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 Capital Structure and Firm Performance in Nigerian-Listed Companies

2016 ◽  
Vol 8 (3(J)) ◽  
pp. 54-74 ◽  
Author(s):  
Matthew Adeolu Abata ◽  
Stephen Oseko Migiro
Keyword(s):  
Firm Performance ◽  
Capital Structure ◽  
Negative Relationship ◽  
Debt Financing ◽  
Descriptive Statistics ◽  
The Other ◽  
Listed Firms ◽  
Business Failures ◽  
The Relationship

a number of business failures have not been reported in Nigeria arising from inability to payback nor does service debts .This paper empirically investigate the relationship between capital structure and firm performance in the Nigerian listed firms. A sample of 30listed firms out of a population of 173 were examined from 2005 to 2014 using multiple regression tools. Two hypotheses were formulated and tested using descriptive statistics and an econometric panel data technique to analyze the gathered data. An insignificantly negative correlation was found between financial leverage and ROA on one hand and a significantly negative relationship between debt/equity mix and ROE on the other hand. It is therefore recommended that firms should use long term liabilities to finance firm’s activities and mix debt/equity appropriately by ensuring that debt financing ratio is lower to enhance corporate performance and survival.

scholarly journals Determinants of Capital Structure and Their Effect to Company’s Value: Study in LQ 45 Companies Listed in Indonesia Stock Exchange

2020 ◽  
Vol 9 (3) ◽  
pp. 156
Author(s):  
Andi Kartika ◽  
Sunarto Sunarto ◽  
Faisal Riza Rahman ◽  
Zaky Machmuddah
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Secondary Data ◽  
Least Square ◽  
Future Research ◽  
Tobin’S Q ◽  
Analysis Method ◽  
Tobin's Q ◽  
Dependent Variables ◽  
The Relationship

The aim of the research is to analyse the effect of  profitability, liquidity, and company’s size to company’s value and examines whetherDERis a mediating variable. Secondary data is taken from annual report of the companies. Analysis method used is multiple regression analysis (least square).  The finding of the research showed thatDER mediated  the relationship between CR  andTobin’s Q. However DER is not a mediating variable for the relationship betweenRNOAand TOBINas well as between SIZE  and Tobin’s Q. Mediating test is conducted by Sobel Test. The other finding is that RNOA positively affects to DER. CR negatively affects to DER. SIZE positively affects to DER and then DER negatively affects to Tobin’s Q. Recommendation for future research is to widen the samples, not just  42 companies, to add observed periods to give clearer description in long term.The next research can also use other dependent variables affecting capital structure and company’s value.

scholarly journals AGGREGATE AND DISAGGREGATE MEASURES OF OPERATING AND NON-OPERATING WORKING CAPITAL INFLUENCE ON FIRM PERFORMANCE: EVIDENCE FROM MALAYSIA

2021 ◽  
Vol 17 (No.1) ◽  
pp. 1-26
Author(s):  
Rabia Bashir ◽  
Angappan Regupathi
Keyword(s):  
Firm Performance ◽  
Tobin’S Q ◽  
Working Capital ◽  
Short Term ◽  
Return On Assets ◽  
Tobin's Q ◽  
Cash Conversion Cycle ◽  
Long Term Performance ◽  
Term Performance

The study is aimed at investigating the following issues: firstly, whether the different types of working capital, namely operating and non-operating working capital influence the short-term (return on assets) and long-term (Tobin’s Q) firm performance differently, and secondly whether the different measures of operating working capital, namely disaggregated and aggregated (cash conversion cycle) operating working capital, influence the short-term (return on assets) and long-term (Tobin’s Q) firm performance differently. It uses the panel data of 208 listed non-financial firms in Malaysia covering the period from 2013 to 2017, and the data has been sourced from Datastream. It employs the panel corrected standard errors regression model. The study has found that quicker sale of inventory increased both the short-term and long-term performance of the firm. Likewise, faster collection of receivables increased the long-term, but not short- term, performance. However, prompter payment of payables increased both the short-term and long-term performance. The study has also found that the disaggregated working capital measures – inventory, receivables, and payables contributed to a more nuanced influence of working capital on performance, compared to the aggregated working capital. The study has provided novel evidence that– higher non- operating working capital increased firm performance.

scholarly journals Capital structure and firm performance in emerging economies: An empirical analysis of Sri Lankan firms

2011 ◽  
Vol 8 (4) ◽  
pp. 253-263 ◽  
Author(s):  
Athula Manawaduge ◽  
Anura De Zoysa ◽  
Khorshed Chowdhury ◽  
Anil Chandarakumara
Keyword(s):  
Firm Performance ◽  
Capital Structure ◽  
Empirical Analysis ◽  
Emerging Market ◽  
Negative Relationship ◽  
Sri Lankan ◽  
Short Term ◽  
Corporate Managers ◽  
Debt Capital ◽  
The Impact

This paper offers an empirical analysis of the impact of capital structure on firm performance in the context of an emerging market—Sri Lanka. The study applies both pooled and panel data regression models for a sample of 155 Sri Lankan-listed firms. The results demonstrate that most of the Sri Lankan firms finance their operations with short-term debt capital as against the long-term debt capital and provide strong evidence that the firm performance is negatively affected by the use of debt capital. The study also finds a significant negative relationship between tangibility and performance indicating inefficient utilization of non-current assets. The negative performance implications associated with over-utilization of short-term debts and the under-utilization non-current assets provide corporate managers with useful policy directions.

CEO Duality and Firm Performance

2020 ◽  
pp. 227-246
Author(s):  
Sandra Alves
Keyword(s):  
Firm Performance ◽  
Negative Relationship ◽  
Least Square ◽  
Tobin’S Q ◽  
Monitoring And Control ◽  
Tobin's Q ◽  
Ceo Duality ◽  
Ordinary Least Square ◽  
Leadership Structure ◽  
And Control

Two divergent theories emerge from the literature on CEO duality. The agency theory advocates that a dual CEO negatively affects corporate performance, because it compromises the monitoring and control of the CEO, whilst the stewardship theory suggests the contrary effect due to the unity of command it presents. For a sample of 26 non-financial listed Portuguese firms from 2002 to 2016, this study draws on agency and stewardship theories to evaluate the relationship between CEO duality and firm performance, proxied by Tobin's Q. Using ordinary least square (OLS) and two stage least squares (2SLS) techniques to control potential problems simultaneity between CEO duality and firm performance, the author finds a negative relationship between CEO duality and Tobin's Q. This suggests that investors perceive no value in having a concentration of power with a dual leadership structure. Therefore, this study recommends that the positions of chairman and CEO should be separated for listed Portuguese firms.

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.

Effect of ownership structure and board structure on firm value: evidence from India

2017 ◽  
Vol 17 (4) ◽  
pp. 700-726 ◽  
Author(s):  
Rakesh Mishra ◽  
Sheeba Kapil
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Performance Measures ◽  
Board Structure ◽  
Tobin’S Q ◽  
Reverse Causality ◽  
Tobin's Q ◽  
Data Set ◽  
Content Type ◽  
The Relationship

Purpose This paper aims to explore the relationship of promoter ownership and board structure with firm performance for Indian companies. Design/methodology/approach Corporate governance structures of 391 Indian companies out of CRISIL NSE Index (CNX) 500 companies listed on national stock exchange (NSE) have been studied for their impact on performance of companies. Panel data regression methodology has been used on data for five financial years from 2010 to 2014 for the selected companies. Performance measures considered are market-based measure (Tobin’s Q) and accounting-based measure (return on assets [ROA]). Findings The empirical findings indicate that market-based measure (Tobin’s Q) is more impacted by corporate governance than accounting-based measure. There is significant positive association between promoter ownership and firm performance. It is also indicated that the relationship between promoter ownership and firm performance is different at different levels of promoter ownership. Board size is found to be positively related to ROA; however, board independence is not found to be related to any of the performance measures. Research limitations/implications Limitations of the study are in terms of data methodology and possible omission of some variables. It is felt that endogeneity and reverse causality might be better addressed using simultaneous equation methodology. Originality/value The paper adds to the emerging body of literature on corporate governance performance relationship in Indian context using a reasonably wider and newer data set.

scholarly journals ANALYSIS OF CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE IN THE JORDANIAN INSURANCE SECTOR

2020 ◽  
Vol 8 (3) ◽  
pp. 1310-1320
Author(s):  
Zelhuda Shamsuddin ◽  
Al Majali Muhammad Ahmad Kamel ◽  
Wan Mohd Nazri Wan Daud ◽  
Wan Sallha Yusoff
Keyword(s):  
Capital Structure ◽  
Financial Performance ◽  
Insurance Companies ◽  
Tobin’S Q ◽  
Short Term ◽  
Equity Financing ◽  
Tobin's Q ◽  
Return On Equity ◽  
Insurance Firms ◽  
The Impact

Purpose of the study: This paper aims to examine the impact of capital structure and financial performance of listed insurance companies in Jordon. Methodology: This study used secondary data that was collected from Amman stock exchange and annual report of the selected insurance companies from the year 2007-2017. The static panel data analysis technique is used to examine the impact of capital structure on firm’s performance. The capital structure is measured using short-term debt, long-term debt, and equity financing. Whereas financial performance is measured using Return on Asset (ROA), Return on equity (ROE), and Tobin’s Q. Main Findings: The study findings suggest that capital structure influence the profitability of the listed insurance firms in Jordan. The results also reveal a significantly positive relation between long-term debt to total assets to profitability indicators, namely, return on assets (ROA), return on equity (ROE) and Tobin’s Q. On the other hand, the results also reveal a short-term debt has a significant positive relationship with return on equity (ROE) and returns on assets (ROA). However, a relationship between short-term debt and Tobin’s Q is not statistically significant. Applications of this study: The result of this study may assist the insurance sector in Jordon in making decisions regarding capital structure, which is to significantly rely on equity financing or debt financing to reduce financing risk such as agency cost that borne by the equity holders of the Jordanian insurance firms. Novelty/Originality of this study: The study noted that insurance firms generally play a crucial role in the economic development of every country. This study provides evidence that Jordanian insurance firms need to diversify their sources of financing and not rely significantly on debt financing, as the results prove that equity financing is a profitable source of financing.

scholarly journals A reassessment of the relationship between working capital management and firm performance: evidence from non-financial companies in Nigeria

2018 ◽  
Vol 15 (3) ◽  
pp. 249-266
Author(s):  
Sunday Simon ◽  
Norfaiezah Sawandi ◽  
Mohamad Ali Abdul-Hamid
Keyword(s):  
Firm Performance ◽  
Inventory Management ◽  
Tobin’S Q ◽  
Return On Assets ◽  
Tobin's Q ◽  
Working Capital Management ◽  
Accounts Receivable ◽  
Cash Conversion Cycle ◽  
Accounts Payable ◽  
The Relationship

This paper reassesses the relationship between working capital management (WCM) and firm performance in the Nigerian context. The study is motivated by the limited insights available on the impacts of WCM on firm performance in the country. To date, most studies from Nigeria have been largely descriptive and focused on a small sample size that is non-representative of the population. In addition, there are limited rigorous statistical analyses involved in such studies. This paper addresses the methodological limitations apparent in prior literature and provides a better understanding of the relationship between WCM and firm performance, revealing how firms can manage their operations more profitably. The paper adopts a panel data regression analysis on a sample of 75 non-financial firms listed on the Nigerian Stock Exchange from 2007 to 2015. The results of the analyses showed that WCM variables have an inconsistent relationship with the measures of performance adopted, which were return on assets and Tobin’s Q. Specifically, accounts receivable management and inventory management were negatively associated with the return on assets, while accounts payable management, cash conversion cycle and cash conversion efficiency were positively associated with return on assets. Additionally, accounts receivable management and inventory management were positively associated with Tobin’s Q, whereas accounts payable management, cash conversion cycle and cash conversion efficiency were negatively associated with Tobin’s Q. These results were found to be robust using quantile regression. The results of the quantile regression showed inconsistency across the various quantiles used (0.10, 0.25, 0.50 and 0.75). These findings have two important implications. The first is that WCM variables influence the performance of firms. The second is that the mixed findings partly indicate that firms and managers must understand and formulate WCM policies that reflect their peculiar conditions.

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