Co-determination of capital structure and stock returns in banking industry using structural equation modeling

Abstract

Capital structure plays essential role on financial strength of business units and there are literally many studies to confirm the relationship between capital structure and return growth. In this paper, we re-examine this relationship by investigating on 12 Iranian private banks using structural equation modelling over the period 2005-2011. The proposed study of this paper designs a questionnaire and distributes it among experts and analyse it use LISREL software package. The result indicates that there is a positive and meaningful relationship, when the level of significance is five percent between capital structure and stock return in private banking industry in Iran. The implementation of Pearson and Spearman correlation tests also validate the findings.

Capital Structure Determinant and Profitability and Their Impact on Firm Value: Study in Indonesian Manufacturing Sector

“…This statement in line with a study by (Al Ani & Al Amri, 2015) found that firm size positively influences leverage. This is in line with a study by (Chen et al, 2014;Cheng & Tzeng, 2011;Lemma & Negash, 2013;Taghavi et al, 2013;Thi Hang & Jay Hung, 2016;Yang et al, 2010). However, it is different from a study by (Chandra, 2015;Fauzi et al, 2013;Chandra et al, 2019;Tse & Rodgers, 2014).…”

“…This condition will stimulate the increase in the company's risk and lead investors to consider the application for a loan from the company. This result is not in line with a study by (Chang et al, 2014;Taghavi et al, 2013;Yang et al, 2010). H3: Uniqueness influenced capital structure in the Indonesia manufacturing sector.…”

“…As a result, the stock return expected by the stockholders will increase. It is parallel with studies by (Cheng & Tzeng, 2011;Ozturk & Yilmas, 2015;Salim & Yadav, 2012;Taghavi et al, 2013). Nonetheless, it is different from the studies by (Ahmad et al, 2013;Ghi, 2015;Priya et al, 2015;Abdullah et al, 2015;Salim & Yadav, 2012;Yang et al, 2010).…”

“…Meanwhile, a study by (Thi Hang & Jay Hung, 2016) found that volatility negatively and significantly influenced capital structure. Other studies by (Lemma & Negash, 2013;Taghavi et al, 2013;Titman & Wessels, 1988;Chandra et al, 2019;Tse & Rodgers, 2014;Yang et al, 2010) stated that volatility did not significantly influence capital structure. H2: Volatility influenced capital structure in the Indonesia manufacturing sector.…”

“…This statement in line with a study by (Al Ani & Al Amri, 2015) discovering that tangibility positively and significantly influences leverage. Other relevant studies are those by (Fauzi et al, 2013;Taghavi et al, 2013;Yang et al, 2010). Contrarily, it is different from the studies by (Chandra, 2015;Lemma & Negash, 2013;Ramjee & Gwatidzo, 2012;Thi Hang & Jay Hung, 2016;Titman & Wessels, 1988).…”