scholarly journals Influence of Capital Structure on Corporate Performance of Listed Firm in PSX: Role of External Factors

2021 ◽  
Vol 7 (3) ◽  
Author(s):  
Abdul Hameed ◽  
Farheen Zahra Hussain ◽  
Khawar Naheed ◽  
Muhammad Sadiq Shahid
Keyword(s):  
Firm Performance ◽  
Capital Structure ◽  
Debt Financing ◽  
External Factors ◽  
Least Square ◽  
Total Debt ◽  
Integral Role ◽  
Equity Ratio ◽  
The Impact

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.  

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

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.

scholarly journals Role of Capital Structure in Firm’s Value: A Case of Pakistani Firms

2021 ◽  
Vol 1 (2) ◽  
pp. 55-64
Author(s):  
MUHAMMAD ASIF ◽  
MUHAMMAD USMAN HAMEED ◽  
ZAINULLAH KHALIL
Keyword(s):  
Capital Structure ◽  
Negative Relationship ◽  
Debt Financing ◽  
Financial Firms ◽  
Effect Regression ◽  
The Impact

The Most important and critical decision for a finance manager is adequate Capital structure. Modigliani and Miller had started the debate of capital structure in creating firm’s value. The research was conducted to find out the impact of capital structure and the value of the firm in Pakistan. The research was conducted on 71 non-financial firms of KSE 100 index. Using fix effect regression in the study it was found that there is significant effect of Capital structure on firm’s value but the use of debt financing had negative relationship with the firm’s value.

scholarly journals Impact of Capital Structure on the Performance of Textilesector in Pakistan: Examining the Moderating Effect of Liquidity

2019 ◽  
Vol 5 (1) ◽  
pp. 1-12
Author(s):  
Adeel Akhtar ◽  
Allah Bakhsh ◽  
Mehak Ali ◽  
Shazia Kousar
Keyword(s):  
Firm Performance ◽  
Capital Structure ◽  
Performance Measures ◽  
Negative Impact ◽  
Least Square ◽  
Debt Ratio ◽  
Return On Assets ◽  
Return On Equity ◽  
Earnings Per Share ◽  
Equity Ratio

Purpose: The basic aim of this study is to investigate how capital structure influences the performance of firms from textile sector listed at Pakistan Stock Exchange, taking liquidity of the firms as a moderator. Methodology: Data of 30 listed textile firms is taken from their financial statementsfor a period of ten years from 2007 to 2016.Analysis has been conducted using the Ordinary least square (OLS) regression. Two measures of capital structure (debt ratio and debt-to-equity ratio) have been used to find out its impact on three performance measures (return on assets, return on equity, and earnings per share). Findings: The variable, total debt ratio does not have any significant effect on all the three firm performance measures (return on asset, return on equity and earnings per share). Debt-to-equity ratio variable also does not have a significant impact on two firm performance measures (ROA and ROE). It however has a significant, negative impact on EPS. In case of liquidity as a moderator, it is found that liquidity acts as the significant moderator between the debt ratio and return on assets whereas liquidity factor is significant in case of relation between debt –to-equity variable and two performance variables return on assets and earnings per share.. Practical implications: Practically this study is important from managerial perspective as the appropriate decision for choosing a level of capital structure vis-à-vis total assets and total equity is essential for the better performance of the firms.

scholarly journals Impacts of Capital Structure on Bank Performance

2019 ◽  
Vol 2 (1) ◽  
pp. 118-123
Author(s):  
Sardar SH. Ibrahim
Keyword(s):  
Capital Structure ◽  
Positive Impact ◽  
Least Square ◽  
Annual Reports ◽  
Bank Performance ◽  
Return On Assets ◽  
Return On Equity ◽  
Probability Of Survival ◽  
Total Debt ◽  
The Impact

Purpose: This study studies the effect of capital structure on the performance of some Iraqi private banks. Six banks based in Iraq namely: Babylon Bank, Investment Bank, Credit Bank, Commercial Bank, Sharq Al-Awsat Bank, and Baghdad Bank were selected for the present study over the period 2005 to 2015. Methodology: Annual reports of these banks were studied and relevant ratios were calculated. The variables that were identified as independent for capital structure were total debt to capital, bank size and asset growth, while return on assets and return on equity were considered to be dependent variables for bank performance. The panel Least Square model has been used to examine the impact of capital structure on bank performance. Findings:  Outcomes indicate that none of the independent variables has a significant impact on return on assets (ROA), while total debt to capital (TDC) has a positive impact on return on equity (ROE). Reduction: Depending on this result, Iraqi banks should keep sufficient amount of capital to avoid any financial risks and increase the probability of survival.

Capital structure, competitive intensity and firm performance: evidence from Pakistan

2019 ◽  
Vol 16 (5) ◽  
pp. 796-813 ◽  
Author(s):  
Naveed Ahmed ◽  
Talat Afza
Keyword(s):  
Firm Performance ◽  
Capital Structure ◽  
Market Competition ◽  
Product Market ◽  
Debt Financing ◽  
Product Market Competition ◽  
Competitive Intensity ◽  
Content Type ◽  
Moderating Role

Purpose The purpose of this paper is to explore the moderating role of competitive intensity between the existing relationship of capital structure and firm performance. Design/methodology/approach Using the balanced panel data of listed non-financial firms of Pakistan, the present study adopts both the panel and OLS estimation techniques to draw the inferences. Findings The results exhibit that high debt ratio is harmful for the accounting performance of the selected sample firms of Pakistan. In addition, product market competition negatively moderates the relationship between capital structure and firm performance which suggests that high product market competition can be used as a substitute of debt financing to align the interests of a firm’s managers and shareholders. Practical implications The findings of the research provide evidence for the policy makers/regulators that the sample firms should discourage the high debt financing in the presence of competitive intensity in the product marketplace. Originality/value The core contribution of the current research is to examine the moderating role of product market competition on the leverage–performance relationship because, to the best of the authors’ knowledge, no single study has previously explored this relationship in the context of Pakistan.

scholarly journals The Firm’s Performance in Relation to Capital Structure and Foreign Ownership: Evidence from Vietnam

2021 ◽  
Vol 5 (1) ◽  
pp. 35
Author(s):  
Duy Suu Nguyen ◽  
Viet Dan Nguyen ◽  
Duc Thanh Tran ◽  
Michael Joseph Dempsey
Keyword(s):  
Firm Performance ◽  
Capital Structure ◽  
Random Effect ◽  
Foreign Ownership ◽  
Positive Influence ◽  
Least Square ◽  
Financial Leverage ◽  
Creative Commons ◽  
Negative Effect ◽  
The Impact

The paper examines the impact of capital structure in the context of foreign ownership on firm performance on non-financial companies in Vietnam between 2008 and 2018. The study employs Pooled OLS, Fixed effect, random effect, and Generalized Least Square to analyze the data. The study finds a non-linear relationship of foreign ownership and firm performance, so that the relationship, which is at first a positive one, becomes negative beyond a certain level of foreign ownership (30-45% ownership depending on the measure of performance). This insight is then combined with a generally inverse relationship between capital structure and performance. Besides, we find that the firm’s size (SIZE) has a positive influence on profitability and financial leverage, while both financial leverage (LEV) and the number of listed years of company (AGE) impact negatively on firm performance. Furthermore, growth of sales (GROWTH) has a positive effect on the debt ratio, and growth rate (GDP) has a negative effect on financial leverage. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium provided the original work is properly cited.

scholarly journals Financial leverage and performance of SMEs in Vietnam: Evidence from the post-crisis period

2021 ◽  
Vol 10 (3) ◽  
pp. 229-239
Author(s):  
Tung Duy Bui ◽  
Huan Huu Nguyen ◽  
Vu Minh Ngo
Keyword(s):  
Firm Performance ◽  
Capital Structure ◽  
Financial Distress ◽  
Debt Financing ◽  
Policy Implications ◽  
Panel Data Models ◽  
Debt Ratio ◽  
Firm Profitability ◽  
And Performance

This study examines the link between capital structure and firm performance (measured by ROA and ROE), focusing on a large sample of SMEs in Vietnam during the postcrisis period (2008-2016). Empirical results from various panel data models confirm the nonlinear relationship between debt financing and firm profitability. This relationship takes the form of an inverted-U shape. Firm profitability only increases to a certain level of leverage. When the debt ratio becomes too high, firm performance starts to decrease. These results highlight the role of financial distress costs in debt financing for SMEs. Furthermore, the paper also confirms the heterogeneity between state-owned firms and private ones. Policy implications are also discussed.

scholarly journals Struktur Modal dan Kinerja Perusahaan (Studi pada perusahaan yang terdaftar di Bursa Efek Indonesia periode 2011 s/d 2012)

2014 ◽  
Vol 5 (1) ◽  
Author(s):  
Novi S Budiarso
Keyword(s):  
Firm Performance ◽  
Capital Structure ◽  
Firm Value ◽  
Stock Exchange ◽  
Optimal Level ◽  
Stock Exchanges ◽  
Listed Firms ◽  
Total Debt ◽  
The Impact

Abstract This paper examine the impact of capital structure on firm performance, in Indonesian Stock Exchange. Firm performance are analyzed from the side of accounting indicators, in this research use liquidity. Because the optimal level of debt of the firm is limited by the liquidity of the assets and it depends on the average usage of the debt in the particular industry. In the other side liquidity  is  conventionally  seen  as  reflecting  investors’  degree  of  risk -aversion, The study collects  of listed firms in Indonesian Stock Exchanges during 2011 to 2012. The listed firms on sub sector trade, services and investment. Multiple Regression analysis approach was employed in carrying out this analysis. Specifically, determined the simultaneous relationships among the various variables. The results show that as partial total debt to asset significantly influences to company’s performance but long term debt to asset not significantly influences to company’s performance. Simultaneously, total debt to asset and  long term debt to asset influences company’s performance. This evidence is consistent with models of optimal capital structure and with the hypothesis that debt level changes release information about changes in firm value/performance.

scholarly journals The Impact of Capital Structure Components on the Total Assets Turnover: Evidence from Amman Stock Exchange

2019 ◽  
Vol 12 (7) ◽  
pp. 71
Author(s):  
Fares Jamiel Hussein Alsufy
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Industrial Firms ◽  
Insignificant Effect ◽  
Total Debt ◽  
Amman Stock Exchange ◽  
Equity Ratio ◽  
The Impact ◽  
The Relationship

This research examines the effect of Capital Structure Components on the Total Assets Turnover. Using information of 62 industrial firms listed on Amman Stock Exchange from 2012 through 2017. The findings of the research revealed that Capital Structure components measured by Total Debt to Total Assets of showed a positive but insignificant effect on Total Assets Turnover. While the relationship is negative and significant between capital structures measured by Debt to Equity Ratio and Total Assets Turnover.

Role of Credit Rating in determining Capital structure: Evidence from Non-Financial sector of Pakistan

2020 ◽  
Vol 38 (3) ◽  
Author(s):  
Shoaib Ali ◽  
Imran Yousaf ◽  
Muhammad Naveed
Keyword(s):  
Capital Structure ◽  
Credit Rating ◽  
Least Square ◽  
Annual Data ◽  
Leverage Ratio ◽  
Financial Decisions ◽  
Financial Firms ◽  
High Level ◽  
The Impact ◽  
The Capital Structure

This paper aims to examine the impact of external credit ratings on the financial decisions of the firms in Pakistan.  This study uses the annual data of 70 non-financial firms for the period 2012-2018. It uses ordinary least square (OLS) to estimate the impact of credit rating on capital structure. The results show that rated firm has a high level of leverage. Moreover, Profitability and tanagability are also found to be a significantly negative determinant of the capital structure, whereas, size of the firm has a significant positive relationship with the capital structure of the firm.  Besides, there exists a non-linear relationship between the credit rating and the capital structure. The rated firms have higher leverage as compared to the non-rated firms. The high and low rated firms have a low level of leverage, while mid rated firms have a higher leverage ratio. The finding of the study have practical implications for the manager; they can have easier access to the financial market by just having a credit rating no matter high or low. Policymakers must stress upon the rating agencies to keep improving themselves as their rating severs as the measure to judge the creditworthiness of the firm by both the investors and management as well.

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