptcy.

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DAMPAK STRUKTUR MODAL PADA SENSITIVITAS PENERAPAN KOMPENSASI OPSI SAHAM KARYAWAN TERHADAP KINERJA

EKUITAS (Jurnal Ekonomi dan Keuangan) ◽

10.24034/j25485024.y2010.v14.i1.2109 ◽

2017 ◽

Vol 14 (1) ◽

pp. 1

Author(s):

Nur Fadjrih Asyik

Keyword(s):

Firm Performance ◽

Capital Structure ◽

Stock Options ◽

Stock Option ◽

Company Performance ◽

Employee Stock Option ◽

Sensitivity Level ◽

The Impact ◽

Option Compensation ◽

Stock Option Compensation

This study aims to test whether the management that receive compensation in the form of stock options having an positive impact on company performance. This study considers the external performance measurement by identifying Cumulative Abnormal Return (CAR). In addition, this study aims to test whether the company's capital structure affects the sensitivity level of employee stock option compensation and firm performance. Capital structure is measured with debt to equity ratio. The result indicates that the proportion of Employee Stock Option Plan (ESOP) influence company performance in accordance with the predictions. This shows that the more stock options offered to employees then came a sense of belonging which resulted in more motivated managers to improve company performance. Furthermore, the higher the market performance of companies that can be achieved, the higher the profit (gain) will be obtained by the recipient of stock options. In addition, this study also shows that the impact of stock option grants at the company's performance declined with the greater capital structure of liability. This shows that the capital structure of liabilities will lower the sensitivity level of employee stock option compensation and firm performance. The higher the company's liabilities would reduce the rights of the owner of the dividends each period in accordance with the ownership of shares held since the company must take into account the interest costs to be paid to the creditor.

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Capital Structure and Firm Performance: Evidence from Malaysian Public Listed Plantation Companies

UNIMAS Review of Accounting and Finance ◽

10.33736/uraf.3536.2021 ◽

2021 ◽

Vol 5 (1) ◽

pp. 123-142

Author(s):

Kim Foong Jee ◽

Jia En Joanne Ngui ◽

Pei Pei Jessica Poh ◽

Wai Loon Chan ◽

Yet Siang Wong

Keyword(s):

Firm Performance ◽

Capital Structure ◽

Significant Relationship ◽

Firm Growth ◽

Control Variable ◽

Short Term ◽

Total Debt ◽

And Performance ◽

The Impact

This paper examines the relationship between capital structure and performance of firms. The study is confined to plantation sector companies in Malaysia and is based on a sample of 39 firms which listed in Bursa Malaysia for the period from 2009 to 2019. This study uses two performance measures which are ROA and ROE as the dependent variable. Besides, the capital structure measures are the short-term debt, long-term debt, total debt and firm growth, which as the independent variables. Size will be the control variable in this study. Moreover, a fixed-effect panel regression analysis has been used to analyse the impact of capital structure on firm performance. The results indicate that firm performance, which is in term of ROA, have an insignificant relationship with short-term debt (STD) and long-term debt (LTD). For the total debt (TD) and growth, there is a significant relationship with ROA. However, for the performance measured by ROE, it has an insignificant relationship with short-term debt (STD), long-term debt (LTD) and total debt (TD). Furthermore, there is a significant relationship between the growth and the performance firms from plantation sector in Malaysia.

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