scholarly journals Capital Structure and Political Risk in an Emerging Market: Evidence from Companies Listed on the Stock Exchange of Mauritius

2018 ◽  
Vol 8 (3) ◽  
pp. 104 ◽  
Author(s):  
Lydie Myriam Marcelle Amelot ◽  
Subadar Agathee Ushad ◽  
Mattew Lamport
Keyword(s):  
Capital Structure ◽  
World Bank ◽  
Stock Exchange ◽  
Emerging Market ◽  
Negative Relationship ◽  
Political Risk ◽  
Time Frame ◽  
Financial Leverage ◽  
Developed Markets ◽  
Political Risks

Cashman, Harrison and Scheiler (2014) stated that companies with less political risk will use more debts than other organisations in other countries with more exposure to political risk. In particular, when there are low political risks, there will be more leverage and when there is high political uncertainty, there will be low debts indicating a negative relationship between financial leverage and political risk (Cashman, 2015). To this effect, this study will investigate the link between capital structure and political risk in an emerging market such as Mauritius. The data sample includes 30 financial and non- financial companies listed on the Stock exchange of Mauritius over a time frame ranging from 2011 to 2015 with a total number of 135 observations. The political risk was based on two World Bank indicators, namely political change index and corruption perceptions index. Based on a panel regression model, the empirical results show an insignificant relationship between financial leverage and political risk. In particular, it is implied that there is little evidence on the importance of political risk on firms’ decision in Mauritius due to the fact that Mauritian companies consider other types of risks to be more relevant when taking on more debts. The study adds to the existing literature on emerging markets and highlights the specificity of the Mauritian equity market relative to other developed markets.

scholarly journals Determinants of Capital Structure: Evidence from Jordan

2019 ◽  
Vol 8 (4) ◽  
pp. 186
Author(s):  
Sufian Radwan Almanaseer
Keyword(s):  
Capital Structure ◽  
Fixed Effects ◽  
Stock Exchange ◽  
Negative Relationship ◽  
Firm Characteristics ◽  
Financial Leverage ◽  
Significant Negative Relationship ◽  
Amman Stock Exchange ◽  
Fixed Effects Regression ◽  
The Relationship

This study aimed to explore the determinants of the capital structure of the banks listed in the Amman Stock Exchange. A sample of 13 Jordanian commercial banks of 16 banks listed on the Amman Stock Exchange selected for the period 2008-2017. The current study applied a fixed-effects regression model by using e-views to analyze the relationship between financial leverage and firm characteristics such as Risk, Size, profitability, Growth, liquidity, Tax, Age, tangibility, and macroeconomic variables such as Gross Domestic Product, Inflation. The study finds a significant positive relationship between financial leverage, age, growth, risk, size, and tax. Also, the study finds a significant negative relationship between financial leverage with GDP, inflation, liquidity, profitability, and tangibility.

FINANCIAL PREFERENCES OF LISTED FIRMS IN EMERGING MARKET: THEORY AND PRACTICE IN THE CASE OF THAILAND

2012 ◽  
Vol 01 (06) ◽  
pp. 134-142
Author(s):  
Suveera Srijaroen ◽  
Jun Jiang
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Empirical Test ◽  
Emerging Market ◽  
Explanatory Power ◽  
Theory And Practice ◽  
Financial Leverage ◽  
Market Theory ◽  
Listed Firms ◽  
Tax Shield

The study aims to identify the determinants of Thai listed firms’ capital structure using derived theoretical-based models from CAPM and Hamada equations, which incorporate the control variables, i.e. company’s operating performance and capital size, with time-invariant and random effects, for improving the explanatory power of the model. The empirical test employs the quarterly data covering the year 2006 to 2010 from the Stock Exchange of Thailand. The results showed that the tax shield and industry classification explicitly demonstrate material relevance to the alteration of the firm’s degree of financial leverage. The results also showed that the fixed assets merely exert moderate influences on the firm’s willingness to implement a policy of increasing financial leverage. Conclusively, none other relevant factors possess a significant impact on the choice of capital structure, in the case of Thailand.

The Determinants of Financial Ratio Disclosures and Quality: Evidence from an Emerging market

2015 ◽  
Vol 1 (1) ◽  
pp. 188 ◽  
Author(s):  
Ben k. Agyei-Mensah
Keyword(s):  
Regression Analysis ◽  
Stock Exchange ◽  
Emerging Market ◽  
Negative Relationship ◽  
Ownership Concentration ◽  
Financial Ratios ◽  
Annual Reports ◽  
Executive Directors ◽  
Financial Ratio

This study investigated the influence of firm-specific characteristics which include proportion of Non-Executive Directors, ownership concentration, firm size, profitability, debt equity ratio, liquidity and leverage on the extent and quality of financial ratios disclosed by firms listed on the Ghana Stock Exchange.The research was conducted through detailed analysis of the 2012 financial statements of  the listed firms.  Descriptive analysis was performed to provide the background statistics of the variables examined.  This was followed by regression analysis which forms the main data analysis.  The results of the extent of financial ratio disclosure level, mean of 62.78%, indicate that most of the firms listed on the Ghana Stock Exchange did not overwhelmingly disclose such ratios in their annual reports.  The results of the low quality of financial ratio disclosure mean of 6.64% indicate that the disclosures failed woefully to meet the International Accounting Standards Board's qualitative characteristics of relevance, reliability, comparability and understandability.The results of the multiple regression analysis show that leverage and return on investment are associated on a statistically significant level as far as the extent of financial ratio disclosure is concerned. Board ownership concentration and proportion of (independent) non-executive directors, on the other hand were found to be statistically associated with the quality of financial ratio disclosed. There is a significant negative relationship between ownership concentration and the quality of financial ratio disclosure.  This means that under a higher level of ownership concentration less quality financial ratios are disclosed. The findings also show that there is a significant positive relationship between board composition (proportion of non-executive directors) and the quality of financial ratio disclosure.  JEL CLASSIFICATION: G3, M1, M2, M4.

scholarly journals Key Fundamental Factors and Long-run Price Changes in an Emerging Market—A Case Study of Karachi Stock Exchange (KSE)

2002 ◽  
Vol 41 (4II) ◽  
pp. 517-533 ◽  
Author(s):  
Mohammad Irfan Chaudhary ◽  
Mohammed Nishat
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Emerging Market ◽  
Share Price ◽  
Relevant Factor ◽  
Direct Relation ◽  
Price Changes ◽  
Important Indicator ◽  
Share Prices ◽  
Long Run

Share prices are the most important indicator readily available to the investors for their decision to invest or not in a particular share. Theories suggest that share price changes are associated with changes in fundamental variables which are relevant for share valuation like payout ratio, dividend yield, capital structure, earnings size of the firm and its growth, [Wilcox (1984); Rappoport (1986); Downs (1991)]. Linter (1956) linked dividend changes to earnings while Shapiro valuation model (1962) showed dividend streams discounted by the difference in discount rate and growth in dividend should be equal to share price. This predicts direct relation between pay out ratio and the price-earning multiple. Conversely it means that there is an inverse relation between pay out ratio and share price changes. Several eventbased studies established direct relation between share price changes and either earnings or dividend changes [Ball and Brown (1968); Baskin (1989)]. Sharpe (1964) and Hamada (1972) suggested direct relation between share price changes and capital structure. Beaver, Kettler and Sholes (1970) showed that firms appear to pay less of their earnings if they have higher earning volatility. This suggests payout ratio as relevant factor for share price changes. Investigations of share price changes appear to yield evidence that changes in fundamental variable(s) should jointly bring about changes in share prices both in developed and emerging markets. However, the actual fundamental factors found to be relevant may vary from market to market. For example, changes in asset growth of firms are significant in the case of Japanese shares while earnings appear to be universally a relevant factor [Ariff, et al. (1994)]. However, it is widely agreed that a set of fundamental variables as suggested by individual theories is no doubt relevant as possible factors affecting share price changes in the short and the long-run [Ariff and Khan (2000)].

scholarly journals The relationship of capital structure decisions with firm performance: A study of the engineering sector of Pakistan

2012 ◽  
Vol 2 (1) ◽  
pp. 245 ◽  
Author(s):  
Abdul Ghafoor Khan
Keyword(s):  
Firm Performance ◽  
Capital Structure ◽  
Negative Relationship ◽  
Engineering Industry ◽  
Tobin’S Q ◽  
Financial Leverage ◽  
Short Term ◽  
Tobin's Q ◽  
Relationship Of ◽  
The Relationship

Purpose: The purpose of this study is to find the relationship of capital structure decision with the performance of the firms in the developing market economies like Pakistan.Methodology: Pooled Ordinary Least Square regression was applied to 36 engineering sector firms in Pakistani market listed on the Karachi Stock Exchange (KSE) during the period 2003-2009.Findings: The results show that financial leverage measured by short term debt to total assets (STDTA) and total debt to total assets (TDTA) has a significantly negative relationship with the firm performance measured by Return on Assets (ROA), Gross Profit Margin (GM) and Tobin’s Q. The relationship between financial leverage and firm performance measured by the return on equity (ROE) is negative but insignificant. Asset size has an insignificant relationship with the firm performance measured by ROA and GM but negative and significant relationship exists with Tobin’s Q. Firms in the engineering sector of Pakistan are largely dependent on short term debt but debts are attached with strong covenants which affect the performance of the firm.Originality/Value: This is first paper to study an individual sector like engineering industry in Pakistan on the mentioned topic.

scholarly journals Determining the Factors Affecting Capital Structure Decisions of Real Sector Companies Operating in ISE

2017 ◽  
Vol 9 (8) ◽  
pp. 25 ◽  
Author(s):  
Bengü Vuran ◽  
Nihat Tas ◽  
Burcu Adiloglu
Keyword(s):  
Capital Structure ◽  
Firm Growth ◽  
Positive Impact ◽  
Stock Exchange ◽  
Negative Relationship ◽  
Order Theory ◽  
Service Firms ◽  
Factors Affecting ◽  
Tax Shield ◽  
The Capital Structure

Corporate capital structure remains a controversial issue in modern corporate finance. Since the seminal work by Modigliani and Miller (1958), a plethora of research has been undertaken in attempting to identify the determinants of capital structure. This paper analyzes the capital structure determinants of manufacturing, merchandising and service firms operating in Istanbul Stock Exchange (ISE) during the period from 2010 to 2013 comprising of 218 companies. This study addresses the following questions: Are the capital structure determinants of three types of firms in ISE driven by different factors? To answer this question, panel data methodology is applied to the sample of firms for the period from 2010 to 2013. The results show that the manufacturing and merchandising firms exhibit similarities in their capital structure choices. For those firms, size and firm growth are positively related to leverage, whereas profitability have a negative relationship with their debt to assets ratio. For service firms, size and non-debt tax shield have significant positive impact on leverage but profitability negatively related to leverage. These findings provide evidence in favour of trade off theory and pecking order theory.

Implications of Government Borrowing for Corporate Financing in Emerging Economies: A Crowding Out Kuznets Curve

2020 ◽  
Vol 23 (02) ◽  
pp. 2050017 ◽  
Author(s):  
Muhammad Ali Nasir ◽  
Toan Luu Duc Huynh ◽  
Quynh Thi Nhu Do ◽  
Cuc Thi Nguyen ◽  
Quynh Thi Tran
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Generalized Method Of Moments ◽  
Negative Relationship ◽  
Kuznets Curve ◽  
Crowding Out ◽  
Macroeconomic Factors ◽  
Corporate Financing ◽  
Financing Decisions ◽  
The Government

This paper investigates the implications of government borrowing for corporate financing and capital structure of the firms. In doing so, we explore the effects of government debt, macroeconomic and firm-specific factors on firm’s choice of financing and capital structure. We draw on the 10-year data (2007–2017) of 225 non-financial firms listed on the Ho Chi Minh Stock Exchange (HoSE) and employ the system Generalized Method of Moments (system-GMM) for estimation. Our key findings suggest that the government borrowing and debt financing for the Vietnamese listed companies have a negative relationship. Specifically, the short-term corporate leverage structure is influenced more strongly than the long-term leverage structure. We also define the threshold for the association between government borrowing and corporate financing decisions by capturing a U-shaped relationship i.e., Crowding out Kuznets Curve (CKC). Furthermore, macroeconomic factors also show a statistically significant impact on corporate financing decisions. Our findings have profound implications for the fiscal and public policymakers, investors as well as corporate finance managers and firms.

scholarly journals Does Capital Structure Affects Firms’ Performance in Ghana? Panel Data Analysis

2019 ◽  
Vol 8 (4) ◽  
pp. 131
Author(s):  
John MacCarthy ◽  
Helena Ahulu
Keyword(s):  
Panel Data ◽  
Capital Structure ◽  
Quantitative Research ◽  
Stock Exchange ◽  
Panel Data Analysis ◽  
Negative Relationship ◽  
Equity Capital ◽  
Debt Capital ◽  
Tangible Assets ◽  
Ghana Stock Exchange

This paper examines the effect of capital structure on the firms’ performance. The study collected data from seventeen firms listed on the Ghana Stock Exchange from 2009 to 2018. A quantitative research technique is used to collect data to test two hypotheses. Panel data regression is employed to determine the effect of capital structure on firms’ performance. The study revealed that short-term debt and total debt accounted for 67% and 76.3% respectively of capital used to finance the operations for the period. Furthermore, the study revealed that there is significant and negative relationship between capital structures and firms’ performance. The study concludes that firms should minimise the use of debt capital and rather concentrate on equity capital to finance their operations. The study recommends that firms should increase sales and invest in tangible assets to maximise the firms’ performance. 

The effects of corporate governance on financial performance and financial distress: evidence from Egypt

2015 ◽  
Vol 15 (5) ◽  
pp. 641-662 ◽  
Author(s):  
Tamer Mohamed Shahwan
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Financial Performance ◽  
Financial Distress ◽  
Emerging Market ◽  
Negative Relationship ◽  
Positive Association ◽  
Time Frame ◽  
Content Type

Purpose – This paper aims to empirically examine the quality of corporate governance (CG) practices in Egyptian-listed companies and their impact on firm performance and financial distress in the context of an emerging market such as that of Egypt. Design/methodology/approach – To assess the level of CG practices at a given firm, the current study constructs a corporate governance index (CGI) which consists of four dimensions: disclosure and transparency, composition of the board of directors, shareholders’ rights and investor relations and ownership and control structure. Based on a sample of 86 non-financial firms listed on the Egyptian Exchange, the effects of CG on performance and financial distress are assessed. Tobin’s Q is used to assess corporate performance. At the same time, the Altman Z-score is used as a financial distress indicator, as it measures financial distress inversely. The bigger the Z-score, the smaller the risk of financial distress. Findings – The overall score of the CGI, on average, suggests that the quality of CG practices within Egyptian-listed firms is relatively low. The results do not support the positive association between CG practices and financial performance. In addition, there is an insignificant negative relationship between CG practices and the likelihood of financial distress. The current study also provides evidence that firm-specific characteristics could be useful as a first-pass screen in determining firm performance and the likelihood of financial distress. Research limitations/implications – The sample size and time frame of our analysis are relatively small; some caution would be needed before generalizing the results to the entire population. Practical implications – The findings may be of interest to those academic researchers, practitioners and regulators who are interested in discovering the quality of CG practices in a developing market such as that of Egypt and its impact on financial performance and financial distress. Originality/value – This paper extends the existing literature, in the Egyptian context in particular, by examining firm performance and the risk of financial distress in relation to the level of CG mechanisms adopted.

scholarly journals Impact of managerial ownership on capital structure: a survey of Turkish firms

2008 ◽  
Vol 5 (2) ◽  
pp. 8-14
Author(s):  
Özgür Arslan
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Emerging Market ◽  
Debt Maturity ◽  
Managerial Ownership ◽  
Insider Ownership ◽  
Istanbul Stock Exchange ◽  
Dividend Smoothing ◽  
The Relationship ◽  
Considerable Support

This paper investigates the relationship between insider ownership and capital structure decisions made by managers for an emerging market. Therefore, we survey managers of 103 firms listed in the Istanbul Stock Exchange (ISE). Our findings lend considerable support to our expectation that leverage, debt maturity and dividend issues reduce ability of managers to divert resources from value maximisation. However the same monitoring and disciplining tax is not observed for stock issues. Also, our findings document that managers of firms listed in the ISE do not opt to dividend smoothing policy. Finally, the results are in line with our expectation that, the more willing are the managers to reduce asymmetric information between them and shareholders, the higher their ownership level in firms.

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