The optimal capital structure and value of a company is in constant evolution, taking into account both the external and internal environment. This study examines company-related determinants of capital structure and investigates whether the 2008 financial crisis exerted any significant influence on the capital structure and the identified determinants in a sample of top 40 JSE Ltd listed companies in South Africa. A panel regression model was applied to identify the most significant capital structure determinants and variance in them. Panel regression accounts for cross-sectional data and time series data simultaneously. It was found that the 2008 financial crisis did not exert a significant difference on the capital structures of the sample companies. The most significant company-related determinants of capital structure before the 2008 financial crisis were risk, tangibility and profitability. Risk and tangibility had a stronger influence on capital structure after the 2008 financial crisis but profitability became insignificant. The significant factors should be closely monitored to detect change in capital structure and the valuation of a company.
The impact of the lockdown restrictions on the retail industry was vast with firms having to act quickly to adapt. Importantly, for the retail industry, a level 5 lockdown meant that only essential goods were allowed to be sold (Ecim et al. 2020). Additionally, many retail businesses shut down completely during the level 5 lockdown period. Consumers were also moving towards buying online, which meant less spending in the actual shops. Other consequences of the pandemic and lockdown measures included COVID-19 regulations such as surface and hand sanitation as well Orientation: Coronavirus disease 2019 (COVID-19) and the subsequent lockdown regulations restricted ongoing trade for most retail firms. Business strategies had to be adjusted to avoid a grand challenge of insolvency.Research purpose: This paper provides previously unavailable empirical evidence of firmlevel capital structure and determinants in relation to the COVID-19 pandemic for the firms in the retail sector in an emerging market.Motivation for the study: Capital structure decisions, as influenced by the pandemic, provide novel value because such decisions are usually long-term, yet the volatile uncertainty of the pandemic negated the long-term cycle.Research design, approach and method: A correlational design was followed to identify and interpret how retail firms reacted during the initial lockdown period. This was completed using a quantitative method, doing statistical analysis to describe and interpret possible relationships. The secondary data ranged from 2009 to 2021 for 11 South African listed retail firms was collected from EquityRT® and INET BFA. Data were analysed using descriptive statistics and panel data analysis by Eviews 12 software. Main findings:The pandemic, measured using a dummy variable, was found to have a significant effect on capital structure together with risk, profitability, size and age. Liquidity, tangibility and growth were insignificant. Overall, capital structure proxied by the debt-equity ratio was reduced timeously without exhibiting dependence on short-term funds.Practical/managerial implications: The retail firms exhibited exemplary capital structure decision-making behaviour during the COVID-19 pandemic. Contribution/value-add:The empirical evidence of the effect of the COVID-19 pandemic on the capital structures and its determinants of retail firms in South Africa is the contribution of this study. Based on the findings, two conflicting capital structure theories (pecking order and trade-off theories) were part of the decision-making process, creating the cautious behaviour for these retail firms.
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