scholarly journals Firm-specific and Macroeconomic Determinants of Capital Structure: Evidence from Pharmaceutical Industry in Bangladesh

2018 ◽  
pp. 43-57
Author(s):  
K.M. Zahidul Islam ◽  
Meskat Ibne Sharif ◽  
Md. Nurul Hoque
Keyword(s):  
Stock Market ◽  
Capital Structure ◽  
Interest Rates ◽  
Practical Implication ◽  
Market Development ◽  
Gdp Growth ◽  
Significant Positive Association ◽  
Macroeconomic Factors ◽  
Stock Market Development ◽  
Pharmaceutical Firms

Purpose: This study explores the significance of firm-specific and macroeconomic factors to explain variation in leverage using a sample of twenty listed pharmaceutical firms in Dhaka Stock Exchange over a six year period of 2008-2012. Design: In this study, panel data has been used and both firm specific and macroeconomic factors are analyzed as the determinants of leverage for pharmaceuticals firms in Bangladesh. Findings: This study employs leverage measure (book leverage) as dependent variable and ten factors (liquidity, profitability, tangibility, debt coverage, growth rate, firm size, GDP growth, and inflation, interest rate, and stock market development) as determinants of capital structure. Around 51% variation in leverage is explained by selected macroeconomic and firm specific factors, while the remainder is explained by unobserved macroeconomic and firm specific differences. Practical Implication: Estimated results show that GDP growth has significant positive association with the leverage. However, liquidity, profitability, tangibility, sales growth, inflation, interest rates, and stock market development reveal inverse relation with leverage. Finally the results suggest that that both trade-off and pecking order theories can explain financing decisions of listed pharmaceutical firms in Bangladesh.

scholarly journals Impact of Macroeconomic Variables on Capital Structure Choice: A Case of Textile Industry of Pakistan

2016 ◽  
Vol 55 (3) ◽  
pp. 227-239 ◽  
Author(s):  
Zia Ur Rehman .
Keyword(s):  
Stock Market ◽  
Capital Structure ◽  
Exchange Rates ◽  
Interest Rates ◽  
Public Debt ◽  
Market Development ◽  
Stock Market Development ◽  
Macroeconomic Variables ◽  
Gdp Growth Rate ◽  
The Impact

The financing decision of a firm is influenced by both internal (firm specific) and external (macroeconomic) factors. However, most of the empirical investigations have focus on internal factors whereas the impact of macroeconomic variables on capital structure decisions is somewhat under researched particularly in the context of developing countries. The aim of the study is to analyse the impact of macroeconomic variables on the capital structure decisions of all listed textile firms in Pakistan for the period 2004-2013. Panel data regression (fixed effects model) was used to estimate the effect of macroeconomic variables on capital structure. The findings of the study reveal that public debt, exchange rates and interest rates are negatively related whereas corporate taxes, stock market development, inflation rate and GDP growth rate are positively related with economic leverage. Moreover, the relationship of corporate taxes, stock market development and exchange rates is significant with the economic leverage. JEL Classification: E44, E52, E62, F31, G32 Keywords: Capital Structure, Interest Rates, Inflation, Public Debt, Exchange Rates, GDP Growth Rate, Stock Market Development, Pakistan

Formation of optimal capital structure of domestic corporations in times of crisis: Econometric analysis of determinants

2020 ◽  
Vol 19 (2) ◽  
pp. 374-398
Author(s):  
V.V. Metel'skaya
Keyword(s):  
Regression Analysis ◽  
Financial Crisis ◽  
Stock Market ◽  
Capital Structure ◽  
Market Development ◽  
Macroeconomic Factors ◽  
Stock Market Development ◽  
Optimal Capital Structure ◽  
Correlation And Regression Analysis ◽  
Optimal Capital

Subject. The article addresses building the optimal capital structure in the face of financial globalization, taking into account the ever-changing factors of external economic and geopolitical environment, including the financial crisis. Objectives. The purpose is to perform empirical tests of hypotheses about the nature of corporate financial leverage dependence on traditional determinants during and after the financial crisis in Russia's emerging market. I used a large data set on 49 public companies in seven leading sectors of the Russian economy from 2011 to 2017. Methods. The study employs the correlation and regression analysis. Results. The results of correlation and regression analysis show that the application of traditional theories of capital structure in the current conditions of financial globalization in a developing country is ineffective for forming an optimal capital structure; macroeconomic factors have a significant impact on the formation of corporate capital structures, which is particularly reflected during and after the crisis; the financial crisis has a considerable impact on the capital structure of companies; the determinant of stock market development has a real impact on leverage and plays an important role in financial decision-making after the financial crisis. Conclusions. I revealed inverse relationship between the leverage and variable size of companies after financial crisis, which contradicts to the trade-off theory and corresponds to the pecking order theory. This supports the hypothesis that macroeconomic factors are crucial, but the variable of stock market development has increased essentially as compared to the pre-crisis period.

scholarly journals The impact of stock market on enterprise capital structure in ASEAN developing countries

2021 ◽  
Vol 5 (1) ◽  
pp. 1359-1367
Author(s):  
Thuan Nguyen ◽  
Loc Tram ◽  
Nguyễn Thanh Liêm
Keyword(s):  
Developing Countries ◽  
Stock Market ◽  
Capital Structure ◽  
Statistical Significance ◽  
Market Development ◽  
Stock Market Development ◽  
Market Capitalization ◽  
Negative Effect ◽  
The Impact ◽  
Stock Market Capitalization

Capital structure is one of the topics in which business managers as well as academics are always interested, because it has many important implications. This problem in developing countries is even more relevant due to the low level of financial development in these countries, leading to uncertain access to external capital by firms. This paper focuses on the impact of stock market development on capital structure in five developing countries in ASEAN, namely Indonesia, Malaysia, Philippines, Thailand and Vietnam, for the period 2010 - 2018. Stock market development is measured in four different ways: Stock market capitalization to GDP (MACAP), total value of shares traded to GDP (LIQ1), total value of shares traded to stock market capitalization (LIQ2) and average of the three indexes (STOCK). The results show that development of stock market has different impacts on capital structure, depending on the measures used to reflect the stock market development. Specifically, MACAP, LIQ2 and STOCK do not reach statistical significance, while LIQ1 has a negative effect. In addition, firm size (SIZE), tangible assets (TANG), growth opportunities (TOBINQ), inflation (INF) and GDP growth (GDPGR) positively affect capital structure; while firms' profit (ROA) has negative effect. Based on the research findings, the research offers several implications for relevant stakeholders.

Determinants of stock market development: a review of the literature

2017 ◽  
Vol 34 (1) ◽  
pp. 143-164 ◽  
Author(s):  
Sin-Yu Ho ◽  
Bernard Njindan Iyke
Keyword(s):  
Stock Market ◽  
Real Income ◽  
Institutional Factors ◽  
Market Development ◽  
Empirical Literature ◽  
Large Set ◽  
Review Of The Literature ◽  
Macroeconomic Factors ◽  
Content Type ◽  
Stock Market Development

Purpose This paper aims to provide a comprehensive review of the literature on the determinants of stock market development. Design/methodology/approach The paper divides the existing studies into the theoretical and empirical literature. Then, it analyses these studies in turn. Findings Based on the theoretical literature, the determinants of stock market development can be broadly classified into two groups: macroeconomic factors and institutional factors. The theory and the empirics predict different ways in which macroeconomic factors affect stock market development. The real income and its growth rate foster stock market development, while the banking sector, interest rate and private capital flows can foster or inhibit it. Inflation and exchange rates have adverse effects on stock market development. In terms of the institutional factors, the literature indicates that different legal origins and stock market integration can have a positive or negative impact on stock market development. In addition, factors such as legal protection of investors, corporate governance, financial liberalisation and trade openness contribute positively to the development of the stock market. Research limitations/implications From the survey, it is imperative that policies which aim at enhancing institutional quality, financial integration, real income growth, macroeconomic stability and capital inflows, among others, will certainly promote stock market development within and across countries. Although the empirical studies have incorporated a large set of variables in their models, the theoretical studies do not contain rich models of stock market development. It is understandable that a theoretical model which contains a large set of the determinants of stock market development may be difficult to solve. However, such a model seems very appealing and will provide a unification of the existing literature. Originality/value The originality of the paper lies in the fact that it is the first to undertake a survey of the determinants of stock market development in the literature. It is hoped that this paper will spur further theoretical and empirical research on the determinants of stock market development.

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