Determinants of Capital Structure and Speed of Adjustment: Evidence from Iran and Australia

Abstract

This study investigated different companies' capital structures using a comparative approach in a developing country (Iran) and a developed country (Australia). The purpose of this study was to identify the factors affecting the capital structure based on the company's characteristics in Iran and Australia. The main characteristics of the companies used in this research are mainly based on the variables used in Pecking order theory and the Trade-off theory namely tangibility, firm size, profitability, and business risk. Three other variables including liquidity, asset utilization ratio and speed of adjustment were also investigated. Two indicators of total debt ratio and long-term debt ratio have been used as corporate leverage index. The population of this study included 178 Iranian companies listed on Iran's stock exchange and 187 Australian companies listed on Australia's stock exchange from 2009 to 2015. To test the hypotheses, Panel data and Eviews software were used. To ensure robustness of the results, the speed of adjustment was estimated using GMM and OLS (with fixed and random effects).The results of this study showed that dynamic trade-off theory could better explain the changes in capital structure in Iran and Australia. The results also revealed significant differences in factors affecting the capital structure in Iran and Australia.

Determinan Struktur Modal Pada Perusahaan Property and Real Estate Di Indonesia

“…Setiap keputusan yang diambil oleh perusahaan dalam menggunakan sumber dana memiliki biaya-biaya tersendiri yang juga harus diperhatikan oleh perusahaan. Kythreotis et al (2018) menyatakan bahwa adapun komponen biaya modal yang perlu diperhatikan oleh perusahaan diantaranya yaitu biaya saham biasa (cost of common stock), biaya saham preferen (cost of preferred stock), dan biaya utang (cost of debt). Tujuan perusahaan menghitung besarnya biaya modal yang timbul dari masing-masing sumber dana adalah untuk memilih metode pendanaan dengan biaya modal yang minimum.…”

“…Semakin tinggi tingkat profitabilitas suatu perusahaan, maka semakin sedikit proporsi utang yang digunakan oleh perusahaan. Pendapat tersebut juga sesuai dengan temuan penelitian yang dilakukan oleh Kythreotis et al (2018), Nnadi (2016), dan Ngjeliu (2018). Namun hasil lain ditemukan pada penelitian yang dilakukan oleh Apsari & Dana (2018), Dewi dkk.…”

“…Hasil penelitian ini tidak mendukung hasil penelitian yang dilakukan oleh Vuran et al (2017), Kythreotis et al (2018), Nnadi (2016), dan Ngjeliu (2018) serta tidak sesuai dengan perspektif pecking order theory yang menyatakan bahwa perusahaan dengan profitabilitas yang tinggi akan cenderung menggunakan dana internal seperti retained earnings sebelum memutuskan untuk menggunakan utang. Profitabilitas perusahaan yang tidak mencukupi kebutuhan modalnya membuat perusahaan tetap memilih untuk menggunakan utang.…”

The Effect of Access to Debt on Lebanese Small and Medium Enterprises Performance

“…Since the introduction of this theory, several theories have emerged to balance between maximising the value of the firm and minimising the cost of capital (Abeywardhana, 2015), namely tradeoff theory (TOT) and pecking order theory (POT), which are used by firms to manage their capital structure (Ross et al, 2013, p.548). Kraus and Litzenberger (1973) established trade-off theory to suggest that an increasing level of debt in capital structure would increase bankruptcy risk through the difficulty of repaying the interest and principal payment (Kythreotis, Nouri & Soltani, 2018). In contrast, Ehrhardt and Brigham (2011, p. 613) focused on bankruptcy costs, suggesting that an increasing level of debt may lead to higher legal and accounting expenses, difficulty in retaining customers who will search for other stable suppliers, difficulty in retaining employees who will leave a failing firm, declining relations with suppliers who will refuse to giving credit and the obligation to sell assets for a lower price.…”

Pengaruh Likuiditas Terhadap Struktur Modal dengan Profitabilitas sebagai Variabel Intervening

“…Hasil penelitian terdahulu yang dilakukan oleh Shahar, Adzis, & Baderi (2016) menemukan bahwa profitabilitas dan likuiditas berpengaruh negatif terhadap struktur modal. Berbeda dengan hasil penelitian yang dilakukan oleh Kythreotis, Nouri, & Soltani (2018)…”