Capital structure and profitability. A case of JSE Listed Companies

Mashavave, Faith; Tsaurai, Kunofiwa

doi:10.22495/rgcv5i1art8

Cited by 2 publications

(2 citation statements)

References 17 publications

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“…The results showed that capital structure had positive impact on the financial performance of companies. Mashavave and Tsaurai (2015) analyzed the impact of financial structure on performance measures. The sample was composed of companies listed on the Johannesburg Stock Exchange in South Africa.…”

Section: Literature Reviewmentioning

confidence: 99%

Capital structure and performance: evidence from European listed companies

Intrisano¹,

Micheli²,

Calce³

2019

Pressacademia

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Purpose -The paper aims to investigate the existence of a relationship between financial structure and performance for European listed companies. Methodology -The reference period of the study is three years (2015)(2016)(2017). In line with Modigliani and Miller' Theory we assume that independent variable (debt/equity ratio) does not influence performance (measured by ROE and ROA). We use correlation and linear regression analysis. Findings -Results show the existence of a weak relationship between capital structure expressed as debt/equity ratio and performance measures. However, the R 2 of the model has a limited explanatory capacity, so only an insignificant part of the variability of performance measures can be explained by changes in capital structure. The remaining part depends on factors not included in the linear models formulated. Conclusion-The study shows that the financial structure does not condition the economic and financial performance of European listed companies.

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Section: Literature Reviewmentioning

confidence: 99%

Capital structure and performance: evidence from European listed companies

Intrisano¹,

Micheli²,

Calce³

2019

Pressacademia

View full text Add to dashboard Cite

show abstract

“…Also, the assumptions of the theory take into account the phenomenon of financial distress that result from too much borrowing. Moreover, its assumption of optimal capital structure (leverage) has been the focal point of the finance literature for the past several decades due to contradicting results obtained from various empirical studies after testing the theory [4]. Therefore, this study was guided by the Traditional Trade-off theory.…”

Section: Introductionmentioning

confidence: 99%

Effects of Capital Structure on Business Profitability of Processing Enterprises Listed on the Dar es Salaam Stock Exchange, Tanzania

Mujwahuzi¹,

Mbogo²

2020

JFA

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This paper examines effects of capital structure on business profitability in seven processing enterprises listed on the Dar es Salaam Stock Exchange (DSE), Tanzania. Capital structure in this study was measured by long-term debt to equity ratio (LTDR) and business profitability was measured by Return on Assets (ROA), Return on Equity (ROE) and Earnings per Share (EPS). The study applied secondary data obtained from the published reports in the DSE website for a duration of ten years from 2009 to 2018. Ordinary Least Squares (OLS) regression analysis and Karl Pearson Coefficient of Correlation were employed to determine the relationship between capital structure and business profitability. Results revealed that the capital structure indicator had a weak and statistically insignificant effect on business profitability measures. The relationship between LTDR and all measures of profitability used in this study were found to be weak and insignificant. Therefore, the study concluded that capital structure is not a major determinant of firm's profitability. These findings generally concur with the predictions of the Pecking Order Theory of capital structure decisions of firms. It is therefore recommended that financial managers should follow a moderate and cautious approach to debt issues despite the benefit of tax shield in order to minimize the risk of operating under financial distress.

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Capital structure and profitability. A case of JSE Listed Companies

Cited by 2 publications

References 17 publications

Capital structure and performance: evidence from European listed companies

Capital structure and performance: evidence from European listed companies

Effects of Capital Structure on Business Profitability of Processing Enterprises Listed on the Dar es Salaam Stock Exchange, Tanzania

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