Capital structure and firm performance: Empirical evidence from a small transition country

Le, Thi Phuong Vy; Phan, Thi Bich Nguyet

doi:10.1016/j.ribaf.2017.07.012

Cited by 202 publications

(247 citation statements)

References 47 publications

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“…The relationship between the share of total debt in the sources of financing and the three tested measures of profitability is negative. Such research results are consistent with the research results attained by many authors from different countries (ia Azhagaiah, Gavoury, 2011;Stekla, Grycova, 2016;Habib et al, 2016;Le, Phan, 2017). The theory in which profitability and indebtedness are negatively correlated is the pecking order theory.…”

Section: Discussionsupporting

confidence: 90%

“…For the identification and measurement of the significance and impact of the independent variables on the dependent variable the following econometric panel models were used: Azhagaiah and Gavoury (2011) and Le and Phan (2017), among others, used analogous or similar methods in their research.…”

Section: Methodsmentioning

confidence: 99%

“…However, most authors (i.a. Azhagaiah, Gavoury, 2011;Stekla, Grycova, 2016;Habib et al, 2016;Le, Phan, 2017) detected a negative relationship. Together with the increase in the share of debt in the capital structure the companies' profitability decreases.…”

Section: Literature Reviewmentioning

confidence: 97%

“…Various profitability measures have been used in previous empirical studies. Most often these were: return on equity (Abor, 2005;Stekla, Grycova, 2016) return on assets (Salawu, Awolowo, 2009;Le, Phan, 2017;Azhagaiah, Gavoury, 2011). In this study, it was decided to supplement the above measures with the third of the key profitability indicators, namely return on sales (ROS).…”

Section: Literature Reviewmentioning

confidence: 99%

See 3 more Smart Citations

Impact of Capital Structure on Enterprise’s Profitability: Evidence From Warsaw Stock Exchange

Jaworski¹,

Czerwonka²

2018

Proceedings of the 9th Economics &Amp; Finance Conference, London

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The aim of the paper is to diagnose the impact of the capital structure of companies listed on the Warsaw Stock Exchange on their profitability. The ratios used in the profitability measurement are Return on Sales (ROS), Return on Assets (ROA) and Return on Equity (ROE). The capital structure is characterised by the total debt ratio (DR) and long-term debt ratio (LDR). The method of the empirical study is panel analysis of data from financial statements of 372 companies listed in Warsaw in the years 1998 -2016. As control variables, the size of the company and the rate of its growth were assumed. The results of the study indicate that the impact of the total debt share in the capital structure on profitability is negative. On the other hand, the dependence between profitability and long-term debt is positive. In addition, it has been found out that a greater size of a company results in higher profitability. A similar relationship is observed for the company growth rate. The limitations of the research are: a time-limited and number-limited research sample and lack of consideration in the study of external conditions (e.g. the general economic situation, the industry, internationalisation etc.).

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Section: Discussionsupporting

confidence: 90%

Section: Methodsmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 97%

Section: Literature Reviewmentioning

confidence: 99%

See 2 more Smart Citations

Impact of Capital Structure on Enterprise’s Profitability: Evidence From Warsaw Stock Exchange

Jaworski¹,

Czerwonka²

2018

Proceedings of the 9th Economics &Amp; Finance Conference, London

View full text Add to dashboard Cite

show abstract

“…Next, Le & Phan (2013) also examined the effect of capital structure on the performance of non-financial companies listed on the Vietnam stock exchange in the period 2007-2012. In line with the research of Salim & Yadav (2012), it was stated that all debt ratios (long-term debt, short-term debt, and total debt) had a significant negative relationship with company performance (ROA, ROE, and Tobin's Q).…”

Section: Empirical Evidence and Hypothesismentioning

confidence: 99%

The Effect of Capital Structure on Profitability of Electricity Companies In Southeast Asia

Wibowo¹,

Rahim²

2019

j. Organisasi dan manaj.

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Capital structure is increasingly important in determining the optimal combination of funding for investment needs that can increase firm value from profitability. The study aims to examine the effect of capital structure on profitability of electricity companies in Southeast Asia. The study used multiple regression model represented by pooled least square to calculate 48-panel data from the annual financial report during the time period of 2009-2016. We utilized short-term debt to total assets (STD), long-term debt to total assets (LTD), total debt to total assets (TD), and debt to equity ratio (DER) as proxies of capital structure (independent variables). Operating income margin (OIM), return on asset (ROA), and return on equity (ROE) were the profitability proxies (dependent variables). Firm size and firm age were used as control variables in the study. The results of this study indicate that STD and LTD have a negative relationship that consequently has significant effect on LTD and OIM. Other than positive and negative relationships between the capital structure (TD and DER) and profitability, this study also finds that TD and DER have positive significant influence on OIM and ROE, but have negative insignificant relation with ROA. Thus, it is necessary to optimize the capital structure by adjusting the target of capital structure that can provide a balance on the marginal cost and marginal benefit.

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Does ownership structure affect the optimal capital structure? A PSTR model for China

Yao

Zhou

2020

Int. J Fin Econ

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In the context of Chinese enterprises' privatization reforms, the relationships between ownership structure and optimal capital structure and between ownership structure and firm performance are worth attention. Using data on listed companies in China, this article uses the panel smooth transfer regression (PSTR) model and multiple regression models to test the nonlinear relationship between capital structure and firm performance. The optimal capital structure is calculated using the partial correlation function of the PSTR model, and the ownership structure-optimal capital structure relationship is analysed. This research found that (a) the effect of the debt-to-asset ratio on firm performance shows a nonlinear relationship with sudden changes in characteristics, and a debt-to-asset ratio interval exists that can significantly improve firm performance; (b) under the premise of the effect of ownership checks and balances, an increase in ownership concentration can improve the optimal capital structure; thus, enterprises can achieve effective operations with higher debt; (c) the promotion effect of ownership concentration on firm performance varies depending on a company's debt-to-asset ratio; and (d) different industries have different optimal capital structures. The raw materials industry has a high optimal capital structure. A series of robustness tests verify the robustness of these conclusions. This research enriches the theoretical interpretation of the optimal capital structure and provides new insights into the relationship between ownership structure and firm performance. The conclusions drawn by this article are helpful to enterprises making corresponding financial decisions and the government in formulating corresponding capital market systems.

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Capital structure and firm performance: Empirical evidence from a small transition country

Cited by 202 publications

References 47 publications

Impact of Capital Structure on Enterprise’s Profitability: Evidence From Warsaw Stock Exchange

Impact of Capital Structure on Enterprise’s Profitability: Evidence From Warsaw Stock Exchange

The Effect of Capital Structure on Profitability of Electricity Companies In Southeast Asia

Does ownership structure affect the optimal capital structure? A PSTR model for China

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