Research paper on capital structure. Research on capital structure determinants: a review and future directions — Monash University 2022-11-08
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The capital structure of a company refers to the mix of debt and equity that it uses to finance its operations and growth. The optimal capital structure is a topic of much debate and research within the field of finance, as it can have a significant impact on the risk and return profile of a firm.
There are various factors that can influence a company's capital structure decision, including the level of risk associated with its business, the availability and cost of different sources of financing, and the tax implications of using debt or equity. The goal of many companies is to find the right balance between these factors in order to maximize shareholder value.
One of the main trade-offs that companies must consider when determining their capital structure is the trade-off between the tax benefits of using debt and the bankruptcy costs associated with excessive leverage. On the one hand, debt financing allows companies to take advantage of the tax deductible nature of interest payments, which can lower the overall cost of borrowing. On the other hand, if a company takes on too much debt, it may become overleveraged and be at a higher risk of bankruptcy if it is unable to make its debt payments.
There are several different approaches that researchers have taken to studying the optimal capital structure of firms. One approach is to use mathematical models to determine the point at which the benefits of debt financing are outweighed by the costs. These models typically consider factors such as the company's profitability, its ability to generate cash flow, and the level of risk associated with its operations.
Another approach is to study the capital structure decisions of real-world companies and attempt to identify patterns or trends that may be indicative of an optimal capital structure. This type of research can be valuable in helping to understand the factors that influence capital structure decisions and the impact that these decisions have on a firm's financial performance.
Overall, the research on capital structure is an important area of study within finance, as it can provide valuable insights into the factors that influence a company's financing decisions and the potential consequences of these decisions. By understanding the optimal capital structure for a company, researchers and practitioners can help firms make informed decisions that can ultimately lead to improved financial performance and increased shareholder value.
Research on capital structure determinants: a review and future directions — Monash University
June 30, 2010 -32. Findings: Major findings show an increase of interest in research on determinants of capital structure of the firms located in emerging markets. Firm size had a significant positive effect. This totally depends on the market conditions and also the economic condition of the company and the country in which the company do their business. Elsey Papers, Harry S.
Comparing the debt to total equity ratio of the company with that of industry averages, points towards an increasing trend for coca cola, pretty obvious from the figure of 75. Social psychology quarterly, 73 2 , 119- 131. In this case, debt will have a negative effect on the value of the firm. This corresponded with increasing deterioration in market share, with the majority of these losses being captured by other competitors. Capital structure is the process through which the finance of a nation or a company functions.
Optimal Capital Structure by Jules H. van Binsbergen, John R. Graham, Jie Yang :: SSRN
It was a threat to completely turn the Soviet Union into ruin by a barrage of nuclear strikes in two hours. The student is supposed to summarize the paper well and evaluate the relevance of the topic f capital structure and suggest his own solutions to the existing problems in the organization of capital structure. This study aims to evaluate published explanatory findings regarding the determinants of company value in the LQ45 and STI indices during the 2015-2018 period with Good Corporate Governance as a moderating variable. The review highlights the major determinants of capital structure and their relationship with leverage. Thus our paper contributes to the literature in four directions by: 1 using X- efficiency as opposed to standard financial indicators as a measure of firm performance to test the predictions of the agency cost hypothesis; 2 showing that X- efficiency as a proxy for inverse agency costs is an important determinant of capital structure choices; 3 demonstrating how competing hypotheses may dominate each other at different segments of the leverage distribution; and 4 providing new 1 As we explain in Section 3, the directional distance function gives the maximum proportional expansion of output s and contraction of inputs that is feasible for a given technology thereby yielding a measure of firm efficiency relative to best practice. He is surprised how the Greeks thought that their phalanx was superior to the Roman foot soldiers because the Roman foot soldier was equipped to act at any position, individually or in flanks. The capital structure decisions are very crucial for the banks of the United Arab Emirates.
The results showed that the return on assets, return on equity, debt-to-equity ratio, firm size and growth simultaneously and significantly influence stock returns. The results showed that Return on Equity ROE models had a significant positive effect on firm value in LQ45, the Debt Equity Ratio had a significant positive effect on firm value at LQ45. Fortune, 159 11 , 44-52. The industry that is in the business of producing non alcoholic drinks is characterised as a beverage industry, production varying greatly on the type of beverage being made. With the passage of time, the usual notion of business has changed a lot.
Capital Structure within Ford, Sample of Research papers
We summarize the contrasting effects of efficiency on capital structure in terms of two competing hypotheses: the efficiency-risk and franchise- value hypotheses. The purpose of this research is to investigate the most influential factor among investment decision, financing decision, and dividend policy toward firm value. It represents a proportionate relationship between debt and equity. It also synthesize the findings of empirical studies on determinants of capital structure statistically. Third, the study uses a factor-analytic technique that mitigates the measurement problems encountered when working with proxy variables. Are the effects of efficiency and the other determinants of corporate financing decisions similar across different capital structures? Hence, it is advisable to add external factor variables, using sample companies within other industries. This shows the presence of pecking order theory in determining the capital structure of the firm.
Capital Structure, Equity Ownership and Firm Performance Research Paper 2022
However, defining the term through the technical lens of financial management explains the concept as a proportionate relationship between debt and equity. We find that in the optimum, the bank chooses a debt structure so as to align internal incentives with external constraints. The interest of researchers in observing State Owned Enterprises on interest ownership interest in investors and potential investors compared to private companies that fluctuate in accordance with state economic conditions and government decisions that provide sentiment for stocks. In this research paper the secondary research methods are being adopted for the development of the research. Agency costs can also exist from conflicts between debt and equity investors.
Capital Structure for Firm's Profitability Research Paper 2022
In this paper we use a directional distance function approach on a sample of French firms from three different manufacturing industries to address the following questions: 4 Does higher leverage lead to better firm performance? Data analysis techniques in this study used Partial Least Square consists of Inner model, Outers model, and Weight relation. There would be successive announcements at different stages to make sure the message is heard far and wide. Furthermore, empirical outcomes reveal that top management experience, and profitability are significantly and negatively related to the leverage of Pakistani firms. Ford Debt to Equity. These bombs were dropped on Hiroshima and Nagasaki, killing 120,000 people and injuring 130,000 others. In the diversified companies with high complexity, manager's motivation to use various earnings management techniques is increase.
Capital Structure and Assets: Effects of an Implicit Collateral (2008)
Do firms with dispersed ownership carry more debt in their capital structure? The structure of reciprocity. Applying the quantitative method with models of Pool OLS, FEM, REM and FGLS , the research results have proven that capital structure has a negative impact on profitability represented by ROA of firms. Simply putting the idea, capital structure can be defined as a term that requires the management to search for the alternative sources of funds in an attempt to finance the various business operations and growth phenomenon. Simultaneously profitability ROA , liquidity CR , assets growth and firm size effect on capital structure DER. Drawing the Line: The Korean War, 1950-1953. Dulles soon became an accomplished diplomat by forming prominent alliances such as the North Atlantic Treaty Organization NATO , the Southeast Asia Treaty Organization SATO and an anti-Communist defensive Alliance. There are two main sources of capital around which the companies structure their capital financing, being debt and equity.
(PDF) The Effect of Capital Structure on Company Financial Performance
Even though this model was for a small village, it was followed for a very long time even after Ancus Marcius was long gone the tradition was followed. He was an essential figure in the world during the Cold War era. However, it is observed that these regions are still under-examined which provides more scope for research both empirical and survey-based studies. Summing it up, MM approach, applicable under certain assumptions, indicate that the value of a leveraged and unleveraged firm are same if the operating profits and future growth prospects of the companies are same. But things took a bad turn for the allies as the Russians had developed and tested their nuclear weapons during that time through espionage, according to Schwartz, Michael I. So, the problem of capital structure is quite unpredictable and requires responsibility and professional management, only then finance will work for the company and bring profit to its owners. The wars extended into totally four major events with empires that were Macedonian Empire, Seleucid Empire, and the Achaean League.
