The Effect of Capital Structure on Profitability

2015 ◽  
pp. 307-323 ◽  
Author(s):  
Seda Erdoğan
Keyword(s):  
Regression Analysis ◽  
Capital Structure ◽  
Manufacturing Sector ◽  
Service Firms ◽  
Trade Off ◽  
Book Value ◽  
Financing Decisions ◽  
Size Growth ◽  
Effect Estimation ◽  
The Relationship

The main objective of this chapter is to understand the trade-off between using debt and equity in the financing decisions of investments and investigate whether capital structure affects profitability of corporate firms in Turkey. This relationship is tested through using observations of 235 firms for 4 years with the inclusion of Correlation Analysis, Independent Sample t-test, and Regression Analysis with random/fixed effect estimation. Results show that in the manufacturing sector, size, growth, GDP, market to book value, short-term debt to total assets, and total debt to total assets came out to be significant factors in determining profitability (i.e. ROA). Findings indicate that the relationship between independent variables (i.e. debt/total assets and profitability) is positive, since firms can benefit from the tax advantages brought through receiving additional debt. For the service firms, contradictory results are obtained, such that the relationship between leverage and profitability is negative.

Financing Decisions and Performance of Italian SMEs in the Hotel Industry

2018 ◽  
Vol 60 (4) ◽  
pp. 335-354 ◽  
Author(s):  
Marco Botta
Keyword(s):  
Capital Structure ◽  
Financial Performance ◽  
Optimal Level ◽  
Pecking Order ◽  
Optimal Capital Structure ◽  
Financing Decisions ◽  
Medium Enterprise ◽  
Optimal Capital ◽  
And Performance ◽  
The Relationship

This study investigates the existence of an optimal capital structure for small and medium enterprise (SME) hotels through the analysis of the relationship between financing decisions and financial performance in a large sample of Italian hotel SMEs. The results show that hotel SMEs face an optimal capital structure that allows them to maximize returns to investors, while instead having both too little and too much debt reduces their financial performance. This notwithstanding, we show that hotel SMEs are not particularly concerned with optimizing their capital structure, and their funding behavior is deeply connected with the availability of internally available funds, a typical pecking order behavior, and they result extremely slow in converging toward their optimal level of leverage so that they could improve their performance by adopting a more sophisticated financial strategy.

scholarly journals New evidences on determinants of capital structure from the Indian manufacturing industry

2016 ◽  
Vol 13 (3) ◽  
pp. 82-88 ◽  
Author(s):  
Pradeepta Sethi ◽  
Ranjit Tiwari
Keyword(s):  
Capital Structure ◽  
Manufacturing Industry ◽  
Order Theory ◽  
Manufacturing Firms ◽  
Indian Government ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Optimal Capital Structure ◽  
Financing Decisions ◽  
Size Growth

In the backdrop of Make in India push by Indian government the purpose of this study is to examine the determinants of capital structure towards a better understanding of financing decisions to be undertaken by the Indian manufacturing firms. The data for the analysis is drawn from COSPI manufacturing index of Centre for Monitoring Indian Economy (CMIE). Our sample is an unbalanced panel of 1077 firms over the period 2000-01 to 2012-13. We apply system-GMM to study different factors that affect the leverage decision of firms in India. The findings of the study reveals that the choice of optimal capital structure can be influenced by factors such as profitability, size, growth, tangibility, non-debt tax shields, uniqueness and signal. We also find the existence of both pecking order theory and static trade-off theory in the case of Indian manufacturing firms. The results thus obtained are robust across the different proxies of leverage

scholarly journals Determinants of Capital Structure in Bahrain Stock Market

2016 ◽  
Vol 3 (2) ◽  
pp. 177
Author(s):  
Abdelrhman Ahmad Meero
Keyword(s):  
Regression Analysis ◽  
Correlation Analysis ◽  
Stock Market ◽  
Capital Structure ◽  
Linear Model ◽  
Significant Relationship ◽  
Correlation And Regression Analysis ◽  
Dependent Variables ◽  
The Relationship ◽  
Industrial Investment

The aim of this paper is to examine the determinants of capital structure (profitability, size, risk and growth). The sample is composed of 39 Bahraini firms listed in Bahrain Stock Market. The study covered the period 2011-2015. Correlation and regression analysis have been used to identify the relationship between the capital structure determinants and debt leverages (book leverage and market leverage). Correlation analysis aims to identify this relationship at market level and at sectorial level. Regression analysis objective is to anticipate the models characterizing the relationships between determinants and capital leverages. Results of the analysis shows negative significant relationship between profitability and dependent variables, with more significance relationship with market leverage. This relationship is demonstrated in market level and in insurance and services sectors between profitability and book leverage. When the market leverage is the dependent variable this relationship is valid in market level and in banking, hotels, insurance and services sectors. Positive significant relationship has been found between size and both leverages in market level. Similar result is detected on sectorial level in banking, industrial, investment and services when the dependent variable is book leverage. Size-market leverage relationship is positive and significant also in insurance, investment and services sectors. The relationship risk—book leverage is significant only on sectorial level in Industrial, insurance and investment sectors. In term of market leverage—risk relationship, significant relationship is detected in market level and in investment and services sectors. Regression analysis results present a significant linear model reflecting the relationship between determinants of capital structure and leverages.

scholarly journals Impact of Firm Specific Factors on Credit Risk: A Case of Karachi Stock Exchange

2015 ◽  
Vol 54 ◽  
pp. 140-143
Author(s):  
Sajid Iqbal ◽  
Saima Nasir Chaudry ◽  
Nadeem Iqbal
Keyword(s):  
Regression Analysis ◽  
Credit Risk ◽  
Significant Relationship ◽  
Multivariate Regression ◽  
Stock Exchange ◽  
Manufacturing Sector ◽  
Multivariate Regression Analysis ◽  
Specific Factors ◽  
Relationship Of ◽  
The Relationship

The current study aims to explore the relationship of firm’s specific factors i-e profitability, ROA, leverage and bank size on credit risk. The population of the study consists of manufacturing sector of Pakistan. The sample of study is cement sector of Pakistan. The sample units are 22 and listed at Karachi stocks exchange. The multivariate regression analysis is used to test the data of sample. The study revealed negative significant relationship of all firm specific factors with credit risk in Pakistan. Thus, the study supported historic investigations regarding credit risk.

scholarly journals Hubungan Struktur Modal Dan Profitabilitas: Analisis Perusahaan Infrastruktur pada Indonesian Stock Exchange Tahun 2012-2016

2019 ◽  
Vol 7 (2) ◽  
Author(s):  
Eddy Winarso, Francis M. Hutabarat
Keyword(s):  
Regression Analysis ◽  
Capital Structure ◽  
Significant Relationship ◽  
Stock Exchange ◽  
Statistical Software ◽  
Return On Equity ◽  
Correlation And Regression Analysis ◽  
Auto Correlation ◽  
The Relationship ◽  
The Capital Structure

The purpose of this research is to analyze the relationship between capital structure and profitability of infrastructure companies listed in SMINFRA18 on the Indonesia Stock Exchange from 2012-2016. The advantage of an appropriate capital structure can help companies to grow primarily in the profits of their companies. This research is descriptive-correlation and quantitative approach. The data used in this study is the Capital Structure and Profitability Data of Infrastructure Companies in the Indonesia Stock Exchange which are members of the SMINFRA Index. There are 18 companies listed in the index which are the best companies in the infrastructure industry. The ratio used to describe the capital structure is Debt to Equity and the profitability ratio used is Return on Equity. This study uses statistical software to analyze: Auto-correlation, Multicollinearity, Normality, Heterocedascity, Correlation, and Regression analysis. Thus, the results of the study show that there is a significant relationship between capital structure and profitability in the SMINFRA18 Infrastructure Company listed on the Indonesia Stock Exchange.Keywords: Capital Structure, Profitability, Infrastructure, return on equity

scholarly journals Pengaruh Perencanaan Pajak dan Profitabilitas Terhadap Nilai Perusahaan dengan BOD Diversity sebagai Variabel Moderasi

2019 ◽  
Vol 9 (2) ◽  
pp. 235-246
Author(s):  
Yuli Dwi Astuti ◽  
Giawan Nur Fitria
Keyword(s):  
Regression Analysis ◽  
Firm Value ◽  
Stock Exchange ◽  
Statistical Tests ◽  
Tax Planning ◽  
Financial Statement ◽  
Book Value ◽  
Company Value ◽  
Real Estate Sector ◽  
The Relationship

This study aims to determine the effect of tax planning and profitability on firm value with BOD diversity as a moderating variable. This research is motivated by the importance of information about the factors that can affect the value of the company. Company value in this study used price book value as an indicator of measurement. The population of this research is the property and real estate sector companies in companies listed on the Indonesia Stock Exchange in 2016 - 2018. The sample of this research is 30 issuers or 90 company financial statement data used in this study. This study uses multiple linear regressiosn with statistical tests and moderate regression analysis test with SPSS 23. The results of this study are tax planning and profitability have a positive and significant effect on firm value. Whereas BOD Diversity weakens the relationship between tax planning and profitability on firm value.

scholarly journals PENGARUH PROFITABILITAS, SIZE DAN GROWTH TERHADAP STRUKTUR MODAL PADA INDUSTRI BARANG KONSUMSI YANG DIDASARI OLEH PECKING ORDER THEORY DAN TRADE-OFF THEORY

Media Ekonomi ◽  
2016 ◽  
Vol 16 (2) ◽  
pp. 229
Author(s):  
Ika Yustina Rahmawati
Keyword(s):  
Capital Structure ◽  
Consumer Goods ◽  
Stock Exchange ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Trade Off ◽  
Industry Sector ◽  
Size Growth ◽  
Consumer Goods Industry

This study aims to determine the effect of profitability, size and growth of the company's capital structure in the consumer goods industry sector based on the pecking order theory and trade-off theory. This research was conducted using the procedure panel data for a sample of 26 consumer goods industry sector companies listed on the Indonesia Stock Exchange during 2009- 2013. The findings of this study is to support H1a, H2b and H3b. based on the results of the analysis of the profitability variable (measured ROE) there is a negative correlation significant at α = 5%, which means supporting the pecking order theory. The size variable (as measured by total assets) and growth (which was measured by the Market to Book Value) positively associated significant at α = 5% and 10%, which means supporting the trade-off theory. For the selection method of FEM and REM, researchers used a test in which the capital REM Test Hausmant be an option for the measurement of capital structure (DER, DAR and Working capital) while FEM selected for the measurement of capital structure (Leverage). Keyword: profitability, size, growth, capital struktur, pecking order theory and trade-off theory

scholarly journals Capital structure, corporate performance, and life cycle: Evidence from Indonesia

2017 ◽  
Vol 14 (4) ◽  
pp. 449-461
Author(s):  
Eko Suyono ◽  
Subba Reddy Yarram ◽  
Riswan Riswan
Keyword(s):  
Regression Analysis ◽  
Life Cycle ◽  
Interest Rate ◽  
Capital Structure ◽  
Institutional Ownership ◽  
Managerial Ownership ◽  
Company Performance ◽  
The Relationship ◽  
Moderating Role

This study aims to investigate firstly, the influences of company life cycle (i.e., pioneer, growth, mature, and decline) and set of control variables (i.e, tax level, interest rate, institutional ownership, and managerial ownership) on capital structure; secondly, the influence of capital structure on company performance; and thirdly, the moderating role of each stage of the company life cycle on the relationship between capital structure and company performance. Implementing quantitative approach by using OLS Regression Analysis and Moderated Regression Analysis (MRA) on a set of the sample that consists of 157 Indonesian non-financial listed firms for 2010-2015 periods (942 firm years), findings show that company life cycle has a significant influence on capital structure. While for control variables, tax level and institutional ownership have a positive influence on the capital structure, wherein interest rate and managerial ownership have a negative effect on capital structure. Moreover, capital structure ratio influences positively on company performance. Finding also documents that pioneer and growth stages have a moderating role in strengthening the influence of capital structure on company performance, while mature and decline stages have a moderating role in weakening the influence of capital structure on company performance. This study provides important implications for corporations and business practitioners with regard to the best choice in the composition of capital structure which is able to improve company performance. On the best of our knowledge, it is the first study testing the moderating role of company life cycle on the relationship between capital structure and company performance.

scholarly journals FAKTOR-FAKTOR STRUKTUR MODAL MENURUT TRADE OFF THEORY

2021 ◽  
Vol 26 (1) ◽  
pp. 55-67
Author(s):  
Farah Tri Megawati ◽  
Nana Umdiana ◽  
Lulu Nailufaroh
Keyword(s):  
Regression Analysis ◽  
Capital Structure ◽  
Quantitative Methods ◽  
Stock Exchange ◽  
Linear Regression Analysis ◽  
Manufacturing Companies ◽  
Corporate Tax ◽  
Trade Off ◽  
Tax Rate ◽  
The Capital Structure

This study purposed to examine the effect of Corporate tax rate and Non debt tax shield on their Capital Structure according to Trade Off Theory on manufacturing companiessubsector metal and allied product that listed in Indonesia Stock Exchange for period 2016-2019. The study was conducted uing quantitative methods with an associative approach.  The study population numbered 16 companies and 6 companies were sampled using purposive sampling.  The study was conducted at manufacturing companies subsector metal and allied product that listed in Indonesia Stock Exchange for period 2016-2019.  Classic assumption test using the test for normality, multicollinearity, autocorrelation, and heteroscedasticity.  The regression analysis used is multiple linear regression analysis.  Data was collected with the Financial Statement 2016-2019 and analyzed with IBM SPSS version 25. The results of this study indicate that the use of high debt to obtain a low corporate tax rate can cause a high risk for the company to go bankrupt, so the company prefers to use depreciation costs to obtain tax savings.  If the depreciation cost of the company is high, the company can also reduce the use of debt.  This shows that the higher the capital structure, the lower the corporate tax rate obtained by the company and the higher the NDTS, the lower the capital structure.  In this study, there are still many limitations and shortcomings namely the influence of the independent variable on the dependent variable can only explain by 63,2%.

scholarly journals Political Patronage on Capital Structure in Indonesia

2019 ◽  
Vol 4 (3) ◽  
pp. 89-97
Author(s):  
Muhammad Istan ◽  
Kamaludin Kamaludin
Keyword(s):  
Regression Analysis ◽  
Capital Structure ◽  
Financial Performance ◽  
Jel Classification ◽  
Political Support ◽  
Financial Ratios ◽  
Weak Effect ◽  
Financial Report ◽  
Political Patronage ◽  
The Relationship

Objective – The purpose of this research is to test the theory of capital structure by determining whether the relationship is affected by Political Patronage. The study will examine political support, capital structure and financial performance of the company. Methodology/Technique – The data in this research is in the form of financial ratios displayed in the financial report of each company listed from 2010 to 2016. The sample was selected using purposive sampling with as many as 70 companies indicated to have political support. The data was analysed using regression analysis. Findings – The results show that Political Patronage has an influence on capital structure and political Patronage has a weak effect on financial performance. Type of Paper: Empirical Keywords: Political Patronage; Capital Structure; Financial Performance. Reference to this paper should be made as follows: Istan, M; Kamaludin. 2019. Political Patronage on Capital Structure in Indonesia, J. Fin. Bank. Review 4 (3): 89 – 97 https://doi.org/10.35609/jfbr.2019.4.3(2) JEL Classification: G30, G32, G39.

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