The Impact of Capital Structure on Firms’ Performance: a Study of Some Selected South African Quoted Firmst PDF Download
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Author: Layton Ruredzo
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Category : Rate of return
Languages : en
Pages : 0
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Author: Layton Ruredzo
Publisher:
ISBN:
Category : Rate of return
Languages : en
Pages : 0
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Author: Taiwo Muritala
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Category :
Languages : en
Pages :
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The relationship between capital structure and firm performance has received considerable attention in finance literature. This study examines the impact of capital structure on performance of some selected manufacturing companies in Nigeria using the annual data of five firms for a period of eleven years (2002-2012). The study hypothesizes a negative relationship between capital structure and firm performance measured in terms of return on equity and return on investment. However, the results of Panel Least Square (PLS) regression confirm that debt ratio, asset turnover and size of the firm are positively related to firm performance, while evidence of a negative and significant relationship is found between asset tangibility and measures of firm performance in the model. This implies that the sampled firms are not able to utilize the fixed asset of their total assets judiciously to impact positively their performance. Hence, it is suggested that although asset tangibility shows a negative relationship with both the performance indicators, it should be considered as a driving factor to capital structure because firms with more tangible assets are less likely to be financially constrained. Finally, the results show that growth fails to have a significant effect on either of the performance indicators.
Author: Cunning Gangeni
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Category :
Languages : en
Pages :
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Corporate finance literature suggests that the capital structure decision has played a pivotal role over the years in driving the establishment and growth of firms. There is also a body of evidence that financial markets take a keen interest in firm performance, especially for those listed on the stock exchange. There is no empirical evidence that there is a causal relationship between capital structure and the firm's performance despite the importance of the two concepts in corporate finance. This study uses the debt/equity ratio as a proxy for capital structure and a selected few financial ratios to represent attributes of firm performance (e.g. profitability and shareholder value) in investigating the relationship between the two in the South African context. The results based on stock exchange data as input are inconclusive but they lay a foundation for potential future research. Interesting insights are drawn from using some limitations identified in the literature to try and explain why the results are the way that they are.
Author: Ishola Akintoye
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Category :
Languages : en
Pages :
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In this paper, we examined the effect of capital structure on organisational performance. We address the following questions: does higher leverage lead to better performance? Is the effect of performance on leverage similar across the distribution of different capital structure? Using a sample of 10 quoted Nigerian firms, with consideration of their financial statements for three years, we discover that an evenly distributed capital structure has positive effect on performance, while the effect of performance on leverage varies across the distribution of different capital structure as seen from the companies understudied.Most of the equity-financed firms in this study performed as much as those who employed debt in their structure in term returns on equity and assets. Although we cannot generalize this fact as few other firms with debt finance performed more efficiently as in the case of Nestle Nig. Plc, Northern Nig. Flour Mills Plc, hence the effect of leverage on efficiency varies across the distribution of different capital structure lending credence to the agency cost theory of Jensen and Meckling (1976). We therefore recommend that investors should concentrate on engagement of efficient management team, motivation and other development programmes so as to achieve goal congruence in long run.
Author: Oluseun Paseda
Publisher:
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Category :
Languages : en
Pages : 71
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Empirical work on capital structure in emerging markets like Nigeria has been limited and met with low explanatory power. This study investigates the determinants of capital structure in Nigeria. The population of study comprises all non-financial corporations quoted on the Nigerian Stock Exchange (NSE) for the period 1999-2014 out of which 50 companies that met the minimum data criteria were utilized. Using panel data least squares regression, modified to weighted (cross section- and period-) models, the research documents the following findings. First, the factors that exert positive influence on corporate borrowing include asset intangibility, firm age and expected inflation while those factors that exert negative influence on capital structure include asset tangibility, growth, size, volatility of earnings, profitability, liquidity, dividend-paying status and uniqueness of industry. The results were, at best, mixed with respect to the portability of pecking order, target adjustment, trade-off, agency and market conditions models. The pecking order beats the trade-off model based on the signs of coefficients of firm-specific characteristics. In order words, asymmetric information explains why smaller, less profitable, less liquid firms with more risky intangible assets and which are low dividend-payers end up relying primarily on debt financing and vice versa. The study recommends the use of leases for financially- and collateral-constrained firms.
Author: Kajananthan Rajendran
Publisher:
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Category :
Languages : en
Pages : 8
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This paper examines the relation between capital structure and firm performance. The main objective of this study is to examine the relationship between capital structure and firm performance in listed manufacturing firms in Sri Lanka. In a way, the present study is initiated on “capital structure and firm performance “with the samples of 25 manufacturing companies using the data representing the periods of 2008-2012. Gross profit, net profit, returns on equity and return on assets, were used as the measures of firm performance whereas debt equity ratio and debt assets ratio were used as the measures of capital structure. The statistical tests were used includes: descriptive statistics, correlation and regression analyses. The results show that gross profit, net profit, return on equity, return on assets, are not significantly correlated with debt equity ratio and Gross profit margin and Return on equity are significantly correlated with debt assets ratio as the measures of capital structure and capital structure has significant impact on gross profit and return on equity. The study only used data from the 2008-2012 annual reports. However, the findings have highlighted the effects of the firm performance and capital structure. The study contributes to literature in Sri Lanka. Furthermore, the finding of the paper can be considered as helpful for managers and users that are anxious to develop financial description quality and practices of capital structure.
Author: Samson Olajide Olaniyan
Publisher: LAP Lambert Academic Publishing
ISBN: 9783659466915
Category :
Languages : en
Pages : 104
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This paper examines the effects of capital structure on performance of quoted non-financial firms in Nigeria between 1996 and 2012. The study employed both the first and second generation econometrics method of panel unit root test, principal component analysis, and Generalized Method of Moments. Using return on assets, returns on equity, price earnings ratio, Tobin's Q, and constructed Performance Index as measures of firm performance and debt ratio as a measure of capital structure. Our result showed that capital structure has a negative and significant relationship with firm performance. The study concluded that the agency costs of the non-financial firms under the Nigerian Stock Exchange are very high and these lead to negative performance.
Author: Babatunde Afolabi
Publisher:
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Category :
Languages : en
Pages : 10
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The capital structure of a firm is very important to the firm's successful operation. The objective of the study was to analyze the effects of Capital Structure on Corporate Performance of selected firms on the Nigerian Stock Exchange in Nigeria from 2011 to 2017. The study employed data from five multinational companies, using Micro Panel data as the estimated technique. Both the Random Effect Model and the Fixed Effect Model were estimated, and the Hausman effect was carried out to determine the appropriate model. The result shows that the effect of liquidity of the firms is negatively related to return on Asset (ROA). Hence, keeping funds in non-interest yielding form does not increase the ROA of the firms. Similarly, the short term debt financing (CLA) is negatively related to ROA. However, there is a positive relationship between long term debt financing and ROA. It noted that short term debt financing requires the payment of the debt in a short term, and this may not be convenient for the firms, and impair their performance. However, repaying long term debt may be convenient, and this may have a positive effect on the performance of the firms. Management of the quoted firms in Nigeria is strongly advised to increase the use of equity capital in financing to improve the earnings of their firms.
Author: Sedeaq Nassar
Publisher:
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Category :
Languages : en
Pages : 4
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The paper tries to examine the impact of capital structure on the financial firm performance of industrial companies in Turkey. the annual financial statements of 136 industrial companies listed on I s Istanbul Stock Exchange (ISE) was used for this study which covers a period of 8 years from 2005-20012. A multivariate regression analysis is applied to test the relationship between capital structure and firm performance. To measure firm performance used indicators such as Return on Asset (ROA), Return on Equity (ROE) and Earning per Share (EPS) as well as Debt Ratio (DR) as capital structure variable. The results show that there is a negative significant relationship between capital structure and firm performance.
Author: Promise Nkak
Publisher:
ISBN:
Category :
Languages : en
Pages : 7
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How really is performance influenced by capital structure? There have being different views by different scholars on this topic. Therefore this study examined the relationship between capital structure and firm's performance of quoted industrial goods on Nigeria Stock Exchange (NSE). Five firms were selected for the study with secondary data covering for six years (2014-2019). We employed the multiple regression model in testing our hypotheses, return on equity (ROE) serve as the dependent variable for measuring performance while the independent variables are measured by three variables which Non-current debt to total assets (NCD), current debts to total assets (CD) and total debts to equity (TDE). Our findings revealed that two of our independent variables (NCD and TDE) have a statistical significant relationship with ROE however TDE have a negative relationship with ROE, while the other independent variable CD has no statistical significant on performance. We therefore recommend that in considering the capital mix/structure of the firms long term financing should be consider first, while CD should be consider last and also proper matching should be carried out between equity and debt.
