Capital structure determinants across sectors: Comparison of observed evidences from the use of time series and panel data estimators

Rehan, Raja; Abdul Hadi, Abdul Razak; Hussain, Hafezali Iqbal; Adnan Hye, Qazi Muhammad

doi:10.1016/j.heliyon.2023.e19618

Cited by 8 publications

(9 citation statements)

References 73 publications

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“…Technically, firms that have significant NDTS have low debt. This is because depreciation figures decrease taxation expenses, thus saving firms' capital, which is later used to run operations and finance assets (Rehan et al, 2023). Besides, negative but significant EPS and insignificant SIZE specify that profitability is a main issue for Malaysian Shariah-tagged firms as their sales are not able to generate the required profits.…”

Section: Discussionmentioning

confidence: 99%

“…This empirical inquiry has chosen the Panel Data Static model that was previously executed by Rehan, Abdul Hadi, Hussain, and Hye (2023); Zandi, Rehan, Hye, Mubeen, and Abbas (2022); and Chakrabarti and Chakrabarti (2019). Notably, the constructed models of this inquiry are different from the former studies' models as they adopt dissimilar determinants.…”

Section: Methodsmentioning

confidence: 99%

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Are shariah and non-shariah firms’ capital structure determinants and financial performance related? Evidence from Malaysia

Rehan,

Sa’ad,

Haron

et al. 2023

5009

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This comparative analysis is an attempt to explore the core differences among the capital structure determinants of Malaysian Shariah and non-Shariah firms. Besides, this investigation also explores which financial category in Malaysia, either Shariah or non-Shariah, maintained its performance, i.e., earnings; during the peak period of the COVID-19 pandemic and to what extent their performance is related. For analysis purposes, this investigation used 454 firms’ 17 years’ financial data, i.e., 2005-2021. The Panel Data Static models are executed to perform the empirical investigation. The debt-to-equity ratio is selected as a dependent variable, whereas total assets, sales, current assets, growth, return on equity, non-debt tax shield, and earnings per share are nominated as independent variables. The results indicate that fixed assets and growth are core determinants for both types of firms. This endorses the validity of these two investigated determinants for the whole Malaysian firm. Moreover, current assets, non-debt tax shield, fixed assets, growth, and earnings per share are also observed as main and significant determinants for Shariah-tagged firms. The positive significance of tangibility, non-debt tax shield, and liquidity explain why the Trade-off theory is more dominant in the Malaysian context. Besides, the outcomes obtained from descriptive statistics and Independent Two-sample t Test explain that both financial categories of Malaysian listed firms maintained negative earnings during the COVID-19 peak period, i.e., 2020. The results will help policymakers devise the best financing model i.e., Shariah and non-Shariah, specifically during the uncertain financial fiascos.

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Section: Discussionmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Are shariah and non-shariah firms’ capital structure determinants and financial performance related? Evidence from Malaysia

Rehan,

Sa’ad,

Haron

et al. 2023

5009

View full text Add to dashboard Cite

show abstract

“…Likewise, in an autocorrelation, the variable is connected with its past realizations [50]. Both tests are connected with GMM estimation and used by following the practices of earlier researchers (see [1,8,14,51]). Notably, the GMM estimator increases the model efficiency and offers a degree of freedom among the explanatory variables.…”

Section: Methodsmentioning

confidence: 99%

What explain capital structure determinants choices of Shariah firms?

Rehan,

Sa’ad,

Rosman

et al. 2024

5003

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This study aims to discover key capital structure determinants for the entire Shariah firms operating in dissimilar contexts. Moreover, it also estimates the adjustment speed for these firms to maintain targeted capital structures at all times. For this purpose, 321 Shariah firms that are operational in Saudi Arabia, Pakistan, the UAE, and Indonesia are nominated. The empirical analysis is conducted using 11 years, i.e., 2011-2021, of balanced Panel Data. The debt-to-asset and debt-to-equity ratios are used as variables of interest, whereas the asset tangibility ratio, current ratio, return on equity, size, non-debt-tax shield, inflation, and gross domestic product are used as explanatory variables. The robust estimator, i.e., Generalized Method of Moments (GMM), is executed to perform the analysis. The results show that the most important factors for Shariah-tagged firms are inflation, the gross domestic product, the asset ratio, the return on equity, the non-debt tax shield, and the lagged dependent variables. The important role of asset tangibility, lagged variables, and the presence of adjustment speed postulate that Shariah-tagged firms are following the provided guidelines of Dynamic Trade-Off theory to preserve capital structure. The findings are a new contribution to the limited empirical inquiries of Shariah firms’ capital structure and a fresh addition to Islamic Finance literature. Besides, the outcomes are also helpful for policymakers and assist them in developing an optimal model of capital structure for Shariah-tagged firms that decreases overall capital costs and enhances these firms’ market value.

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“…Capital structure refers to the composition of a company's sources of financing, including debt and equity. This is an important decision for companies because it affects the cost of capital, financial risk, and ability to conduct investment opportunities (Luo et al, 2023;Rehan et al, 2023). An optimal capital structure can increase the value of a company by minimizing financing costs and maximizing the use of financial leverage.…”

Section: Ijafibsmentioning

confidence: 99%

Current ratio, return on assets and company size to capital structure in manufacturing companies in the food and beverage subsector

Oktaviani,

Nurhayati,

Safitri

et al. 2024

ijafibs

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This study investigates the interaction between the current ratio, return on assets, company size and capital structure in Indonesia's food and beverage sector. The goal is to gain insight into how these factors interact and affect the overall value of a company in a particular region and industry. This analysis uses quantitative methods based on financial data and relevant metrics for a sample of 15 food and beverage sector companies operating in Indonesia. This study examines the relationship between the current ratio, return on assets, and company size to capital structure through statistical analysis and linear regression modelling techniques with SPSS version 26. The results showed that the current ratio did not significantly affect the capital structure. Return on assets does not have a significant effect on the capital structure. Then, the size of the company has a significant influence on the capital structure. The current ratio, return on set, and company size affect the capital structure simultaneously. The findings contribute to the existing literature on company valuations by providing empirical evidence specific to the food and beverage sector. The research has implications for policymakers, investors, and managers, as it offers valuable insights into the factors driving shaping capital structures in the industry, helping stakeholders make decisions and strategies to improve performance and competitiveness. Provide benefits in the context of financial management

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Capital structure determinants across sectors: Comparison of observed evidences from the use of time series and panel data estimators

Cited by 8 publications

References 73 publications

Are shariah and non-shariah firms’ capital structure determinants and financial performance related? Evidence from Malaysia

Are shariah and non-shariah firms’ capital structure determinants and financial performance related? Evidence from Malaysia

What explain capital structure determinants choices of Shariah firms?

Current ratio, return on assets and company size to capital structure in manufacturing companies in the food and beverage subsector

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