Capital Structures of Small Family Firms in Developing Countries

Bas, Tugba; Muradoğlu, Yaz Gűlnur; Phylaktis, Kate

doi:10.1561/114.00000029

Cited by 3 publications

(4 citation statements)

References 49 publications

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“…Due to this inefficiency in the developing markets, there is still room for improvement and thus, further development in the financial market has the scope to enhance the impact of goodwill assets on firms' debt ratio. Conversely, financial markets in the developed countries are much more efficient compared to the developing countries' counterparts (Bas et al, 2009). In addition, due to favorable property rights (Claessens and Laeven, 2003) and better protection of creditors' rights (Giannetti, 2003), the collaterizability of intangible assets (goodwill assets) is more Besides, demand side factors such as PPETA (property, plant and equipment to total assets), LSL (log of sales), earnings before interest and tax to total assets (EBITA), market-to-book ratio (MTB), firm age, pay-out ratio and depreciation to total assets (DEPTA) consistently predict debt ratios in both the developed and developing countries.…”

Section: Discussion Of Resultsmentioning

confidence: 98%

Section: Discussion Of Resultsmentioning

confidence: 99%

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The relationship between goodwill and capital structure and the moderating effect of financial market development

Thakur,

Tunde,

Noordin

et al. 2023

JEFAS

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PurposeThis study empirically investigates the relationship between goodwill assets and capital structure (i.e. debt ratio) of firms and the moderating effect of financial market development on the relationship between goodwill assets and capital structure.Design/methodology/approachThis research applied a quantitative method. The article collects large samples of listed firms from 23 developing and nine developed countries and applied the panel data techniques. This research used firm-level data from the DataStream database for both developed and developing countries. The study uses 4,912 firm-level data from 23 developing countries and 4,303 firm-level data from nine developed countries.FindingsThe findings reveal a significant positive relationship between goodwill assets and capital structure in developing countries, but goodwill assets have a significant negative relationship with capital structure in developed countries. Moreover, financial market development positively moderates the relationship between goodwill assets and the capital structure of firms in developing countries. The results inform firm managers that goodwill assets serve as additional collateral to secure debt financing. Moreover, policymakers should formulate a debt market policy that recognizes goodwill assets as additional collateral for the purpose of obtaining debt capital.Research limitations/implicationsThe study has several implications. First, goodwill assets are identified as a factor of capital structure in this study. Fixed assets have been identified as one of the drivers of capital structure in previous research, although goodwill assets are seldom included. Second, this article shows that along with demand-side determinants, supply-side determinants also play an important role in terms of the firms' choice about the capital structure. Therefore, firms should take both the demand-side and supply-side factors into consideration when sourcing for external financing (i.e. debt capital).Originality/valueThe study considered goodwill as a component of capital structure. The study analysis includes a large sample of enterprises, including 4,912 big firms from 23 developing countries and 4,303 large firms from nine industrialized or developed countries, which adds to the current capital structure information. Furthermore, a large sample size increases the results' robustness and generalizability.

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Section: Discussion Of Resultsmentioning

confidence: 98%

Section: Discussion Of Resultsmentioning

confidence: 99%

The relationship between goodwill and capital structure and the moderating effect of financial market development

Thakur,

Tunde,

Noordin

et al. 2023

JEFAS

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“…Annual GDP growth GDP growth (annual %)/100 Jaworski and Czerwonka (2021), Bas et al (2009) In the above-given Table 1, DR indicates the dependent variable. TANG: Tangibility, PROF: Profitability, LIQ: Liquidity, SIZE: Sales of the energy firms, NDTS: Non-debt tax shield, GDP: Gross domestic products determinants.…”

Section: Gdpmentioning

confidence: 99%

Examining Capital Structure Determinants for ASEAN Energy Firms

Ghani

Hye²,

Rehan

et al. 2023

IJEEP

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Increasing energy insufficiency is the main trench for the South East Asian countries. Though, there are rare empirical inquiries in relation to the energy firms’ capital structure determinants for the firms functioning in the Association of Southeast Asian Nations (ASEAN). Therefore, this study is an attempt to discover the capital structure determinants of energy firms that are functioning in the six key economies of ASEAN region which are Malaysia, Indonesia, Thailand, Philippines, Cambodia and Vietnam. In this setting, a total of 144 energy firms’ yearly Panel Data is involved over 14 years period from 2007 to 2020. The seven core determinants of capital structure, namely tangibility, return on equity, current ratio, non-debt tax shield, inflation and annual gross domestic product are inspected in relation to capital structure which is measured by ratio of debt to total asset. Employing both Panel Data models that are Static and Dynamic models via using robust estimator i.e. Generalized Method of Moments (GMM), the results reveal that tangibility and profitability are the most prominent determinants among all others. Evidently, the two newly introduced capital structure determinants that are inflation and energy consumption for ASEAN region energy firms are also reported significant by dissimilar estimators. The significant character of tangibility, profitability and lagged dependent variable directly infers the relevance of Dynamic Trade-Off theory. The findings provide new ways for policy makers to construct parallel strategies which will not only help out to overcome the energy scarcity issues but also to enhance regional level integration.

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“…Different industries' ideal capital structures are still up for debate (Saeed et al, 2021). Most studies explore non-financial firms' capital structure determinants (Amatya, 2020;Shah et al, 2004) or small and medium firms (Bas et al, 2009;Daskalakis & Psillaki, 2008). Some scholars have looked into how financial leverage (FL) impacts a company's performance and used it as a descriptive variable (Hussain et al, 2021;Nguyen & Nguyen, 2020).…”

Section: Introductionmentioning

confidence: 99%

Unveiling the Changing Capital Structure Dynamics in the Oil and Gas Industry: Evidence from Pakistan

Ch Ahtesham ul Haq Dhariwal,

Dr. Muhammad Tahir,

Ullah

2024

IJMRES

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Firm-specific considerations impact decisions about capital structure. A few investigations have been done in Pakistan's oil and gas sector. Most studies have examined the effect on non-financial firms and the textile industry. As this sector is very attractive for investors, The influences on capital structure decisions must be considered. In this study, only firm-specific factors are considered for analysis. The effect of asset structure, financial distress (earning volatility), non-debt tax shield, liquidity, firm size, profitability, and firm growth on capital structure decisions are examined. For this, data ranging from 2007 – 2021 of the firms working in Oil and Gas sector of Pakistan was used. The pool regression approach was applied. As per the results, tangibility and liquidity have an inverse relationship; non-debt tax shields and firm size directly affect profitability, and growth does not impact the capital structure.

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Capital Structures of Small Family Firms in Developing Countries

Cited by 3 publications

References 49 publications

The relationship between goodwill and capital structure and the moderating effect of financial market development

The relationship between goodwill and capital structure and the moderating effect of financial market development

Examining Capital Structure Determinants for ASEAN Energy Firms

Unveiling the Changing Capital Structure Dynamics in the Oil and Gas Industry: Evidence from Pakistan

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