Managerial Incentive, Ownership Control and External Finance: A Theory of Capital Structure

2006 ◽  
Author(s):  
Xuewen Liu
Keyword(s):  
Capital Structure ◽  
Managerial Incentive ◽  
External Finance ◽  
Ownership Control

Corporate Capital Structure, Agency Costs, and Ownership Control: The Case of All-Equity Firms

1990 ◽  
Vol 45 (4) ◽  
pp. 1325-1331 ◽  
Author(s):  
ANUP AGRAWAL ◽  
NANDU J. NAGARAJAN
Keyword(s):  
Capital Structure ◽  
Agency Costs ◽  
Corporate Capital ◽  
Corporate Capital Structure ◽  
Ownership Control

scholarly journals The Effect of Capital Structure Gearing Levels on Financial Performance of Public and Private Sector Firms in Kenya’s Coastal Counties

2019 ◽  
Vol 11 (3) ◽  
pp. 99
Author(s):  
Swalhah Ibrahim Yusuf
Keyword(s):  
Private Sector ◽  
Capital Structure ◽  
Financial Performance ◽  
The Body ◽  
Public And Private ◽  
External Finance ◽  
Size Growth ◽  
Set Up ◽  
Public And Private Sector ◽  
The Capital Structure

Soon after independence in 1963, many firms including those in productive public and private sectors were set up in Kenya to produce goods and services for consumption in Kenya and beyond. Some public and private firms were set up in Kenya’s coastal counties while some were set up in other parts of Kenya. As at June 1990 however, most of these firms were either collapsed and liquidated or were ailing. Few were performing fairly. By 2015, there were 194 public firms which were in operations. Many of these however were formed after 1990. 46.4% of these had poor financial performance as measured by accounting and market ratios (ROE and ROA). About 35 of these firms, among them sugar firms and local authorities had more operating expenses than revenue. Postal Corporation of Kenya for example made KES 2.6b in revenues. Operating expenses however were KES 4.16b. National Oil Corporation of Kenya (NOCK) made KES 24.76b in revenues. Cost of sales excluding operating expenses however were KES 22.95b (Kenya’s treasury department, statement, 2015). In the small enterprise segment, about 300,000 SME’s were set up in 2010. About 350,000 SME’s were set up in 2012. However 2.2m SME’s closed down in six years ending 2015. About 35% of these closed down in 2015. Overall, about 96% of the firms which are set up closed down by the end of their first year in operations. (World Bank Report, 2010). The questions were ‘why did firms underperform and why did these firms fail?’ Published annual financial reports of firms, studies by Kenya National Bureau of Statistic (KNBS) and others attributed the poor financial performance and failure of the firms to many factors; high cost of energy, intense competition, high cost of raw materials, obsolete equipment, poor management, poor technical skills, high cost of finance and other bank charges, inadequate finance, family feuds, lack of succession plan etc. Some empirical studies attributed poor financial performance and failure of firms to financing; the capital structure. None however attributed this to capital structure gearing levels. This constituted a research gap to be filled by this study to add to the body of knowledge and literature. The capital structure gearing level is the proportion of external finance used in financing a firm. This proportion (gearing) may vary between ›0 to 100% (Brealey & Myers, 1991). Some firms however have a proportion ranging between ›0 and <30% (LG), 30%-‹35% (MG1) ≥35%-‹40% (MG2) ≥40%-≤60% (MG3) and ›60% (HG). The external finance may be inform of short term and long term debt and equity finance. Debt carries a fixed slice of earnings. The gearing levels therefore debt levels will carry a proportionate fixed slice of earnings. High gearing (HG) will magnify the effect on earnings and hasten the process of insolvency (Brealey & Myers, 1991). Poor financial performance and failure therefore maybe the result of inappropriate gearing level. Gearing level therefore was the problem. This study sought to do the following: Assess the capital structure of public and the private sector firms in Kenya’s coastal counties. Assess the capital structure gearing levels of public and private sector firms in Kenya’s coastal counties. Determine the effect of the capital structure gearing levels on financial performance of public and private sector firms in Kenya’s coastal counties. This involved a target population of 500 productive firms in Kenya’s Coastal Counties. Using the Cochran’s sample size formula, 50% proportion of the productive public and private sector firms randomly selected, the sample was 139 firms. They were observed for a period of 2003 to 2015. Questionnaires and structured interviews were used as instruments for collecting primary data from finance officers or finance managers or their equivalent of the firms. Secondary data was obtained from financial statements (income statement and the balance sheet). Control variables were; size, tangibility and growth. The basic framework for regression was of the form below; Y= f (gearing levels+ tangibility+ size+ growth) Where, Y= return on assets/return on equity ROA/ROE=f (gearing levels+ tangibility+ size+ growth) Data analysis was done using both descriptive statistics and inferential statistics (regression).

Capital structure and earnings quality in microfinance institutions

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Naima Lassoued
Keyword(s):  
Capital Structure ◽  
Earnings Management ◽  
Information Quality ◽  
Management Practice ◽  
Investment Decision ◽  
External Financing ◽  
Microfinance Institutions ◽  
Content Type ◽  
External Finance ◽  
Negative Effect

PurposeThe purpose of this paper is to examine whether capital structure matters for earnings management of microfinance institutions.Design/methodology/approachThe empirical study is conducted using a sample of 575 MFIs over 2007 to 2015, we determined in the first step the discretionary part of provision for loan impairment. In the second step, we examine the effect of debt and donated equity on discretionary provision for loan impairment.FindingsWe found robust evidence that MFIs manage their earnings for external finance purposes. Debt exhibits a negative effect on earnings management for both profit and nonprofit MFIs. However, donated equity incites managers of MFIs to engage this practice in nonprofit MFIs.Practical implicationsFindings could be valuable to fund providers and investors who should consider accounting information quality in order to reach a better investment decision.Originality/valueThis paper is among the few to explore earnings management motivation of MFIs and to determine the role of external financing on earnings management practice.

scholarly journals Analisis Equity Market Timing dan Struktur Modal

SKETSA BISNIS ◽  
2020 ◽  
Vol 7 (1) ◽  
pp. 45-55
Author(s):  
Acchedya Anugrahani ◽  
Rahmat Setiawan
Keyword(s):  
Capital Structure ◽  
Firm Size ◽  
Stock Exchange ◽  
Market Timing ◽  
Weighted Average ◽  
Equity Market ◽  
Manufacturing Companies ◽  
Control Variables ◽  
External Finance ◽  
Equity Market Timing

Abstract This study aims to examine the effect of equity market timing in determining the company's capital structure decisions. The sample used was Indonesian manufacturing companies listed on the Indonesia Stock Exchange (IDX) for the 2013-2018 period. This study uses independent variables namely market to book ratio and External finance weighted average market to book ratio (EFWAMTB), the dependent variable used is market leverage, and the control variables used are profitability, tangibility, and size. This study uses panel data regression. The results of this study indicate that the MTB ratio and EFWAMTB have a significant negative effect on market leverage. So it can be said that Indonesian manufacturing companies apply the equity market timing theory in determining capital structure decisions. The profitability and firm size control variables give significant negative and the tangibility variable shows significant positive results on the company's market leverage. Keywords: equity market timing, market to book ratio, market to book ratio dan External finance weighted average market to book ratio (EFWAMTB), ROA, tangibility, size and market leverage. Abstrak Penelitian ini bertujuan untuk menguji pengaruh equity market timing dalam menentukan keputusan struktur modal perusahaan.Sampel yang digunakan adalah perusahaan manufaktur Indonesia yang terdaftar di Bursa Efek Indonesia (BEI) periode 2013-2018. Strudi ini menggunakan variabel independen yaitu market to book ratio dan external finance weighted average market to book ratio (EFWAMTB), variabel dependen yang digunakan yaitu market leverage dan variabel kontrol yang digunakan adalah profitabilitas, tangibilitas dan size. Studi ini menggunakan regresi data panel.Hasil penelitian ini menunjukan bahwa MTB dan EFWAMTB berpengaruh negatif signifikan terhadap market leverage.Sehingga dapat dikatakan perusahaan manufaktur Indonesia menerapkan teori equity market timing dalam menentukan keputusan struktur modalnya. Variabel kontrol profitabilitas dan firm size memberikan hasil negatif signifikan dan untuk variabel tangibilitas menunjukan hasil positif signifikan terhadap market leverage prusahaan. Kata Kunci: equity market timing, market to book ratio, market to book ratio dan External finance weighted average market to book ratio (EFWAMTB), ROA, tangibility, size and market leverage

scholarly journals Pengaruh Sustainability Reporting, Profitabilitas, Struktur Modal Dan Insentif Manajer Terhadap Nilai Perusahaan

2021 ◽  
Vol 4 (2) ◽  
pp. 434-444
Author(s):  
Yolanda Pratami ◽  
Poppy Camenia Jamil
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Research Result ◽  
Sustainability Reporting ◽  
Total Sample ◽  
Company Performance ◽  
Managerial Incentive ◽  
Share Prices ◽  
Result Show ◽  
Growing Economy

Indonesia's growing economy require every company to improve company performance for achievement of company goals. In addition, the company is also expected to increase the firm’s value for shareholder prosperity. Firm’s value is very important because it shows the performance of the company that can affect investor perceptions of the company. The issue of companies listed on the Indonesia Stock Exchange shows that most firm’s values ​​have declined from 2017 to 2018 while good company values ​​are seen from stable and rising share prices. This study aims to test empirically the influence of sustainability reporting, profitability, capital structure and managerial incentive to firm’s value on the companies listed in Indonesia Stock Exchange during periode 2017-2018. This study used purposive sampling method for the selection of sampel. The population of this research is 613 companies with total sample of 39 companies. Data analysis technique in this research is multiple regression analysis with SPSS version 23.0. The research result show that sustainability reporting has no effect to to the firm’s value, profitability has effect to the firm’s value, capital structure has no effect to the firm’s value and managerial incentive has no effect to the firm’s value. The results of this study are expected to be a motivation for company management to increase firm’s value because it will have an impact on investor interest in investing in companies in Indonesia. Keywords: Sustainability Reporting, Profitability, Capital Structure, Managerial Incentive, Firm’s Value

Analysis of Factors Affecting Capital Structure in Food and Beverage Manufacturing Company

2018 ◽  
Vol 1 (2) ◽  
pp. 1-14
Author(s):  
Nur Hajja Aini ◽  
St Habibah
Keyword(s):  
Capital Structure ◽  
Firm Size ◽  
Significant Influence ◽  
Fixed Effects ◽  
Random Effect Model ◽  
Manufacturing Companies ◽  
Business Risk ◽  
Growth Opportunities ◽  
Food And Beverage ◽  
The Capital Structure

The purpose of this research to analyze the influence of firm size, liquidity, growth opportunities, tangibility asset, and business risk to the capital structure of listed food and beverage manufacturing companies in Indonesia and Vietnam Stock Exchange from 2010 to 2016. The result shows that the fixed effects model should be appropriate for this study as compared to the random effect model. Capital structure significantly differences between the two countries. Firm size has a positive but insignificant influence on the capital structure in Indonesia, whereas it has a positive and a significant influence on the capital structure in Vietnam. Liquidity has a negative and significant influence on the capital structure both in Indonesia and Vietnam. Growth opportunities have a negative but insignificant influence on the capital structure both in Indonesia and Vietnam. Asset tangibility has a positive but insignificant influence on the capital structure in Indonesia, but it has the negative but insignificant influence on the capital structure in Vietnam. Ultimately, the business risk has a negative and significant influence on the capital structure in Indonesia but has a positive and insignificant influence on the capital structure in Vietnam.

Capital Structure and its Impact on Profitability in Select Software Companies in South India

2011 ◽  
Vol 2 (3) ◽  
pp. 108-110
Author(s):  
K.nirmal Kumar Reddy ◽  
Keyword(s):  
Capital Structure ◽  
South India ◽  
Software Companies

Does Being Islamic or Shariah-compliant affect Capital Structure? Evidence from Real-estate Firms in the Gulf Cooperation Council States.

2015 ◽  
Author(s):  
Omokolade Akinsomi ◽  
Muhammad Faishal ◽  
Seow Ong ◽  
Graeme Newell
Keyword(s):  
Real Estate ◽  
Capital Structure ◽  
Gulf Cooperation Council
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