The Determinants of Capital Structure: Evidence from Selected Listed Companies in Sri Lanka

Pratheepan, Thuraiyappah; Yatiwella, Weerakoon Banda

doi:10.2139/ssrn.2725792

Cited by 6 publications

(10 citation statements)

References 35 publications

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“…In order to decide which one of the alternative panel analysis model whether it is fixed effect model or random effect model, hausman specification test was performed and result indicated that fixed effect model is most suitable in this study (Prob> Chi2 = 0.000). As indicated by Piratheepan and Banda (2016), the Hausman test simply refers to the difference in the coefficient of the output obtained in fixed effects and random effects. Baltagi (2005) suggested that the Hausman test has two restrictions, it requires strict exogenety of error term and assumes that both idiosyncratic error and unobserved effects have constant variances.…”

Section: International Journal Of Accounting and Financial Reportingmentioning

confidence: 99%

Impact of Corporate Governance Practices on Firm's Cash Holdings in an Emerging Market: A Panel Data Analysis

Kengatharan

2017

ijafr

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The aim of the study was to examine the impact of corporate governance practices on firm's cash holdings of listed manufacturing companies in Sri Lanka, using panel data extracted from the financial statements of the companies listed on Colombo Stock Exchange. Corporate governance practices of Sri Lankan listed manufacturing companies were measured by board independence, board size, CEO duality, audit committee meetings and audit committee members, cash holdings were measured by percentage of cash and cash equivalents on total assets and also leverage and firm size were considered as control variables. Data were collected from 26 listed manufacturing companies over a five years period of 2011-2015. Pooled Ordinary Least Square, Fixed Effect and Random Effect models were performed using STATA to explore the best model for the impact of corporate governance practices on firm's cash holdings. Results of the study revealed that fixed effect model was the best model with the evidence of Hausman specification test. According to the fixed effect model, CEO-duality and leverage had significant negative impact on cash holdings while audit committee meetings and firm size had positive impact on cash holdings of the listed manufacturing companies in Sri Lanka. Board independence, board size and audit committee members did not show any significant impact on cash holdings. Findings of the study may be useful to practitioners to identify the effects of corporate governance practices on firm's cash holdings.

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Section: International Journal Of Accounting and Financial Reportingmentioning

confidence: 99%

Impact of Corporate Governance Practices on Firm's Cash Holdings in an Emerging Market: A Panel Data Analysis

Kengatharan

2017

ijafr

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“…As a result, the ratio of total liabilities to total assets decreased. Profitability has negative direction relative to total debt to total assets (Titman and Wessels 1988;Serghiescu and Văidean, 2014;Thippayana, 2014;SithySafeena, 2015;Pratheepan and Yatiwella, 2016;Güner, 2016;Pepur and Poposki, 2016). On the contrary, trade off theory predicts to have positive relationship of profitability to debt ratio.…”

Section: Profitabilitymentioning

confidence: 99%

“…However, there are two conflicting viewpoints about the relationship of size to leverage of firms under pecking order theory. First, larger firms being more diversified have lesser chances of bankruptcy, so one may expect a positive relationship between size and leverage of a firm (Daskalakis and Psillaki ,2008;La Rocca, et.al., 2009;Sangeetha and Sivathaasan, 2013;Serghiescu and Văidean, 2014;Thippayana, 2014;Pratheepan and Yatiwella, 2016;Shah and Khan, 2017. Second, contrary to first view, Rajan and Zingales (1995) argue that large firms should be more capable of issuing informationally sensitive securities like equity, and should have lower debt.…”

Section: Firm Sizesmentioning

confidence: 99%

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Determinants of Capital Structure: An Empirical Analysis of Listed Companies in Thailand Stock Exchange Set 100 Index

Pongsupatt¹,

Pongsupatt²

2019

Proceedings of the 49th International Academic Conference, Dubrovnik

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The main purpose of this study is to investigate some financial indicators that affect the debt ratio in Thailand's capital market. Two competing theories that explicate the capital structure are old-fashioned pecking order and static trade-off model. From existing literature reviews, we select seven traditional factors: profitability, asset structure, size, liquidity, non-debt tax shields, dividend policy and growth as explanatory variables. While long-term debt and total debt are used as proxies for dependent variables. This study uses secondary data collected from annual financial statements of companies in SET 100 index exclude financial business sector. All firms rank highest market capitalization and top trading liquidity in Thailand Stock Exchange for a period of 10 years during 2009-2018. After examine the data, only 760 samples are qualified under criteria. Two panel multiple regression models are implemented for statistic testing at the significant level 0.05. The results for model 1 (Long term debt) show positive and statistical significant effect of asset structure, size, liquidity and growth. While other three factors comprising profitability, non-debt tax shield and dividend policy indicate negative statistical relationships. The results for model 2 (Total debt) show positive and statistical significant effect of asset structure and growth. Whereas, two factors including profitability and liquidity display negative statistical correlation. The results of the two models are consistent with the Pecking Order theory for profitability and growth. High growth firms have higher need for funds then expect to borrow more. While asset structure is consistent with trade-off theory which hold that there should be a positive relationship between fixed assets and debt since fixed assets can serve as collateral. The explanatory variables which have the highest impact on capital structure choices for long term debt and total debt are non-debt tax shield and profitability respectively. Other independent variables such as product uniqueness, risk and macroeconomic indicators are subject to future research.

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“…Also profitable firms use less debt based on pecking order theory. Pratheepan and Yatiwella (2016) unveil inverse relationship between profitability and leverage. Conversely, Growth and size specify direct relationship with leverage.…”

Section: Introduction and Literature Reviewmentioning

confidence: 98%

Sector and Firm Specific Variance Composition of Capital Structure: A Panel Data Analysis on Indian Chemical Industry

Shilpa¹,

Amulya²

2018

ijms

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The Determinants of Capital Structure: Evidence from Selected Listed Companies in Sri Lanka

Cited by 6 publications

References 35 publications

Impact of Corporate Governance Practices on Firm's Cash Holdings in an Emerging Market: A Panel Data Analysis

Impact of Corporate Governance Practices on Firm's Cash Holdings in an Emerging Market: A Panel Data Analysis

Determinants of Capital Structure: An Empirical Analysis of Listed Companies in Thailand Stock Exchange Set 100 Index

Sector and Firm Specific Variance Composition of Capital Structure: A Panel Data Analysis on Indian Chemical Industry

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