The Effect of Capital Structure on Company Financial Performance

Nini, Nini; Patrisia, Dina; Nurofik, Agus

doi:10.21831/economia.v16i2.30661

Cited by 4 publications

(5 citation statements)

References 20 publications

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“…Shindu et al (2014) also show that Leverage shows a positive relationship with firm performance measures. It is also strengthened by the findings of Nini et al (2020) who see the effect of choosing a company strategy using debt financing on corporate financial performance on the Indonesian Stock Exchange.…”

Section: H1: the Firm Strategy Affects The Capital Structure The Infl...mentioning

confidence: 89%

Explanation Study of Agro-Industrial Firm Financial Performance Based on Capital Structure and Firm Strategy in the Covid-19 Pandemic

Sulistiyo

Maharani²,

Aprillianto³

et al. 2022

JRABA

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The purpose of this study was to examine the effect of corporate strategy on financial performance with capitalstructure as an intervening variable. The advantage of this research lies in taking the object of the company inthe agroindustry sector in the Covid-19 pandemic situation which has not been the concern of researchers. Thepopulation is all agroindustry companies, listed in Indonesian Stock Exchange. Data collection technique usingpurposive sampling method and a total of 52 sample data were obtained with a time span of 2020-2021 whichwere processed using the multiple regression method. The results show that there is an effect of corporatestrategy on capital structure, as well as capital structure that affects financial performance. However, theopposite result is shown by the non-influence of corporate strategy variables on financial performance. Thus,the mediating role of capital structure in the relationship between corporate strategy and financial performancehas been clearly proven. The results of this study are able to provide future research recommendations in theform of using variations of company strategies that can have different implications, especially for companies inthe agroindustry sector during the covid-19 pandemic. In addition, this study also recommends companies tomanage their capital structure optimally to generate value to financial performance. This research will alsocontribute on the fast growth of literature related to corporate strategy, capital structure, and financialperformance as well as the development of agency theory, signal theory and pecking order theory.

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Section: H1: the Firm Strategy Affects The Capital Structure The Infl...mentioning

confidence: 89%

Explanation Study of Agro-Industrial Firm Financial Performance Based on Capital Structure and Firm Strategy in the Covid-19 Pandemic

Sulistiyo

Maharani²,

Aprillianto³

et al. 2022

JRABA

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“…Based on the explanation of the phenomenon, this research is a development of previous research by Husada and Handayani (2021), Giannopoulos et al (2022), Hanim et al (2018), Nini et al (2020), Manurung and Wijaya (2022), Almashhadani and Almashhadani (2022), andAlabdullah (2021). The novelty of this study is that the authors use different objects and places.…”

Section: Introductionmentioning

confidence: 84%

“…In contrast, Junius et al (2020) and Ghazali and Zulmaita (2020) stated that Environmental, Social, and Governance Disclosure has no effect on a company's financial performance. Regarding capital structure, Heliola et al (2020); Aulia et al (2018) found that capital structure has a significant positive effect on financial performance, while Nini et al (2020), Mohammad et al (2019) stated that capital structure has a negative and significant effect on the company's financial performance. For managerial ownership, Fibriani et al (2022), Almashhadani and Almashhadani (2022), Suartama and Sukartha (2020), and Loen (2022) found a positive and significant effect on financial performance, whereas Astari and Suputra (2019) stated that managerial ownership has negative effect, and Manurung and Wijaya (2022) found no effect.…”

Section: Introductionmentioning

confidence: 99%

Environmental, Social, and Governance Disclosure as Pathway to Business Sustainability on the Mining Companies in Indonesia and America

Putriningtyas,

Widiastuti,

Sjam

2024

JAM

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This research aims to examine the influence of Environmental, Social, and Governance Disclosure, Capital Structure, and Managerial Ownership on Financial Performance, with Good Corporate Governance as a moderating variable. The research focuses on Indonesian and American mining companies listed on the Indonesian Stock Exchange and the New York Stock Exchange. The number of samples in this research was 250 mining companies in Indonesia and 75 mining companies in America. The research employs purposive sampling method to select the sample. The results show that Environmental, Social, and Governance Disclosure negatively affects financial performance in both Indonesia and America, indicating that higher levels of Environmental, Social, and Governance Disclosure are associated with lower financial performance. Capital structure, as measured in Debt to Asset Ratio, has a negative influence on Financial Performance both in Indonesia and America, implying that greater reliance on debt is linked to poorer financial performance. Managerial Ownership exhibits a positive influence on financial performance in both Indonesia and America, suggesting that higher levels of managerial ownership are associated with better financial performance. In Indonesia, Good Corporate Governance as a moderation strengthens the influence of Environmental, Social, and Governance Disclosure on financial performance. However, in America, Good Corporate Governance does not have a similar strengthening influence. Good Corporate Governance as a moderation also strengthens the influence of Capital Structure on financial performance in Indonesia, but not in America. Good Corporate Governance as a moderation does not enhance the influence of Managerial Ownership on financial performance in both Indonesia and America.

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“…Besides that, the cost of business financing, as well as its accessibility and availability, is a crucial component that stimulates sustainable value creation (Kamau, 2021). In another study conducted by Nina et al (2020) capital structure has a negative and http://www.eafj.periodikos.com.br/ significant effect on the company's financial performance. The findings of this study were in line with the agency theory on increase in debt leading to increase in agency costs through the increase of interest rate of debt from creditors.…”

Section: Literature Reviewmentioning

confidence: 96%

Effects of Cost of Capital on Firm Performance in Kenya

Ochoki,

Oloo,

Mwabaka

et al. 2023

EAFJ

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This paper discusses the importance of the cost of capital and its impact on the performance of firms in Kenya. The cost of capital is affected by various factors such as interest rates, inflation, market conditions, and government policies. Financial managers use discounting cash flow techniques to evaluate capital investments, which requires the estimation of the project's cash flows and the discount rate. The article also explores the concept of capital structure and its significance in determining the cost of capital. Managers need to manage the capital structure effectively to optimize shareholder wealth and minimize the company's cost of capital. The article highlights the importance of balancing the mix of financing sources between debt and equity. High costs of capital can limit a firm's access to financing, while low costs of capital can improve a firm's investment and growth opportunities. This article concludes that the cost of capital is an essential factor that affects the performance of firms in Kenya. It impacts investment decisions, financial structure, and competitiveness in the market. Researchers suggest that managers should balance the use of debt and equity financing in an optimum manner to maximize shareholder wealth. However, the research suggests that high costs of capital can discourage firms from investing in new projects, reducing growth and profitability. Firms need to evaluate their cost of capital and consider strategies to lower it, such as improving creditworthiness or exploring alternative financing options.

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The Effect of Capital Structure on Company Financial Performance

Cited by 4 publications

References 20 publications

Explanation Study of Agro-Industrial Firm Financial Performance Based on Capital Structure and Firm Strategy in the Covid-19 Pandemic

Explanation Study of Agro-Industrial Firm Financial Performance Based on Capital Structure and Firm Strategy in the Covid-19 Pandemic

Environmental, Social, and Governance Disclosure as Pathway to Business Sustainability on the Mining Companies in Indonesia and America

Effects of Cost of Capital on Firm Performance in Kenya

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