Non-linear dynamics of size, capital structure and profitability: Empirical evidence from Indian manufacturing sector

Jaisinghani, Dinesh; Kanjilal, Kakali

doi:10.1016/j.apmrv.2016.12.003

Cited by 60 publications

(50 citation statements)

References 25 publications

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“…Therefore, we reject the null hypothesis that there is no significant causal relationship between firm value and financial leverage. The results are in line with the findings of Ifechi, Kenn-Ndubuisi and Joel (2019), Chadha and Sharma (2015) as well as Abdul & Badmus (2017) but contrarian, to the findings of Jaisinghani and Kanjilal (2017) and Muritala (2018).…”

Section: Conclusion 51 Summary Of Findingssupporting

confidence: 91%

“…The Trade-off theory of capital structure holds that within a certain range higher leverage results in higher firm value beyond which more debts brings about higher default risk and lower firm value. Hence, like previous studies like Jaisinghani et al (2017) this work sought to determine whether the firms on the stock exchange had an optimal capital structure or not. The Hausman test was conducted in order to determine which of the three alternative empirical models (i.e.…”

Section: Conclusion 51 Summary Of Findingsmentioning

confidence: 99%

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Effect of Financial Leverage on Firm Value: Evidence From Selected Firms Quoted on the Nigerian Stock Exchange

Ibrahim¹,

Isiaka²

2020

EJBM

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This study examined the effect of financial leverage on firm value with evidence from a sample of selected companies quoted on the Nigerian Stock Exchange. The study adopts a panel data analysis using secondary data obtained from the financial statements of the selected companies over the period 2014-2018. The sample of 18 firms studied was selected through the convenient sampling technique. The level of financial leverage was denominated by long term debt to equity ratio. This work is the first Nigerian study to utilize the Tobin's q ratio as a proxy of firm value. Other variables proven in literature to be of importance when considering firm value such as Total Asset, Return on Asset and the Number of years for which the firm has been in operation, were utilized as control variables in presenting the Tobin's Q model of firm valuation. Data obtained were analyzed by E-VIEWS to determine the extent of the causal and correlational relationships between the dependent variable and the regressors. The study determined the degree of causality using the Pooled Ordinary Least Squares (POLS), Random Effect Panel Data Model(REM) and Fixed Effect Panel Model(FEM) estimation techniques. The correlation coefficients were estimated using the pairwise correlation matrix to determine the extent to which financial leverage can predict firm value In line with the findings of Akani & Kenn-Ndubuisi (2017); the regression results showed that financial leverage has a significantly negative effect on firm value while the result of the pairwise correlation showed that there is no significant linear relationship between leverage and firm value. The Management of these companies were advised to take less long term debts and instead such firms should consider issuing more equity to reduce the level of financial leverage to thereby attain the optimal capital structure. Financial leverage has proven to be a weak predictor of firm value; hence the management should not rely on the levels of financial leverage to predict future firm value. Future studies may consider the use of a larger sample and a random sample selection method which will group the firms based on their level of capitalization into mid, low and high-capitalization companies so which will help to ascertain the average optimal capital structure for each of the three classes. Finally, future studies can consider a longer time span.

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Section: Conclusion 51 Summary Of Findingssupporting

confidence: 91%

Section: Conclusion 51 Summary Of Findingsmentioning

confidence: 99%

Effect of Financial Leverage on Firm Value: Evidence From Selected Firms Quoted on the Nigerian Stock Exchange

Ibrahim¹,

Isiaka²

2020

EJBM

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“…The research results showed a strong correlation between the company's performance and its financial structure, but the direction of impact depended on the sector in which the enterprises were doing the business. Confirming the impact of profitability as one of the factors influencing the financial structure can be also found in the study by Jaisinghani and Kanjilal (2017). The influence of asset structure, business size and non-debt tax shield was also confirmed by the research of Bajramovič (2017) on a sample of enterprises operating in Bosnia and Herzegovina.…”

Section: Literature Reviewsupporting

confidence: 68%

Differences in the financial structure of Slovak and Czech enterprises operating in machinery manufacturing and equipment industry

Kalusová¹,

Badura²

2020

Journal of International Studies

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The paper offers a thorough study of the selected factors influencing the financial structure of Slovak and Czech companies operating in the machinery and equipment industry. These factors were broken down into internal factors (profitability, company size, liquidity, assets' structure, business risk, non-debt tax shield and company's age) and the external factors (economic cycle, inflation, interest rate and tax rate). The aim of the paper was to analyze, evaluate and assess whether there were differences in the influence of these factors (i.e. different direction and intensity of their impact) on the financial structure of Slovak and Czech enterprises. The analysis was done for the years 2014-2018. The multiple regression analysis was used as the main research method. The research results pointed to the fact that the financial structure of Slovak and Czech companies was affected mainly by the influence of internal corporate factors, and moreover, there were also certain differences between Slovak and Czech enterprises-not only in intensity but even in the direction of action of these factors. Given the internal structure of financing sources and based on our findings, our recommendations were that in the area of financial structure of enterprises, they should focus their attention primarily on corporate liquidity (Slovak enterprises in particular). At the same time, it was clear that the government policy should focus on improving law enforcement in trade relations and also improving the protection of creditors' rights, as business loans were the most used external sources of funding.

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“…It is recommended that management should maximize firm performance by utilizing the combination of debt and equity. This has been discussed in a number of following literature: Azhagaiah and Gavoury (2011), Burja (2011), Malik (2011), Seelanatha (2011), Akinlo and Asaolu (2012), González (2013), Nirajini and Priya (2013), Sivathaasan et al (2013), Chechet and Olayiwola (2014), Hamid et al (2015), Ahmad et al (2015), Sultan et al (2015), Vithessonthi and Tongurai (2015), Daud et al (2016), Ogebe et al (2013), Ameen and Shahzadi (2017), Detthamrong et al (2017), Jaisinghani and Kanjilal (2017), Ghayas and Akhter (2018), Odusanya et al (2018). According to a report of The Financial Stability Board in 2015, there was a significant improvement in debt on total assets ratio of non-financial firms after the global financial crisis.…”

Section: Introductionmentioning

confidence: 99%

Financing decision and firm performance: Evidence from an emerging country

Doan¹

2020

10.5267/j.msl

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This paper gives first empirical evidence from Vietnam, an emerging country, on the impact of financing decision on firm performance in Vietnam. The study uses data of 102 non-financial firms listed on Ho Chi Minh Stock Exchange (HOSE) in the 2008-2018 period. Generalized method of moment (GMM) is employed to overcome drawbacks of the model to assure stable and efficient findings. In this study, return on assets (ROA) is utilized to measure firm performance. Further, financing decision is measured by three indicators: total debt to total assets (TDTA), long-term debt to total assets (LTDTA), and short-term debt to total assets (STDTA). Besides, firm size (SIZE), economic growth (GDP) and inflation rate (INF) are also used as control variables. The paper reveals that firm performance is significantly correlated with financing decision. The findings confirm that the increase in debt use decreases firm performance. Therefore, it is recommended that firms should be chary of using debt to finance business operation as it can lead to bad effects on their performance. The results also report the positive effects of inflation rate on financial development. Accordingly, some strong implications are suggested in order that the authorities and management can develop suitable policies to improve firm performance and aim to a sustainable and steady development.

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Non-linear dynamics of size, capital structure and profitability: Empirical evidence from Indian manufacturing sector

Cited by 60 publications

References 25 publications

Effect of Financial Leverage on Firm Value: Evidence From Selected Firms Quoted on the Nigerian Stock Exchange

Effect of Financial Leverage on Firm Value: Evidence From Selected Firms Quoted on the Nigerian Stock Exchange

Differences in the financial structure of Slovak and Czech enterprises operating in machinery manufacturing and equipment industry

Financing decision and firm performance: Evidence from an emerging country

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