scholarly journals Dynamic capital structure determinants: Some evidence from South African firms

2013 ◽  
Vol 6 (3) ◽  
Author(s):  
Vusani Moyo ◽  
Hendrik Wolmarans ◽  
Leon Brümmer
Keyword(s):  
Financial Distress ◽  
Capital Expenditure ◽  
Stock Exchange ◽  
Retention Rate ◽  
Economic Value ◽  
Value Added ◽  
Order Theory ◽  
Share Price ◽  
Debt Ratio ◽  
Pecking Order Theory

This study uses a sample of 49 manufacturing, 24 mining and 23 retail firms listed on the Johannesburg Stock Exchange during the period 2005-2010 to investigate the relationship between leverage and the firm’s key financial performance variables. Leverage is directly proportional to cash flow. This is consistent with the trade-off (TO) and agency theories. Capital expenditure is positively correlated to leverage, while asset tangibility and retention rate are negatively correlated to leverage. These findings confirm the validity of the pecking order theory. Liquidity and financial distress are negatively correlated to leverage. Consistently with the TO theory, leverage increases with profitability. Share price is positively correlated to leverage and this finding validates the market timing theory. The economic value added (EVA) is positively correlated to leverage and this finding rejects the TO theory. The true speed of adjustment for the sample is 64.20% for book-to-debt ratio and 28.11% for market-to-debt ratio.

Hierarchical financing and reality of the financial structure of Moroccan listed companies

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Firano Zakaria ◽  
Doughmi Salawa
Keyword(s):  
Stock Exchange ◽  
Financial Structure ◽  
Order Theory ◽  
Debt Ratio ◽  
Growth Opportunities ◽  
Pecking Order ◽  
Positive Role ◽  
Pecking Order Theory ◽  
Content Type

Purpose There is a wealth of literature on the financing structure of a company. For this reason, the authors considered it useful to present a theoretical and empirical literature review of classical and new theories of the financial structure. The purpose of this study is to realize on a panel of 15 nonfinancial Moroccan companies listed on the Casablanca Stock Exchange, over a period of 11 years. Design/methodology/approach The results obtained indicate that only a few variables from financial theory have an important role in the financing policy of Moroccan companies. The authors have presented the positive role of size and self-financing on the debt ratio. The analysis of the effects of profitability shows in this study that it is negative related on the debt ratio which asserts the predictions of the pecking order theory. Also, the age of the company and the growth opportunities explain the level of indebtedness. Findings Econometric analysis is used to ascertain the nature of the financial structure of listed companies. For this purpose, a large number of companies listed on the Casablanca stock exchange were used. Originality/value The authors have presented the positive role of size and self-financing on the debt ratio. Regarding the influence of profitability, this analysis shows that it is negative related on the debt ratio which asserts the predictions of the pecking order theory. Also, the age of the company and the growth opportunities explain the level of indebtedness.

scholarly journals ANALISIS PENGARUH FAKTOR DETERMINAN TERHADAP ECONOMIC VALUE ADDED DAN IMPLIKASINYA TERHADAP PERGERAKAN HARGA SAHAM PROPERTI DI BURSA EFEK INDONESIA

2019 ◽  
Author(s):  
Afriyeni Afriyeni ◽  
jhon fernos
Keyword(s):  
Interest Rates ◽  
Stock Prices ◽  
Stock Price ◽  
Economic Value ◽  
Value Added ◽  
Share Price ◽  
Debt Ratio ◽  
Economic Value Added ◽  
Model Framework ◽  
Ceteris Paribus

Property sector companies whose shares are traded on the Indonesia Stock Exchange (IDX) has a period of booming growth dynamics of a property crash period when the economic crisis. Economic Value Added (EVA) valuing the company economically while assessing the company's stock price is the market. Four determinant factors in the EVA model framework: profitability (ROA), capital structure (debt ratio), beta stocks and interest rates; investigated its effect on EVA and its implications for stock price movement. Testing hypotheses through stages: (i) the design of the model-path (path analytical model), (ii) parameter estimation, (iii) analysis of the model, and (iv) model evaluation. Estimation models with SPSS ver ver 10:05 and 8:51 LISREL. The results are: (i) EVA influenced by, from the most dominant, ROA profitability levels, interest rates, debt ratio, and beta stocks (R2 = 95%). ROA has a positive effect, interest rate and debt ratio negatively, whereas no significant effect of beta stocks (balance); (ii) The movement of stock prices are influenced by, from the most dominant, beta stocks, interest rates, ROA, and the debt ratio (R2 = 20%). ROA beta and positive influence, a negative influence interest rates, whereas the effect of debt ratio balance; (iii) If the ROA rose one standard unit, precision EVA rose 0.98 units and the stock price rose 0.20 units, if the interest rates go down one unit, EVA rose by 0.10, the stock price rose 0.25 units; if debt ratio down one unit, EVA rose 0.06 units, but does not cause a change in the stock price; when beta stocks rose one-unit standard, EVA has not changed but the stock price will rise by 0:37 units, ceteris paribus. Single regression analysis model EVA exogenous to the movement of stock prices show that the company's share price movements in the property sector IDX very little influenced by variations in EVA (4.7%), the stock price will rise by 0:22 dipresisikan if EVA unit up one unit, ceteris paribus.

Impact of Firm-specific Variables on Capital Structure Decisions. Evidence from the Indian Hospitality Sector

2021 ◽  
pp. 231971452110525
Author(s):  
Hardeep Singh Mundi ◽  
Jayant Gautam
Keyword(s):  
Capital Structure ◽  
Fixed Effects ◽  
Stock Exchange ◽  
Order Theory ◽  
Debt Ratio ◽  
Pecking Order Theory ◽  
Tax Shield ◽  
Hospitality Sector ◽  
Hospitality Firms ◽  
Fixed Effects Regression

This study investigates the determinants of capital structure for hospitality firms listed in India. The study validates the contradiction in the determinants of capital structure by using the data for firms listed on the Bombay Stock Exchange. Using fixed-effects regression models, the findings indicate that firm size and return on assets are significantly associated with total debt ratio (TDR), long-term debt ratio (LTDR) and short-term debt ratio. The variables such as growth rate, tangibility and volatility are found to be significantly associated with TDR and LTDR. Non-debt tax shield is found to be significantly associated with only TDR. Each of the stated determinants has a unique impact on capital structure decisions. The study partially confirms the applicability of the pecking order theory for hospitality sector firms. With the findings on hospitality firms, we hope to provide useful insights to lending institutions and corporate executives.

Impact of firm characteristics on capital structure choice of Turkish SMEs

2015 ◽  
Vol 41 (3) ◽  
pp. 286-300 ◽  
Author(s):  
Ali Uyar ◽  
Mustafa Kemal Guzelyurt
Keyword(s):  
Financial Distress ◽  
Survey Methodology ◽  
Order Theory ◽  
Debt Ratio ◽  
Pecking Order ◽  
Financing Policy ◽  
Pecking Order Theory ◽  
Content Type ◽  
Financing Decisions ◽  
Structure Complexity

Purpose – The purpose of this paper is to investigate whether SMEs have a target debt ratio or not; who makes financing decisions for investments; the financing preferences; and which factors play a role in external financing policy of the firms. Design/methodology/approach – The authors adopted questionnaire survey methodology in the study. The questionnaire was administered to SMEs operating in Istanbul through e-mail, telephone, and fax in July 2011. For the analysis, the authors have adopted the non-parametric test of the Kruskal-Wallis. Findings – The study produced several important findings. Most of the surveyed firms do not follow a target debt ratio. Hence, the trade-off theory is not supported. Partners rather than professional managers are more likely to make financing choices in SMEs. The study has provided evidence regarding the implementation of the pecking order principle. Turkish SMEs primarily prefer internal funding sources over external ones and short-term debt over long-term debt. Thus, the pecking order theory is supported. General economic conditions, debt-paying ability of the firm, and financial distress risk play the most important role in outside financing decisions. Research limitations/implications – The study has got some limitations as all such studies have. First, it was conducted only on SMEs in Istanbul; hence it has a geographical limitation. Second, the findings may not be generalizable to large and publicly traded companies as the sample consists of only SMEs. For further study, similar research can be carried out across Turkey on a wider sample. Originality/value – The SMEs are different from large companies in a variety of ways, such as ownership structure, complexity of operations, financing sources, and so on. Hence, there is a need for empirical analysis conducted, particularly, on SMEs. The primary motivation for the study is the scarcity of such empirical works in general. Secondarily, SMEs make up a large proportion of companies in the Turkish economy. Therefore, the subject needs to be studied in Turkey.

scholarly journals THE EFFECT OF ECONOMIC VALUE ADDED (EVA) ON PRICE TO BOOK VALUE THE ROLE OF INSTITUTIONAL OWNERSHIP IN RETAIL SECTOR COMPANIES LISTED ON THE INDONESIA STOCK EXCHANGE

2020 ◽  
Vol 1 (5) ◽  
pp. 889-904
Author(s):  
Apriyani Apriyani ◽  
Nur Aisyah F Pulungan
Keyword(s):  
Stock Exchange ◽  
Descriptive Analysis ◽  
Economic Value ◽  
Value Added ◽  
Institutional Ownership ◽  
Share Price ◽  
Retail Sector ◽  
Economic Value Added ◽  
Financial Policies ◽  
Book Value

This study examines and analyzes the effect of Economics Value Added (EVA) on the price to book value mediated by institutional ownership in retail sector companies listed on the Indonesia Stock Exchange (IDX). The object of this study is the sector of retail with shares of sharia when listed on the Indonesia Stock Exchange (BEI) period 2015-2019. In order to achieve the goals and objectives, the company increases it’s value by increasing shareholders. Improving the walfare on shareholders can be done through investment and financial policies, and is reflected in share price in the capital market. The higher the share price, the better the owner’s walfare, and the company’s value will also increase. The population of this research is the retail companies as many as 27 companies when the sample is 12 company’s by using a purposive sampling method met criteria for the sample. The data is further analyzed using SmartPLS Vs.3.2.9 by looking at the result of descriptive analysis, coefficient path, and path analysis. The result of the study showed that Economic Value Added (EVA) has a negative and significant effect to Price to Book Value (PBV), the Economic Value Added (EVA) has a negative and not significant effect to institutional ownership, the institutional ownership has a negative and significant effect to Price to Book Value (PBV), in addition institutional ownership does not mediate the relationship between Economic Value Added (EVA) and Price to Book Value (PBV).

scholarly journals PENGUJIAN PECKING ORDER HYPOTHESIS DAN MANAGERIAL HYPOTHESIS

2010 ◽  
Vol 9 (1) ◽  
Author(s):  
Go, Lisa Safira ◽  
Mudji Utami
Keyword(s):  
Cash Flow ◽  
Capital Expenditure ◽  
Stock Exchange ◽  
Negative Relationship ◽  
Order Theory ◽  
Managerial Ownership ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Internal Cash Flow ◽  
Pecking Order Hypothesis

This research examines hypotesis that suitable with capital expenditure behavior of services industry in Indonesia. Pecking Order Theory argued that capital expenditure affected mainly from internal cash flow. However, managerial hypothesis argued that managerial ownership also affect capital expenditure amongst firms and on several cases the effect more keen that internal cash flow. The research uses 25 firms from Jakarta Stock Exchange from 2000-2005. The result showed lower managerial ownership will tend to increase the over-investment by managers, therefore the relationship between managerial ownership to capital expenditure. Meanwhile the research alos found a negative relationship between dividend to capital expenditure and align with Pecking Order Hypothesis.

scholarly journals Bulls and Bears and Bankruptcy- An Early Warning of Distress.

2018 ◽  
pp. 962-969
Author(s):  
Eka Bertuah ◽  
Erlane K. Ghani
Keyword(s):  
Capital Structure ◽  
Financial Distress ◽  
Stock Exchange ◽  
Order Theory ◽  
Structure Theory ◽  
Manufacturing Companies ◽  
Equity Financing ◽  
Pecking Order Theory ◽  
Financial Ratio ◽  
Market Index

This study examines possible indicators of financial distress: financial ratio; financial decision; the preferences of investors; and economic macro conditions. Based on these indicators, the model of financial distress was constructed using capital structure theory. The population in this study is manufacturing companies listed on The Indonesian Stock Exchange from 2003 to 2016. This study relies on the composite market index to detect whether the market is bullish or bearish using regression analysis time series. Then, the factor analysis and logistic regression are used. Models which predict financial distress in bearish markets are more accurate than in a bullish market. Investors, therefore, are more vulnerable ina bullish market. Equity financing will reduce the probability of financial distress in both bullish and bearish markets. This supports the pecking order theory in capital structure - when the companies need funding, an early funding alternative is to retain earnings.

Going public in interwar Britain

2010 ◽  
Vol 17 (1) ◽  
pp. 51-71 ◽  
Author(s):  
David Chambers
Keyword(s):  
Initial Public Offerings ◽  
Financial Regulation ◽  
Capital Expenditure ◽  
Stock Exchange ◽  
Survival Rates ◽  
Order Theory ◽  
Pecking Order ◽  
Going Public ◽  
Pecking Order Theory ◽  
Public Offerings

Utilising a new sample of interwar initial public offerings (IPOs), I consider the effectiveness of the interwar stock market for firms going public. Consistent with the pecking order theory, IPO proceeds contributed only modestly to domestic industry's capital expenditure needs. IPOs of capital-hungry new manufacturing industries raised no more finance than did the rest of manufacturing. This was in part attributable to the detrimental effect of weak financial regulation on investor appetite for newer, riskier enterprises. In terms of the quality of firms allowed onto the market, IPO survival rates of the early and late 1920s were shockingly low, just as earlier research has shown. However, survival rates rebounded strongly in the following decade due not only to the economic recovery but also to tougher scrutiny of listing applications by the London Stock Exchange.

scholarly journals The capital structure practices of listed firms in South Africa

2010 ◽  
Vol 8 (1) ◽  
pp. 624-636
Author(s):  
Jason Kasozi ◽  
Sam Ngwenya
Keyword(s):  
Capital Structure ◽  
Financial Distress ◽  
Stock Exchange ◽  
Significant Negative Correlation ◽  
Order Theory ◽  
Debt Financing ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Listed Firms ◽  
Johannesburg Stock Exchange

This study investigates whether financial theory is aligned with financial practice by testing two conventionally recognised theories of capital structure choice, the trade-off theory and the pecking-order theory against the financing practices of listed firms on the Johannesburg Stock Exchange (JSE) during the period 1995-2005. Data were obtained from the McGregor database. The results indicated a unique, but significantly positive, correlation between debt financing and financial distress, and a significant negative correlation between debt financing and the collateral value of assets. These findings suggest that financial theory is not aligned with practice on firms listed on the JSE. This study attempts to contribute to efforts to align financial theory with practice, and to help future researchers advance or modify current theories.

scholarly journals Bulls and Bears and Bankruptcy- An Early Warning of Distress

2019 ◽  
pp. 95-102
Author(s):  
Eka Bertuahc ◽  
Erlane K. Ghani
Keyword(s):  
Capital Structure ◽  
Financial Distress ◽  
Stock Exchange ◽  
Order Theory ◽  
Structure Theory ◽  
Manufacturing Companies ◽  
Equity Financing ◽  
Pecking Order Theory ◽  
Financial Ratio ◽  
Market Index

This study examines possible indicators of financial distress: financial ratio; financial decision; the preferences of investors; and economic macro conditions. Based on these indicators, the model of financial distress was constructed using capital structure theory. The population in this study is manufacturing companies listed on The Indonesian Stock Exchange from 2003 to 2016. This study relies on the composite market index to detect whether the market is bullish or bearish using regression analysis time series. Then, the factor analysis and logistic regression are used. Models which predict financial distress in bearish markets are more accurate than in a bullish market. Investors, therefore, are more vulnerable ina bullish market. Equity financing will reduce the probability of financial distress in both bullish and bearish markets. This supports the pecking order theory in capital structure - when the companies need funding, an early funding alternative is to retain earnings.

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