Determinants of profitability in Chinese companies

Purpose This study is conducted to determine the factors that affect profitability in Chinese listed companies (by using financial ratios). Four independent variables liquidity, intangible assets, working capital and company leverage were empirically tested for their relationships with profitability besides two control variables which are firm size and company efficiency.Design/methodology/approach This study used secondary data extracted manually from the annual reports of non-financial Chinese listed companies on the Shanghai stock exchange (http://www.szse.cn/); the data set covers 100 companies during the period of 2017–2019, and a random selection method was used in order to achieve credibility and fairness as much as possible.Findings The findings show firm size, working capital and intangible assets have positive and significant relationships with profitability [return on assets (ROA) and earnings per share (EPS)]. Positive working capital is important to lower the cost of capital and improve companies' profitability. Intangible assets are also an essential source to improve profitability due to their low costs. In addition, the findings display a negative and strong relationship between liquidity and profitability, meaning that companies suffer low profit due to inefficient use of liquid items. Interestingly, leverage, which is measured by debt ratio and leverage ratio, shows mixed results; debt ratio shows a positive and strong association with ROA but not with EPS; while leverage ratio displays a strong but negative association with ROA but not with EPS. These results confirm the inverted U-shape relationship between leverage and profitability, which depends on the balance between benefit and cost of debt.Social implications Profitability is also important for employees and society where business organization provides sustainability and stability for both of them. Employees can then significantly contribute to achieve higher firm's profitability by efficiently using firm's resources.Originality/value This study differs than previous studies in number of aspects: First, this study focuses on financial ratios to explain profitability in Chinese companies. This study provides empirical results about the factors connected to profitability and help stakeholders to make their right decisions. Second, it examines the impact of four independent factors and two control variables that some of them are new in Chinese context such as intangible assets. Third previous studies focus on financial industry such as banks; however, this study focuses on non-financial industry.

Financial Distress and Firm Performance: Evidence from COVID-19.

This study is dedicated to discovering the impact of COVID-19 on Malaysia’s plantation industry firms. This paper uses quarterly data from annual report of 39 listed firms from Malaysia from 2018 to 2020. The variables to measure financial distress are debt ratio and debt-to-equity ratio while the measurement for firm performance is return on assets. The findings shows that there is a significant negative relationship between debt-to-equity ratio on firm performance. This indicates that the increase in debt-to-equity ratio results in a significant decrease in return on total assets. On the other hand, positive correlation exists between debt ratio and firm performance. This means that an increase in debt ratio results in an increase in the return value of total assets.

Role of Governance and Public Trust on Government Debt-Economic Growth Nexus (A Global Empirical Analysis)

High government debts in several countries have the potential to trigger or exacerbate economic instability. These concerns are consistent with the results of this study, where countries that have a high debt ratio tend to have declining economic growth. To provide more understanding about this effect, this study tries to examine the effect of debt on economic growth by utilising the governance and public trust level as a contextual variable and mediator. Empirically, both variables have a prominent role in the debt and economic growth nexus. The debt threshold as a budgetary rule is necessary but might not be sufficient to validate the rationality of rising debt. The capability of government in providing public governance and the effect of additional debt on public trust is another crucial aspect that needs to be seriously scrutinised, or when the addition of debt becomes inevitable (such as in pandemic situation), the government should strengthen governance capability to ensure the productivity of debt and mitigate the decreased public trust. This finding implies that the debt policy should not only be based on budgetary rule but also the capacity of governance and the potential implication of the falling public trust.

A. PENGARUH RASIO KEUANGAN TERHADAP RETURN SAHAM PADA PERUSAHAAN TELEKOMUNIKASI YANG TERDAFTAR DI BURSA EFEK INDONESIA (BEI)

ABSTRAK Penelitian ini bertujuan untuk mengetahui pengaruh variabel current ratio, quick ratio, debt to equity ratio, debt ratio, profit margin, return on assets, total asset turnover, fixed assets turnover secara parsial dan simultan terhadap return saham. Metode penelitian yang digunakan pada penelitian ini adalah metode kuantitatif. Data yang digunakan pada penelitian ini adalah data sekunder dengan metode pengumpulan data berupa dokumentasi. Teknik analisis data yaitu menggunakan teknik analisis regresi berganda dengan 8 variabel bebas yaitu current ratio (X1), quick ratio (X2), debt to equity ratio (X3), debt ratio (X4), profit margin (X5), return on assets (X6), total assets turnover (X7), fixed assets turnover (X8) dan 1 variabel terikat yaitu return saham (Y). Berdasarkan penelitian yang telah dilakukan diperoleh hasil sebagai berikut: variabel current ratio (X1), quick ratio (X2), debt to equity ratio (X3), debt ratio (X4), profit margin (X5), return on assets (X6), dan fixed assets turnover (X8) memiliki pengaruh secara parsial terhadap return saham (Y) karena memiliki nilai signifikansi lebih kecil daripada 0,05. Sedangkan variabel total assets turnover (X7) tidak berpengaruh secara parsial terhadap return saham (Y) karena memiliki nilai signifikansi lebih besar daripada 0,05. Pada pengujian simultan diperoleh hasil sebagai berikut: current ratio, quick ratio, debt to equity ratio, debt ratio, profit margin, return on assets, total assets turnover, fixed assets turnover secara simultan tidak berpengaruh terhadap return saham karena nilai Fhitung lebih kecil daripada nilai Ftabel. Kata Kunci: Rasio Keuangan, Return Saham, Analisis Regresi Berganda.

DETERMINANTS OF THE CAPITAL STRUCTURE OF EUROPEAN FIRMS: THE MODERATING ROLE OF EFSF/ESM FINANCIAL ASSISTANCE PROGRAMS

The present study has investigated the moderating effect of the European Financial Stability Facility (EFSF) / European Stability Mechanism (ESM) support to the firms’ indebtness. Using dynamic panel data, three models were estimated and aimed at the determination of the way that EFSF/ESM financial assistance programs could influence the impact of five firm-specific characteristics, namely growth, profitability, size, tangibility and non-debt tax shield on the capital structure of European firms. Data from 2,086 firms for the period 2003 – 2016 were used, and two dummy variables; one for the EFSF/ESM support period and one for any kind of economic crisis period were formed. The results indicated that pecking order prevailed over trade-off theory. Economic crises did not affect severely the firm-characteristics’ effects, but the EFSF/ESM programs influence appeared in three cases. During the period of EFSF/ESM assistance, profitability’s negative effect on long-term debt ratio disappeared and on total debt ratio strengthened, growth’s positive impact on total debt ratio diminished and non-debt tax shield acquired positive influence on total debt ratio. These changes might be explained by the increased levels of tax rates and decreased levels of uncertainty that the EFSF/ ESM programs caused, as well as by the reluctance of lenders to provide new funds.

Effect of Debt Ratio, Company Size, Reputation of Public Accounting Firms and Company Growth on Going Concern Audit Opinions on Consumer Goods Companies Listed on The Indonesia Stock Exchange For The 2016-2019 Period

Go public companies are required to audit their financial statements by an independent auditor, namely an auditor who works at a public accounting firms. This study aims to examine the effect of debt ratio, company size, reputation of public accounting firms and company growth on going concern audit opinions on Consumer Goods Companies listed on the Indonesia Stock Exchange for the 2016-2019 period. This study uses a quantitative descriptive approach. The population is 51 Consumer Goods Companies listed on the Indonesia Stock Exchange for the 2016-2019 period. The sample is 15 companies. The data analysis method used is logistic regression. The results of the study are the debt ratio, company size, reputation of public accounting firms and company growth simultaneously effect on going concern audit opinions on Consumer Goods Companies listed on the Indonesia Stock Exchange for the 2016-2019 period. Debt ratio, company size, reputation of public accounting firms and company growth partially have no effect on going concern audit opinions on Consumer Goods Companies listed on the Indonesia Stock Exchange for the 2016-2019 period.

Analysis of Factors Determining Capital Structure of Firms Listed in Colombo Stock Exchange in Sri Lanka

Capital structure describes a mix of long-term debt capital and equity capital employed by a company to fund its operation and finance its assts. The objective of the study is to identify the determinants of the capital structure and examine whether each of the determinants have significant impact on capital structure. A sample of 25 beverage food and tobacco sector firms listed on Colombo Stock exchange(CSE) in Sri Lanka over the period of 2016 to 2020 were considered for the study. The independent variables such as profitability (PROR), firm size (FMSZ), tangibility (TANR) and liquidity (LIQR) and dependant variable such as long term debt ratio (LTDR), short term debt ratio (STDR) were used to measure the leverage level of the firms. The data were analysed and hypotheses were tested through regression analysis and correlation analysis by use of SPSS. Coefficient of regression used to identify the significant impact of each determinant against the endogenous factors. The investigation empirical findings reveals that firm size, tangibility and liquidity have significant negative impact on leverage level (STDR), while profitability has positive insignificant impact on leverage level (SDTR). On the other hand all four element have insignificant relationship with LTDR.

Rasio Solvabilitas

Rasio solvabilitas atau leverage ratio merupakan rasio yang digunakan untuk mengukur sejauh mana aktiva perusahaan dibiayai dengan utang. Dalam arti luas dikatakan bahwa rasio solvabiliteitunakan untuk mengukur kemampuan perusahaan untuk membayar seluruh kewajibannya, baik jangka pendek maupun jangka panjang apabila perusahaan dibubarkan. Jenis-jenis rasio solvabilitas : debt to asset ratio (debt ratio), debt to equity ratio, long term debt to equity ratio, times interest earned dan fixed charge coverage. Debt to asset ratio (debt ratio) merupakan rasio yang digunakan untuk mengukur perbandingan antara total utang dengan total aktiva.

Is the Improvement of CSR Helpful in Business Performance? Discussion of the Interference Effects of Financial Indicators from a Financial Perspective

To achieve sustainable business operations, corporate betting on the implementation of social responsibility has become a trend of global concern. Therefore, companies that pay attention to and invest many resources in corporate social responsibility (CSR) have gradually become critical strategies for business operations. This strategy has a substantial effect on business performance, especially regarding the financial impact. This study aims to explore the effect of CSR improvement on financial performance, return on assets (ROA), return on equity (ROE), size, debt ratio, and asset turnover on its interference. A total of 346 items of data from Taiwan companies that have won the “CommonWealth Corporate Citizenship Award” from 2012 to 2018 were analyzed via descriptive statistics and hierarchical regression methods to determine the influence and adjustment of various factors layer by layer. CSR, firm size, debt ratio, and asset turnover have a significant prediction on ROA. CSR, firm size, and turnover have a significant prediction on ROE. Firm size and debt ratio have a significant negative moderation effect on CSR to ROA. The debt ratio has a significant negative moderation effect on CSR to ROE. This study concludes that CSR has a significant impact on business performance. CSR affects ROA moderated by firm size and ROA and ROE moderated by debt ratio. This study puts forward practical and future research suggestions for the relevant units to promote CSR development.

Financial Leverage and Performance of the Energy and Petroleum Sector Companies Listed in the Nairobi Securities Exchange

Financial leverage and financial performance are fundamental issues in corporate finance. In Kenya, some companies listed at the Nairobi Securities Exchange have had performance improvement. However, most of them have experienced declining fortunes which has been attributed to the fact that corporate managers another practitioner lack adequate guidance required to attain optimal financing decisions. Financial leverage comprises of loans and other forms of debts where the proceeds from these loans are reinvested to earn higher return than the cost of loans. Financial use is the company's capacity to utilization of settled money related charges to amplify the impacts of changes in the profit before premium and duty on the company's income per share. The extent of obligation to value is a vital decision for corporate supervisors. The poor performance of Energy and Petroleum sector companies is of great concern. Financial leverage ranges from debt ratio, debt/equity ratio and interest coverage ratio which are vital since they directly affect the financial performance of firms. The general objective as to determine the effect of financial leverage on the financial performance of energy and petroleum sector companies listed in the NSE. While the specific objectives were; to establish the effect of debt ratio, debt -equity ratio and interest coverage ratio on financial performance of energy and petroleum sector companies recorded in the NSE. The research was anchored on the following theories: Modigliani-Miller theorem, Pecking Order Theory and Trade-off Theory. The empirical literature review was based on the three objectives of the study and gaps established. The study adopted a descriptive research design. Management of all the 5 energy and petroleum companies listed with the NSE was involved in the study which mainly used secondary data to conclude. Data was analyzed using regression analysis. Analyzed data was presented using tables. Confidence interval of 95% was used by the researcher. The study adopted a multiple regression model (Y = β0 + β1X1 + β2X2 + β3X3 +ε). The findings indicate that the independent variables Debt ratio, Debt to Equity ratio and interest cover ratio affected the financial performance of the firms in the Energy and petroleum sector. Their effect was up to 75.4%. Debt ratio and Debt to Equity ratio had a positive relationship whereas Interest cover ratio had a negative relationship to the firms in the Energy and petroleum sector listed in the NSE. This study recommends that the firms handle their capital structure decisions prudently as the changes in the factors like Debt ratio, Debt to Equity ratio and Interest cover ratio enhance profitability of firms when prudently employed and hence affect the performance of Energy and petroleum firms listed at the Nairobi Securities Exchange. This study also recommends that firms control the amount of interest expense since an increase in interest expense has an effect in that it reduces the financial performance of firms in the Energy and petroleum sector listed in the NSE.