The Impact of the Debt Ratio, Total Assets, and Earning Growth Rate on WACC: Evidence from Nepalese Commercial Banks

Budhathoki, Prem Bahadur; Rai, Chandra Kumar

doi:10.9734/ajeba/2020/v15i230210

Cited by 4 publications

(4 citation statements)

References 12 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Companies that maximize debt share can decrease the WACC level due to the tax shield effect [117]. The tax shield affects the choice of financing sources [47], and this approach is adopted in WACC valuation methods [118].…”

Section: Discussionmentioning

confidence: 99%

Energy Sector Risk and Cost of Capital Assessment—Companies and Investors Perspective

2021

View full text Add to dashboard Cite

This paper aims to identify the costs of capital in a group of companies from the energy sector by including an investor and market risk approach. The study also concerns the company’s Weighted Average Cost of Capital (WACC) cost intra-industry analysis related to sector characteristics such as total assets, revenues, market capitalization, and companies’ age. In order to assess the intergroup relationships, basic correlation relationships were compared and a nonparametric test of variance was performed. The period under study covered the years 2015–2019. The conducted research evaluates groups of companies that dedicated their activity to a particular energy intra-industry division under numerous regulations in Europe. The study contributes to assessing the level of risk among energy listed companies in European capital markets based on capital structure valuation. The study results underline the role of the cost of equity financing, which was twice as high as the cost of debt. The highest WACC was related to the Beta indicator that also expressed the political and regulatory risk over the investigated period. Across debt cost analysis, the role of effective tax rate decreased the level of WACC. The highest level of WACC was noticed among uranium and integrated oil and gas companies. The study contributes to information asymmetry theory related to the cost of capital assumptions.

show abstract

Section: Discussionmentioning

confidence: 99%

Energy Sector Risk and Cost of Capital Assessment—Companies and Investors Perspective

2021

View full text Add to dashboard Cite

show abstract

“…The outcomes of the study were supported by the fact that a larger volume of investment in modern technology enhances the delivery of better service quality, alleviates the operating cost, and able to compete more effectively by lowering the interest rate. The banks also benefited from economies of scale and economies of scope (Budhathoki & Rai, 2020). The regression coefficient of geographic expansion (c'3 = -.326, p. < .01) indicated that a higher number of bank branches resulted in lower ROA to the banks.…”

Section: 980mentioning

confidence: 99%

The Mediating Role of NIM on Market Structure and Bank Performance: Empirical Confirmation from Listed Nepalese CBs

Budhathoki

Rai²

2020

IJFBS

Self Cite

View full text Add to dashboard Cite

This study examined the mediating role of net interest margin (NIM) on the nexus between market structure and banks’ performance. Two ordinary least-squares models with a path analysis model were applied to analyze the data. The first regression model measured the indirect effects of market structure, total assets, geographic expansion, and specialization on ROA through NIM and revealed that the higher market share of loans positively effects on bank’s performance and statistically insignificant. Similarly, the geographic expansion was observed to hurt the bank’s ROA, but statistically insignificant. On the other hand, the indirect effect of total asset size and specialization was negative, but the first one was statistically significant, and the second was statistically insignificant. The result of the second regression model measured the direct effect of antecedent variables on the ROA and revealed that the market structure, geographic expansion, and specialization were negatively related to performance measure ROA. However, the direct effect of total assets size was positively related to ROA and statistically significant. The results of the two regression models based on total effects revealed that a higher bank size appeared favorable to Nepalese CBs and was found to have positive effects on ROA but the geographic expansion was a negative effect on ROA, and statistically significant. The results of the study might be helpful to Nepalese bankers, regularity authorities, and other concerned stakeholders to take an effective decision about the direct, indirect, and total effects of chosen antecedent variables on consequent variables through the mediating role of NIM.

show abstract

“…NPV method has the most extensive and difficult application scope among the various enterprise valuation methods currently used, and has the highest requirements for financial and business sensitivity [8]. Marchioni and Magni [9] also proposed that the reliability of a valuation model depends on its compatibility with NPV.…”

Section: Introduction Of the Traditional Npvmentioning

confidence: 99%

A Systematic Literature Review on the Traditional NPV Model and Its Improved Versions

Li¹,

Li²,

Xu³

et al. 2022

Proceedings of the 2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022)

View full text Add to dashboard Cite

Based on the analyses of the usage scenarios and limitations of the traditional NPV model, this paper aims to introduce and compare three kinds of the most practical and representative versions of the improved NPV models. In this study, the traditional NPV model is first introduced; followed by analyses of its main defects, such as low flexibility, inability to quantify the value of options, and changes in discount rates that may lead to errors in results. Therefore, three improved NPV models are introduced including Max-NPV, Fuzzy NPV and DNPV. The development background, reasoning logic and application scenarios of each of the three modified models were demonstrated in detail. In the end, some feasible suggestions are given including how to select appropriate modified NPV in reality as well as the matters needed to pay attention to application. This paper could provide useful reference for the NPV related study in the future.

show abstract

The Impact of the Debt Ratio, Total Assets, and Earning Growth Rate on WACC: Evidence from Nepalese Commercial Banks

Cited by 4 publications

References 12 publications

Energy Sector Risk and Cost of Capital Assessment—Companies and Investors Perspective

Energy Sector Risk and Cost of Capital Assessment—Companies and Investors Perspective

The Mediating Role of NIM on Market Structure and Bank Performance: Empirical Confirmation from Listed Nepalese CBs

A Systematic Literature Review on the Traditional NPV Model and Its Improved Versions

Contact Info

Product

Resources

About