A Study on Financial Constraints of Capital Structure Theories and Dividend Policy: Evidence from Indian Capital Market

2018 ◽  
Vol 10 (1) ◽  
pp. 66
Author(s):  
Nenavath Sreenu
Keyword(s):  
Capital Structure ◽  
Capital Market ◽  
Financial Constraints ◽  
Dividend Policy

scholarly journals The Indirect Impact of Profitability on Firm Value: Evidence Dividend Policy as Moderators and Capital Structure as Mediator

2020 ◽  
Vol 10 ◽  
pp. 299-311
Author(s):  
Achmad Budi Susetyo ◽  
Agus Eko Sujianto ◽  
Mochamad Arif Faizin ◽  
Kiki Yunita Anjarsari ◽  
Charina Dwi Rivylina Nafisah
Keyword(s):  
Capital Structure ◽  
Capital Market ◽  
Indirect Effect ◽  
Firm Value ◽  
Dividend Policy ◽  
The Other ◽  
Indirect Impact ◽  
Path Analysis Approach ◽  
The Relationship ◽  
The Capital Structure

Firm value is a basis for investors in deciding whether or not to invest in a firm. Therefore, a study on issuer’s strategies to maximize firm value requires special attention, especially in dealing with the Islamic capital market which is growing rapidly from time to time. A particular study is important to be conducted to look at the factors that have a direct or indirect effect on a firm's value, which includes; profitability, capital structure, and dividend policy. The path analysis approach is employed in the current study to reveal the effect of profitability on firm value, both directly and indirectly, with the intermediaries of capital structure and dividend policy. The results of the analysis indicate that profitability has a direct positive and significant effect on firm value and a negative and significant effect on capital structure, while the capital structure has a negative and insignificant effect on firm value. Indirectly, dividend policy moderates and strengthens the effect of profitability on firm value, but on the other hand, the capital structure does not mediate the effect of profitability on firm value. The absence of capital structure role in mediating the relationship between profitability and the firm value indicates that investors can determine the value of the firm directly by simply looking at the level of profitability, regardless of management’s strategy in arranging the capital structure.

scholarly journals Financial Decision, Innovation, Profitability and Company Value: Study on Manufacturing Company Listed in Indonesian Stock Exchange

2015 ◽  
Vol 7 (2) ◽  
pp. 72-78
Author(s):  
Mursalim Mursalim ◽  
Nur Alamzah . ◽  
Abdullah Sanusi .
Keyword(s):  
Capital Structure ◽  
Capital Market ◽  
Dividend Policy ◽  
Stock Exchange ◽  
Investment Decision ◽  
Secondary Data ◽  
Financial Decisions ◽  
Company Value ◽  
Financial Decision ◽  
The Relationship

This study aims to describe the relationship between financial decisions, innovation, enterprise profitability and the value of the company. Based on the research objectives, this research is a causality research. The data used are secondary data for a 5-years period, obtained through several sources such as Indonesian Capital Market Directory (ICMD) and the websites of 22 companies. The results show that (1) Investment decision affects company profitability positively and significantly, (2) Investment decision affects company value positively and significantly, (3) Capital structure affects company profitability positively and significantly, (4) Capital structure affects company value positively and significantly, (5) Dividend policy affects company profitability positively and significantly, (6) Dividend policy does not affect company value, (7) Innovation affects company profitability positively and significantly, (8) Innovation affects company value positively and significantly, and (9) Profitability affects company value positively and significantly.

scholarly journals A Study on Financial Constraints of Capital Structure Theories and Dividend Policy: Evidence from Indian Capital Market

2018 ◽  
Vol 13 (02) ◽  
Author(s):  
Nenavath Sreenu
Keyword(s):  
Capital Structure ◽  
Financial Constraints ◽  
Dividend Policy ◽  
Investment Decision ◽  
Balance Sheet ◽  
Financial System ◽  
Initial Result ◽  
Firm Characteristics ◽  
Capital Budget ◽  
Internal Cash Flow

The study focused on the ability of firms to play this role is in major part determined by the structure of the financial system in which they operate, and in particular whether this financial system is able to make capital available efficiently to those firms that need it. The study examines the relation between the Financing, Investments, Capital Budget and Dividend decisions, where the effect of financial constraints on the firm’s investment decision is investigated. The study focuses on how financial constraints affect different firms by investigating the extent to which the dependence on internal cash flow is affected by firm characteristics such as size, age, dividend payout ratio, and market listing. This implies that firms retain earnings (RE) in order to ensure that they have sufficient capital to invest, confirming the initial result that Indian firms are financially constrained. This study adopted a descriptive design that aims at exploring the financial constraints of dividend policy and capital structure theories of companies listed at NSE and BSE in India. The data was obtained from financial statements and balance sheet of all the listed companies’ information available at the NSE and BSE secretariat for 10 years from 2005 to 2015.

Dividend Policy and Capital Market Theory

1976 ◽  
Vol 58 (2) ◽  
pp. 181 ◽  
Author(s):  
Sasson Bar-Yosef ◽  
Richard Kolodny
Keyword(s):  
Capital Market ◽  
Dividend Policy ◽  
Market Theory ◽  
Capital Market Theory

Do Financially Constrained Firms Earn Higher Returns than the Unconstrained Firms? A Comprehensive Evidence from Pakistan Stock Exchange

2020 ◽  
Keyword(s):  
Time Series ◽  
Asset Pricing ◽  
Capital Structure ◽  
Stock Returns ◽  
Financial Constraints ◽  
Stock Exchange ◽  
Cash Flows ◽  
Total Asset ◽  
Cash Holding ◽  
The Relationship

This paper examines the relationship between financial constraints and the stock returns explaining the pricing of stock through financially constrained and unconstrained firms in Pakistan. Three proxies; total assets, tangible to total assets and cash holding to total assets ratios) have been used for financial constraints and the study tried to investigate that either the investors are compensated for taking the extra risk or not in Pakistan Stock Exchange (PSX). We find that the financially constrained firms don’t earn higher returns when their capital structure is heavy with liquid assets and their cash flows are more than the unconstrained firms in PSX. Moreover, the time series results showed that the risk-adjusted returns of the most constrained firms give the mix and somewhat negative and significant and insignificant results for the Pakistani firms listed in PSX sorted based on tangible to total assets and Cash holding to total asset ratios. Keywords: Asset Pricing, Financial constraints, risk-adjusted performance of portfolios

Using 10-K Text to Gauge Financial Constraints

2015 ◽  
Vol 50 (4) ◽  
pp. 623-646 ◽  
Author(s):  
Andriy Bodnaruk ◽  
Tim Loughran ◽  
Bill McDonald
Keyword(s):  
Capital Structure ◽  
Financial Constraints ◽  
Securities And Exchange Commission ◽  
Financial Constraint ◽  
Firm Characteristics ◽  
Low Correlation ◽  
Highly Correlated ◽  
Firm Attributes ◽  
The U.S ◽  
Better Than

AbstractMeasuring the extent to which a firm is financially constrained is critical in assessing capital structure. Extant measures of financial constraints focus on macro firm characteristics such as age and size, variables highly correlated with other firm attributes. We parse 10-K disclosures filed with the U.S. Securities and Exchange Commission (SEC) using a unique lexicon based on constraining words. We find that the frequency of constraining words exhibits very low correlation with traditional measures of financial constraints and predicts subsequent liquidity events, such as dividend omissions or increases, equity recycling, and underfunded pensions, better than widely used financial constraint indexes.

scholarly journals Capital Market Response to the Change in the Dividend Policy: The Case of Slovenian Stock Market

2016 ◽  
Vol 8 (1) ◽  
pp. 42 ◽  
Author(s):  
Matjaž Mikluš ◽  
Zan Jan Oplotnik
Keyword(s):  
Stock Market ◽  
Capital Market ◽  
Stock Price ◽  
Dividend Policy ◽  
Market Response ◽  
Asymmetry Of Information ◽  
Price Increases ◽  
Signalling Theory ◽  
Stock Price Reaction ◽  
Dividend Increases

<p>The three basic dividend policy theories have a completely different approach to describing the influence of dividends payment on stock price, and on the value of the company. Numerous studies conducted in this area have led to almost as many derived dividend policy theories, which are more or less related to the basic three. As one of them Wang, Manry &amp; Wandler (2011) specify the dividend signalling theory, which is based particularly on the assumption of the asymmetry of information between the company management and the shareholders and in recent decades it has been studied by many authors, who mostly concluded that dividend increase has a positive stock price reaction, and vice versa, that dividend decrease results in stock price falls (as cited in Ross, 1977; Leland and Pyle, 1977; Grinblatt et al., 1984; Baker and Phillips, 1993; Rankine and Stice, 1997; Bechmann and Raaballe, 2007). For the purposes of our analysis we adopted the methodology of foreign researches and checked the existence of the dividend signalling theory in the Slovenian stock market. The Slovenian stock market is one of developing markets, and is particularly specific due to its small size and illiquidity. Our research resulted in no statistically significant stock price increases from company dividend increases, whereby we have refuted the research hypothesis and, consequently, the dividend signalling theory in the Slovenian stock market in the described period.</p>

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