scholarly journals The Influence of Firm Specific Determinants on Financial Performance in the Power Industry

2017 ◽  
Vol 9 (5) ◽  
pp. 18
Author(s):  
Mafumbate J ◽  
Ndlovu U ◽  
Mafuka A ◽  
Gavhure P
Keyword(s):  
Capital Structure ◽  
Financial Performance ◽  
Firm Size ◽  
Poor Performance ◽  
Target Population ◽  
Order Theory ◽  
Power Industry ◽  
Trade Off ◽  
The Impact ◽  
Retained Earnings

This study concentrates on the impact of firm specific determinants on financial performance in the power industry. The firm specific determinants used in this study as independent variables were capital structure, firm size and liquidity whilst ROA, ROI and profitability were used as proxies of financial performance. Modigliani and Miller (1958) argue that capital structure has no impact on financial performance whilst the Trade-off theory suggests that the ideal capital structure that helps firm remain financially healthy is the trade-off between cost of leverage and the advantages of debt. Beyond that trade-off point, a firm will start making losses. The target population included 60 employees from all the 5 subsidiaries of the Holding company and researchers used 40 respondents as sample size to enhance reliability. A relationship was established between firm specific determinants and financial performance as measured by ROA, ROI and profitability. The results showed a negative but significant relationship between capital structure and financial performance and they support the pecking order theory which suggests that capital structure is a significant determinant of financial performance. Firm size and financial performance were also negatively related. However, a significant positive relationship was established between liquidity and financial performance. From the findings the researchers concluded that firm specific factors have a significant impact on financial performance. Researchers therefore recommend that ZESA holdings should use its internal funds such as retained earnings and more equity than debt when financing its activities so as to reduce leverage costs which lead to poor performance. 

scholarly journals The Influence of Firm Specific Determinants on Financial Performance in the Power Industry

2017 ◽  
Vol 9 (5(J)) ◽  
pp. 18-28
Author(s):  
Mafumbate J ◽  
Ndlovu U ◽  
Mafuka A ◽  
Gavhure P
Keyword(s):  
Capital Structure ◽  
Financial Performance ◽  
Firm Size ◽  
Poor Performance ◽  
Target Population ◽  
Order Theory ◽  
Power Industry ◽  
Trade Off ◽  
The Impact ◽  
Retained Earnings

This study concentrates on the impact of firm specific determinants on financial performance in the power industry. The firm specific determinants used in this study as independent variables were capital structure, firm size and liquidity whilst ROA, ROI and profitability were used as proxies of financial performance. Modigliani and Miller (1958) argue that capital structure has no impact on financial performance whilst the Trade-off theory suggests that the ideal capital structure that helps firm remain financially healthy is the trade-off between cost of leverage and the advantages of debt. Beyond that trade-off point, a firm will start making losses. The target population included 60 employees from all the 5 subsidiaries of the Holding company and researchers used 40 respondents as sample size to enhance reliability. A relationship was established between firm specific determinants and financial performance as measured by ROA, ROI and profitability. The results showed a negative but significant relationship between capital structure and financial performance and they support the pecking order theory which suggests that capital structure is a significant determinant of financial performance. Firm size and financial performance were also negatively related. However, a significant positive relationship was established between liquidity and financial performance. From the findings the researchers concluded that firm specific factors have a significant impact on financial performance. Researchers therefore recommend that ZESA holdings should use its internal funds such as retained earnings and more equity than debt when financing its activities so as to reduce leverage costs which lead to poor performance. 

The Importance of Financial Theories for SME Capital Structure Decisions

2020 ◽  
pp. 82-95
Author(s):  
João Lussuamo ◽  
João Lopes ◽  
Márcio José Sol Pereira Oliveira
Keyword(s):  
Capital Structure ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Trade Off ◽  
Sme Finance ◽  
Investment Opportunities ◽  
Scopus Database ◽  
Retained Earnings ◽  
The Web

This chapter aims to analyze the importance of financial theories for SME capital structure decisions. The financial theories considered for this study were trade-off theory and pecking order theory. From the various empirical evidences researched in the Web of Science and Scopus database, it was found that most SME capital structure decisions follow the financial theory of hierarchical hierarchy, that is, the SME finance their investment opportunities through retained earnings, debt issuance, and finally stock issuance.

scholarly journals The Influence Of Corporate Governance, Capital Structure, and Company Size on The Company's Financial Performance

2021 ◽  
Vol 5 (2) ◽  
pp. 98-108
Author(s):  
Muhammad Abdul Izzatur Rahman ◽  
Subagio Subagio
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Financial Performance ◽  
Firm Size ◽  
Financial Services ◽  
Good Governance ◽  
Positive Impact ◽  
Company Size ◽  
Bank Capital ◽  
The Impact

This study aims to examine the effect of the implementation of corporate governance, capital structure, and firm size on the financial performance of banking companies. The implementation of good corporate governance is an obligation that must be carried out by companies which already have guidelines from the Financial Services Authority and other institutions. In fact, not all companies have applied good governance even though it can improve the performance of the company so it becomes interesting to study the impact of good governance implementation in Indonesia. This study uses panel data regression analysis with research samples from banking companies listed on the Indonesia Stock Exchange (IDX) from 2017 to 2019. The results of the study as overall show that corporate governance, capital structure and firm size have a positive effect on the company's financial performance. Managerial ownership as corporate governance proxy has a significant positive impact on financial performance partially. Keywords: bank, capital structure, corporate governance, company size

scholarly journals Role of Capital structure in financial performance of non-financial sector firms: Evidence from Pakistan Stock Exchange

2020 ◽  
Vol V (II) ◽  
pp. 1-16
Author(s):  
Hafiz Abdur Rashid ◽  
Ahmed Raza Bilal
Keyword(s):  
Capital Structure ◽  
Financial Performance ◽  
Negative Impact ◽  
Stock Exchange ◽  
Order Theory ◽  
Positive Contribution ◽  
Negative Contribution ◽  
Pecking Order Theory ◽  
Financing Cost ◽  
Retained Earnings

This paper looks at financial performance of non-financial sectors of Pakistan concerning capital structure. We gathered data from annual audited financial statements of 152 firms listed at PSX during 2010-2017. To analyze data gathered, we have employed descriptive, correlation and regression analyses techniques. The findings show substantial positive contribution of LTDA in EPS and ROA and significant negative role in NPM and ROE which implies prefer long term debt over short term debt because of less financing cost. STDTA has substantial negative contribution in firms financial performance among all sectors except sugar and communication & technology sectors. TDTA also has negative impact on financial performance of firms among all sectors except automobile sector, which implies that equity financing is preferable over debt financing. These findings validate pecking order theory and recommend preferring internal financing (retained earnings) over external financing.

scholarly journals KONSENTRASI KEPEMILIKAN SAHAM DAN DAMPAKNYA TERHADAP KINERJA KEUANGAN PERUSAHAAN DI BURSA EFEK INDONESIA

2014 ◽  
pp. 1-17
Author(s):  
Donalson Silalahi
Keyword(s):  
Capital Structure ◽  
Financial Performance ◽  
Empirical Evidence ◽  
Firm Size ◽  
Stock Exchange ◽  
Control Variable ◽  
Stock Ownership ◽  
Share Ownership ◽  
Before And After ◽  
The Impact

The study aims to: First, obtain empirical evidence about the impact of the concentration of stock ownership to the company's financial performance by using size of the compay and capital structure as a control variable in the Indonesia Stock Exchange. Second, obtain empirical evidence about the the impact of the company's financial performance to the concentration of stock ownership by using the size of the company and capital structure as a control variable in the Indonesia Stock Exchange. Third, obtain empirical evidence about the optimal concentration of share ownership in the Indonesia Stock Exchange. To achieve these objectives, the research conducted at the Indonesian Stock Exchange with a sample size as many as 195 companies and in explaining the relationship between the concentration of share ownership with the company's financial performance, firm size and capital structure as control variables and used t test, F test with α by 10 percent. Based on the results of research, the conclusions can be stated as follows: First, the concentration of share ownership and financial performance of the company can be placed as dependent and independent variables. The concentration of stock ownership have a significant positive effect on the company 's financial performance both before and after included firm size and capital structure as a control variable. Company's financial performance have a significant positive effect on the concentration of ownership of shares before and after included firm size and capital structure as a control variable. That is, the relationship between the concentration of share ownership with the company's financial performance is not a systematic relationship. Second, there is no an optimal concentration of share ownership, but there is a tendency of non- monotonic relationship between the concentration of share ownership with the company's financial performance. That is, the more concentrated the ownership of shares resulting majority shareholder actions that benefit themselves, to the detriment of minority shareholders

A Study of Determinants of Capital Structure through Panel Data Analysis of Firms Listed in NSE CNX 500

2016 ◽  
Vol 20 (4) ◽  
pp. 267-277 ◽  
Author(s):  
Barnali Chaklader ◽  
Deepak Chawla
Keyword(s):  
Capital Structure ◽  
Control Variable ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Trade Off ◽  
Tax Shield ◽  
Debt Tax Shield ◽  
The Impact ◽  
The Capital Structure

This study contributes to the capital structure literature by investigating the determinants of capital structure of firms listed in NSE CNX 500. The period of the study is 2008–2015, the period starting from the year of global slowdown. This study is an attempt to study the capital structure of firms listed in National Stock Exchange in the post liberalization period. The objectives of the study are to study the impact of independent variables such as growth, profitability, tangibility, liquidity, size and non-debt tax shield on financial leverage and also to find out whether the results are in line with the pecking order theory or the trade-off theory of capital structure. Size is taken as a control variable. Our study supports the trade-off theory for all variables such as growth, profitability, size tangibility and non-debt tax shield. Liquidity is the only independent variable that goes in accordance with the pecking order theory. Thus, this study is more inclined towards the trade-off theory.

scholarly journals CAPITAL STRUCTURE, PROFITABILITY AND FIRM VALUE: EVIDENCE FROM MINING COMPANIES

2018 ◽  
Vol 4 (1) ◽  
pp. 1-12
Author(s):  
Diga Cendekia Budianto ◽  
Yosman Bustaman
Keyword(s):  
Capital Structure ◽  
Financial Performance ◽  
Firm Size ◽  
Firm Value ◽  
Control Variable ◽  
Total Asset ◽  
Revenue Growth ◽  
Mining Companies ◽  
The Impact ◽  
The Capital Structure

This research investigates the impact of firm capital structure on profitability and firm value of the twenty eight mining companies listed in Indonesia Stock Exchange from the year 2009 to 2013. The capital structure is measured by the proportion of debt over total asset, ROA and ROE are used to measure the firm profitability, meanwhile stock price is applied to measure firm value. This study uses panel data regression analysis. After controlling with external factor such as GDP rate and inflation rate, and internal factor such as revenue growth and firm size (total asset), we find leverage has negative impact on ROA however they are not significant, thus it could be said capital structure has no effect on financial performance. The indicators that significantly affect financial performance come from the control variable, which is revenue growth. Our research also finds that the capital structure has a significant effect towards firm value. The firm size and GDP rate is more impactful towards firm value. This contradicts with the MM’s capital structure irrelevance proposition, but supports other theories such as pecking order theory and Trade-off theory

scholarly journals The Relationship between Capital Structure and Financial Performance of the Company

2021 ◽  
Vol 91 ◽  
pp. 01002
Author(s):  
V.V. Tretiakova ◽  
M.S. Shalneva ◽  
A.S. Lvov
Keyword(s):  
Pharmaceutical Industry ◽  
Capital Structure ◽  
Financial Performance ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Market Capitalization ◽  
Negative Effect ◽  
The Impact ◽  
The Relationship

The article examines and analyzes the relationship of key performance indicators (ROA, ROIC, change in market capitalization and price-to-book ratio) and the capital structure of the company based on the pharmaceutical industry in the UK for the 2009-2019 period. The study seeks to provide a practical evidence on the impact of external financing on company’s financial performance and test applicability of the pecking order theory for the chosen companies. The research conducted uses panel data regression and Wald test to determine and analyze the effect of capital structure on the financial indicators of the company performance. The study used a sample of 185 UK companies from the pharmaceutical industry. The result of the research showed that equity has negative effect on price-to-book ratio and ROA and positive effect on change in market capitalization, while long-term debt has a positive relationship with price- to-book ratio and change in market capitalization. In addition, short-term debt has a negative effect on change in market capitalization, ROA and ROIC. The study also provides only partly coincidence of the results with the pecking order theory.

scholarly journals Sustainability of Both Pecking Order and Trade-Off Theories in Chinese Manufacturing Firms

2020 ◽  
Vol 12 (9) ◽  
pp. 3883 ◽  
Author(s):  
Huu Manh Nguyen ◽  
Thi Huong Giang Vuong ◽  
Thi Huong Nguyen ◽  
Yang-Che Wu ◽  
Wing-Keung Wong
Keyword(s):  
Capital Structure ◽  
Firm Size ◽  
Positive Relationship ◽  
Negative Relationship ◽  
Manufacturing Firms ◽  
Model Tests ◽  
Pecking Order ◽  
Trade Off ◽  
Dividend Payout ◽  
The Impact

Our study investigates Chinese manufacturing firms listed on both the Shanghai and the Shenzhen Stock Exchanges. These firms follow the pecking order or trade-off theories in their capital structure choices. Using panel data from the Taiwan Economic Journal and quantile regression, we construct three models to compare the two theories. Our first model tests the impact of profitability, tangible asset, firm size, and investment opportunities on leverage; our second model adds the dividend payout ratio to test the robustness of the first model; and our third model tests how leverage, profitability, firm size, and dividend variables affect a firm’s investments. From the results of all the models used in our study, we find a negative relationship between leverage and both profitability and the dividend payout ratio and a positive relationship between leverage and growth in a firm’s investments. We also find a negative relationship between dividends, firm size, and growth in a firm’s investments and a positive relationship between investment capital and profitability. The overall results indicate that the capital structure decisions of Chinese manufacturing firms are best explained by the pecking order theory.

Panel Data Analysis of Determinants of Leverage in the Automobile Industry in India

GIS Business ◽  
2018 ◽  
Vol 13 (2) ◽  
pp. 29-47
Author(s):  
Vibha Tripathi
Keyword(s):  
Panel Data ◽  
Capital Structure ◽  
Automobile Industry ◽  
Panel Data Analysis ◽  
Negative Relationship ◽  
Order Theory ◽  
Ordinary Least Squares ◽  
Pecking Order ◽  
Trade Off ◽  
Coverage Ratio

The study tries to investigate the key determinants of capital structure of leading automobile companies and the Automobile Industry in India. The study also tracks the theory implications, i.e. trade off vs. pecking order in these firms and the industry in general. An attempt is to see, if individually each sample company and the whole industry are influenced by the same determinants of capital structure. Pooled ordinary least squares and panel data econometric techniques such as fixed effect models are used to investigate the most significant determinants that affect the capital structure choice of 10 leading companies categorized as BSE Auto Top 100 and the Automobile Industry as a whole for a period of 14 years from 2000–2001 to 2013–2014. The study reveals some interesting facts and results. Multiple regression analysis reveals that while profitability and size are significant determinants in most of the leading companies; NDTS, Growth, and Debt service coverage ratio are not significant for these companies. While the Panel data results of the Automobile Industry as a whole reveals that profitability is the only significant determinant having negative relationship with debt equity ratio; and the other variables are insignificant. Also individual companies coefficient results shows implications of mix of pecking order and trade off theories while the panel data results of the whole Industry strongly supports the Pecking order theory.

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