No full-text available
To read the full-text of this research,
you can request a copy directly from the authors.
Corporate Income Taxes and The Cost of Capital: A Correction
... Finally, we use the general discount rate, denoted as TS , which is suitable for tax savings, rather than specific discount rates, such as the cost of debt or the unleveraged cost of equity capital. We apply this approach to two financing strategy scenarios: the model of Modigliani and Miller (1963) (hereafter MM), and the model of Miles and Ezzell (1980) (hereafter ME). 6 Our use of the general discount rate is appropriate for the third contribution of this study, a scenario of time-varying debt. ...
... First, prior theories consistently recognize the importance of various elements in business valuation, including debt levels (e.g., Modigliani and Miller 1963;Miles and Ezzell 1980), default risk and bankruptcy costs (BC) 2 (e.g., Kraus and Litzenberger 1973;Scott 1976), and personal income taxes (PIT) (e.g., Miller 1977). However, valuation textbooks often overlook or deem these factors insignificant for simplicity's sake, or they do not consistently and prominently incorporate them into the income-based approach. ...
... The first two methods directly estimate equity value, whereas the others calculate the firm value directly. Modigliani and Miller (1963) CIT, PIT VTS -- Ezzell (1980, 1985) f D ≠ 0 TS = Eu CIT VTS Taggart (1991) D(g D = 0) ...
This study introduces a new version of the adjusted present value (APV) method and ensures its consistent valuation with the cost of capital (CoC) method at the highest level of generalization. The newly developed APV version and equivalent formulae consider stochastic debt and the trade-off between corporate income taxes (CIT) and personal income taxes (PIT), as well as tax benefits and financial distress costs. The value of expected bankruptcy costs aligns with the valuation aspect, enabling practical application of the formulae by valuers. The equivalence also reflects the differing perspectives of tax shields between stockholders and debt holders when PITs are introduced. Ultimately, the results demonstrate that the equivalence in this study aligns with, and can reduce to, previous standard formulae, under their stringent assumptions.
... Regardless of the traditional theories (Durand, 1952) and MM I and II theories (Franco and Miller, 1963;Modigliani and Miller, 1958) of capital structure and its effect on firms' value, there is still no optimal capital structure that maximizes firms' value. MM II (Franco and Miller, 1963) gives room for research when it states that the results depend on the specific environment of the study. ...
... Regardless of the traditional theories (Durand, 1952) and MM I and II theories (Franco and Miller, 1963;Modigliani and Miller, 1958) of capital structure and its effect on firms' value, there is still no optimal capital structure that maximizes firms' value. MM II (Franco and Miller, 1963) gives room for research when it states that the results depend on the specific environment of the study. From that point, how leverage can affect performance is researched by many authors from developed, emerging and developing economies, in a nutshell, using different methodologies, different time periods included in the research and different variables tested as proxies for the independent and dependent variables. ...
... However, Detthamrong et al. (2017), when studying the impact of capital structure decisions on firms' performance in Thailand, found that debt ratios positively influence the firms' performance. The finding was in line with that of Franco and Miller (1963). ...
Purpose
The study aims to evaluate the influence of capital structure decisions and asset structure on firms' performance for East African listed nonfinancial firms.
Design/methodology/approach
The research is descriptive and employs secondary data from the East African capital markets' websites. The generalized method of moments approach is used to estimate the relationship due to its ability to account for endogeneity problems.
Findings
The result shows that capital structure decisions and asset structure strongly influence the firms' performance. When long-term debts, short-term debts and tangible fixed assets increase, the return on total assets increases. An increase in the total debt ratio raises the return on equity (ROE). However, the increase in long-term debt lowers the ROE.
Practical implications
The results will help investors and potential investors decide on a financing policy that maximizes performance. Likewise, governments and other policymakers review the capital markets' frameworks to attract institutional and individual investors to the markets for financial availability and to increase profitability.
Originality/value
The research provides evidence on the influence of capital structure decisions and asset structure on firms' performance. Furthermore, its results contribute to firms' financing policy formulation and the corporate finance literature.
... Modigiliani and Miller [13] put out an altered version of their Modigliani and Miller [13] thesis as the trade-off hypothesis. The ideal quantity of debt is reached, depending to the researchers, at the level wherein the marginal advantage of debt financing is equivalent to the marginal expense of debt financing [14]. ...
... Modigiliani and Miller [13] put out an altered version of their Modigliani and Miller [13] thesis as the trade-off hypothesis. The ideal quantity of debt is reached, depending to the researchers, at the level wherein the marginal advantage of debt financing is equivalent to the marginal expense of debt financing [14]. ...
... They contended that the capital structure of an organization may be maximized by using a great deal of debt as capital in order to benefit from the tax break constrained by the interest charges related to debt. According to Myers [15], there is a trade-off among the capital structure of a company and the implications of taxes, costs related to financing, as well as agency expenses, which is in line with Modigiliani and Miller [13] claim. According to Myers [15] and Wen-Chien [16], firms aim for levels of debt that strike a balance between the tax benefits of greater debt and the risks of potential financial distress. ...
Despite the availability issue, debt financing continues to be an essential form of funding for businesses. Risks have been a major source of uneasiness for owners, executives, experts, as well as shareholders globally. The Kenyan enterprises have a greater susceptible to variations in currency rates in the nation’s economic climate, which is growing to become increasingly open with an increase in global trade. The study objective is to investigate the effect of risk on total debt of companies listed on Nairobi Securities Exchange. The study was underpinned by tradeoff theory and pecking order theory. The study utilized causal research design. Secondary data was used to collect data from yearly accounting statement from 2007-2011. Panel regression was used to analyze the fixed effect model. The result showed that risk negatively and substantially affects total debt. The study recommended that the management of listed firms should understand the tradeoff theory and pecking order theory. The study also recommended that risk should continually be monitored by companies to be in line with the prevailing economic conditions. This can be ensured by studying other factors trend that can affect the risk of companies.
... Theoretical frameworks in corporate finance have long guided our understanding of capital structure decisions. The works of Modigliani and Miller (1958), the Trade-Off Theory (Modigliani and Miller 1963), and the Pecking Order Theory (Myers and Majluf 1984) have provided valuable insights into how companies navigate the delicate balance between debt and equity. However, the COVID-19 pandemic has presented a unique and multifaceted challenge to these established theories, prompting the need for a global examination of its impact. ...
... The capital structure of companies has been substantially influenced by the COVID-19 pandemic, and its ramifications can be comprehended by examining various financial theories, such as Modigliani and Miller's Propositions, the Trade-Off Theory, and the Pecking Order Theory. Modigliani and Miller (1963) analyzed the role of indebtedness in a company's capital structure, particularly in terms of its tax advantages. They argued that interest payments on debt are deductible from income taxes, making debt financing attractive from a tax perspective. ...
... The Trade-Off Theory extends the understanding of capital structure by considering a broader set of factors, including taxes, bankruptcy costs, and agency problems (Modigliani and Miller 1963). It suggests that an optimal capital structure exists that balances the benefits of debt (such as tax savings) with the costs of financial distress. ...
Understanding a company’s capital structure is essential for optimizing financial resources amid the challenges posed by the COVID-19 pandemic. This research examines how the pandemic affected the capital structures of global consumer goods companies across industries, market types, and regions. In this study, a fixed effects model was employed to analyze panel-data regression data spanning from 2018 to 2022, encompassing 1491 companies across 80 countries. The results revealed a significant and positive impact of COVID-19 on capital structure in the initial two years, contrasting with a negative trend in the third year, notably in the short-term debt to total assets ratio. The pandemic’s influence on the capital structure varied across sectors, markets, and regions, starting with a consistent positive impact before shifting to a negative and significant effect. The study provides valuable insights for businesses, policymakers, and researchers grappling with the financial implications of external shocks like the pandemic. It underscores the importance of prudent financial decision-making, leveraging the opportunities stemming from a conservative debt approach, and the growing reliance on short-term debt while staying adaptable in response to evolving market dynamics and economic changes.
... Subsequently, factors present in the real economy were added to the model, such as taxes, whose impact was examined by Modigliani and Miller (1963), along with agency costs and costs of default, financial distress and information asymmetry, with varied findings by researchers around the world (e.g., Ross, 1977;Leland & Pyle, 1977;Myers, 1984;Myers & Majluf, 1984). These studies led to the proposal of some theories to support firms' capital structure decisions, chief among them the tradeoff and pecking order theories. ...
... When including taxation of firms in the analyses, Modigliani and Miller (1958;1963) noted that leverage considerably reduces the tax liability because of the deduction of interest expenses from taxable income. In other words, when firms choose debt financing, they have a smaller tax obligation, which tends to increase their value. ...
... It is likely that none of the startups in our sample were able to obtain tax benefits from use of debt. In a context of low profits, high risk and no tax benefits of debt, leverage is not justified (Modigliani & Miller, 1963). This result agrees with the tradeoff theory. ...
Purpose: Startups have significant differences compared to other companies. They have many intangible assets (e.g., team tenure and experience of founders), are risky, and tend not to generate profits in their initial years (Heirman & Clarysse, 2007; Weber & Zulehner, 2009). Does the startups’ financing choice also differ from that of traditional companies? We analyzed the capital structure of startups in their first years of life based on the classic tradeoff and pecking order theories. Methodology/approach: We collected data on 40 startups in the city of Ribeirão Preto, São Paulo, Brazil, through a questionnaire on the profiles of the founders, company characteristics, bottom-line performance and financing sources. The data collected covered the year of founding and the three subsequent years. Findings: The results indicated that these startups mainly financed themselves through the founders’ capital in all four years covered. Only in the third year did they start using resources generated internally, indicating pecking order adherence. However, the presence of angel investors and government subsidies contrasted with the absence of bank debt. In line with the tradeoff theory, bank debt was not a viable financing option in the early years of these firms since they had low profitability and high risk. Theoretical/methodological contributions: We offer a theoretical contribution by analyzing the adequacy of traditional financial theories in the specific context of startups. Originality: The finance literature about startups is scarce, and few studies have analyzed these companies from the capital structure theoretical perspective. Social contributions / for management: We provide a panorama of the financing of startups to support their financial planning regarding fundraising.
... However, in 1963, Modigliani and Miller revised the irrelevance theory, stating that since interest expenses are tax deductible firms with higher debt ratios have a higher value. Due to the imperfect nature of real economies, numerous finance decision theories have been developed over time to demonstrate the importance of capital mix (Modigliani and Miller 1963). According to capital structure theory, an optimal mix of capital should increase market value per share by ensuring a low average cost of capital (Modigliani and Miller 1963). ...
... Due to the imperfect nature of real economies, numerous finance decision theories have been developed over time to demonstrate the importance of capital mix (Modigliani and Miller 1963). According to capital structure theory, an optimal mix of capital should increase market value per share by ensuring a low average cost of capital (Modigliani and Miller 1963). Akintoye (2008) argues that firm performance is affected by business risk, taxes, managerial behaviour, and financial flexibility. ...
This research aims to investigate the impact of leverage on the performance of small and large publicly listed firms in New Zealand. Further, it explored the moderating effect of agency costs on the association between leverage and firm performance. The research sample includes quarterly data from New Zealand firms from 2010 to 2021. To test the hypotheses, univariate and multivariate methods were used, such as correlation and panel data regression. The empirical results show that leverage has a significant positive impact on the performance of small firms, but a negative impact on their market value. In large firms, the opposite trend occurs, with firms having a higher market value when they have a higher level of debt in their capital structure. Additionally, the findings show that agency costs have a considerable impact on the relationship between leverage and firm performance. Regardless of the size of the firm, the market value and performance of firms improve when agency cost is introduced as a moderating variable. This study supports the theory that agency costs contribute to enhancing firms' market value by allowing managers to allocate their discretionary spending to more profitable, value-enhancing projects, leading to fewer agency conflicts. The insights can be instrumental in improving the overall performance of firms by achieving an optimal debt structure and utilising debt effectively.
... In the second paper, taxes are included in the rationale of Modigliani and Miller (1963). They claim that increasing leverage increases the risk of the firm and thus the cost of equity. ...
... The debate about the Modigliani-Miller theorem led to the first form of the trade-off theory. When Modigliani and Miller (1963) added a corporate tax to their original, unrelated plan, it helped protect tax revenues and gave debt an advantage. Since the company's objective function is linear and borrowing costs are not compensated, this means that it has 100% leverage. ...
... In the theory related to capital structure, both the proposition developed by Modigliani & Miller (1963) and the trade-off theory by Kraus & Litzenberger (1973), tax is one of the management considerations in deciding the source of company funding. Funding with debt sources has an advantage in terms of the amount of corporate income tax that the company can save due to interest expense which can reduce taxable income. ...
Main Purpose - This study looks into whether transfer pricing, corporate social responsibility, and leverage are factors that motivate companies to undertake tax avoidance of non-financial companies on the Indonesia Stock Exchange (IDX).Method - The sample consisted of 86 companies that were randomly selected by simple random sampling from 2017 to 2019. A total of 603 data observations consisting of the annual reports of 52 domestic companies and 34 multinational companies were analyzed by use of multiple linear regression with IBM SPSS 21 software.Main Findings – This study implies that the majority of companies consider the practice of tax avoidance to be unethical, the results show that the tier of tax-avoidance practices in companies that are listed on the IDX is very low. On the other hand, transfer pricing, corporate social responsibility, and leverage do not affect tax avoidance since those are not factors that cause companies to avoid taxes.Theory and Practical Implications - Most companies in Indonesia view tax avoidance as unethical even though it is legal. These findings are expected to contribute to regulators in setting tax-avoidance arrangements in Indonesia.Novelty - Compared to other studies, this study examines tax avoidance practices from an ethical perspective.
... Instead, they argued that the firm value is determined solely by its basic earning power. Later, however, they proposed, by taking the effect of tax advantage on debt, that the firm value can be increased by incorporating more debt into the capital structure and thus the optimal capital structure of a firm should be made up of a hundred percent of debt (Modigliani and Miller 1963). Later, however, they proposed, by taking the effect of tax advantage according to Brigham and Houston (2004), the optimal capital structure of a firm, from which the firm value will increase and the cost of capital will decrease, is determined by the trade-off of the benefits of using debt, known as tax savings and the costs of debt such as agency costs. ...
This study investigates how Managerial decisions influence the capital structure on theperformance of some selected private commercial banks working in Bangladesh as samples forthe period of 2017 to 2022, employing panel data, structured from available secondary sources.This study used the debt-equity ratio, debt-asset ratio, asset growth, and firm size to measurecapital structure. Also used three indicators of profitability such as return on asset, return onequity, and earnings per share. Applying multiple regression analysis find that TDTEnegatively influences both ROA and ROE, LTDTE negatively influences the ROE, Total debtto total asset positively affect the ROE, the Size of the banks negatively affect the ROA andEPS and finally asset growth of the banks positively affect ROA, ROE, and EPS. Also usedmultiple regression analysis considering the profitability factor (ROA/ROE/EPS) as thedependent variable and capital structure as the independent variable. The models are also foundsatisfactory with sufficient explanatory power. The results of the study confirm that TDTEnegatively influences both ROA and ROE which indicates that the higher the TDTE, the lowerthe ROA and ROE and vice versa. LTDTE is found negatively influence the ROE whichindicated that higher LTDTE reduces the ROE and vice versa. Size is found negativelyaffecting the ROA and EPS. Finally, it is found in all regression results that the asset growthof the banks positively affects ROA, ROE, and EPS which indicates that the positive growthin the assets will increase the profitability of the banks. The banks can also be recommendedto keep the banks' size as small as possible with expected positive growth in assets.
Keywords: Managerial Decision Making, Capital Structure, Profitability, Private CommercialBank, Bangladesh.
... The "Irrelevance Theory" by Modigliani and Miller (1958), A revolutionary concept in capital structure doctrines claimed that, in the case of an ideal capital market, the worth of a company was more closely tied to its profitability than to its capital structure. The irrelevance theory was then refined by Modigliani and Miller (1963), who claimed that debt financing is gainful because it gives the company a tax benefit. Hence a firm can eliminate tax payment by using entire debts in its capital structure. ...
Current paper investigated the effects of country governance indicators and firm level variables on the capital structure of non-financial listed firms registered with Pakistan Stock Exchange (PSX) for the interval of 2002-18. The collected panel data was analyzed by employing panel data analysis techniques e.g., pooled OLS, fixed effect and random effect (FR/RE) model and 2-step system GMM. The purpose of employing these techniques was to capture the un-observed heterogeneity and endogeneity in the model. FE model with robust standard error was applied to control the heteroskedasticity in the model. The suitability of pooled OLS and RE model was decided on the basis of P-value of “Breusch and Pagan Lagrangian Multiplier Test” (BPLM). The results revealed that corruption perception, country governance variables and firm level variables have a considerable impact on capital structure of non-financial registered firms. Equally theory and practice can benefit from the study's findings. The study aims to theoretically incorporate new independent variables into the capital structure literature in the context of Pakistan, including political patronage, democratic regime, rule of law, abuse of power, quality of regulation, stability of politics, voice and accountability, and government effectiveness. On the practical side, the findings provide guidelines for the firms to be careful about these determinants that may be helpful in minimizing the default risk associated while lending funds. Future research may be conducted by replicating in other sectors to validate the results.
... From a capital structure perspective, the trade-off theory emerged as a result of the analysis performed by adding the costs of financial distress to the model in the Modigliani and Miller (1963) study. According to the trade-off theory, each company has a target debt-to-equity ratio that it wants to achieve and that varies from company to company. ...
Purpose
There has been an increase in research examining whether and how companies disclose climate change impacts and how these disclosures influence capital structure strategies in recent years. However, prior literature has generally focused on developed countries. This paper proposes to examine the impact of voluntary climate change disclosures on corporate financing decisions in an emerging economy.
Design/methodology/approach
The dataset includes 335 firm-year observations listed in the Borsa Istanbul (BIST) 100 manufacturing industry firms that participated in the Carbon Disclosure Project (CDP) questionnaire from 2016 to 2020, characterized by high public awareness of greenhouse gas emissions in Turkey. To accomplish this aim, two models have been constructed that link capital structure strategies with voluntary corporate climate change disclosures while controlling for firm-level attributes in terms of size, profitability, market value and free float ratio (FFR).
Findings
The significant and negative relationship between the voluntary disclosure of climate-related activities and long-term borrowing is consistent with the arguments that companies with high commitments are unlikely to reduce default risk in emerging markets. This paper also provides empirical evidence that the high size and the level of low profitability magnify this relationship between CDP and financial leverage.
Originality/value
The Paris Agreement seems to be a significant point where corporate lenders have become aware of the commitment of policymakers to fight climate change. The results have significant implications for both managerial strategies and environmental regulatory policy-making issues. In addition, the findings shed light on the strategic behavior of managers in the consideration of climate change risks and related transparency.
... The origin of Capital Structure Theory can be traced back to the seminal work presented by Modigliani and Miller (1958) in which a firm's cost of capital does not affect firm value under the restrictive assumptions of no taxes, transaction costs, or bankruptcy. However, in 1963, Modigliani and Miller presented new evidence indicating that borrowing could contribute to tax advantage which would result in a tax shield, hence reducing the cost of borrowing while increasing firm value or performance (Modigliani and Miller, 1963). ...
The purpose of this study is to investigate the relationship between capital structure and firm performance by exploring the moderating effect of one of the corporate governance mechanisms, namely board independence. Panel data regression was employed based on a sample of 492 non-financial listed companies in Malaysia from 2010 to 2019. The results showed that capital structure has a significant positive impact on firm performance. Meanwhile, board independence significantly and negatively moderates the relationship between capital structure and firm performance. The findings of this study shall provide better insights for investors, firm managers, and policymakers on the critical role of corporate governance mechanisms in enhancing firm performance, particularly in implementing suitable actions and policies.
... Modigliani va Miller fikriga ko'ra, firmaning qiymati firma tomonidan jalb qilingan qarz majburiyatlari qiymatiga bevosita bog'liq. Ularning fikricha, soliq qalqonidan ko'riladigan daromad jalb qilingan qarz majburiyatlari bilan bevosita bog'liq [2] . Modigliani va Miller nazariyasi Mayers va Majluf nazariyalari bilan kengaytirildi. ...
Ushbu maqolada yog‘-moy sanoatida band bo‘lgan korxonalarning xususiy kapitali rentabelligini oshirishimkoniyatlari o‘rganiladi. Yog‘-moy sanoati korxonalari butun dunyoda oziq-ovqat zanjirining katta qismini tashkil etadi vabuning natijasida bu kabi korxonalar investitsiyalar uchun ajoyib imkoniyatlar yaratadi. Maqolada investorlar e’tiborini jalbqilish uchun korxona qarz hamda xususiy kapitalni qanday usullarda shakllantirish kerakligi hamda rentabellikni qaysiomillar evaziga oshirish mumkinligi o‘rganilib o‘tilgan.
... The first foremost base theory has been given by (Modigliani & Millar, 1958), under which it is purposed that capital structure decisions are irrelevant to a firm's value and the overall cost is not affected by any change made in capital structure by taking into account some assumptions like the existence of a perfect capital market, no transaction cost and taxes, firms being indifferent on debt and equity choice decision. Later on, when tax advantage is considered, (Modigliani & Miller, 1963) documented that capital structure decisions are relevant to a firm's value and consequently the firms by using tax advantage on more and more debt capital can maximize its market value. (Jensen & Meckling, 1976) postulated agency theory which states that the cost occurs as a result of the conflicting interest among various parties like managers, shareholders and debt holders. ...
The primary goal of the study is to examine the factors affecting the financial leverage of unicorn start-ups in India. In order to achieve this goal, the study has employed the panel data techniques on the financial data of 25 start-ups unicorn of India from 2017 to 2021. The study has employed three proxies to measure the financial leverage namely short-run, long-run, and total debt ratio. The result of the study indicates that firm size and profitability are significantly negatively correlated with debt ratios, whilst tangibility, business risk, and firm age are positively and significantly associated. Moreover, short-term debt is found to be more prevalent in unicorn firms when we bifurcate total debt into short and long-term debt. As per the best of author’s knowledge, this is the first research that identified the financial choice of startups. Furthermore, this study provides a pathway for conducting future study in this domain on startup firms’ capital structure decisions. This study has major implications for unicorn managements in taking decisions regarding their finance choice that may lead them to plan adequately their capital structure more efficiently and effectively.
... 57-71. 30 on average, the debt share falls by 4.7% and the investment raises by 6.3% due to the reduction in the cost of capital by 0.5%. Princen (2012 33 ) finds a positive impact with her estimated results. ...
Objective:
This article assesses the impact of the allowance of corporate equity (ACE) in Poland on the tax-induced debt bias. The tax-induced debt bias is based on the fact that the fiscal system “subsidises” debt, as its cost, the interest, is tax-deductible. As a consequence, debt is more interesting than equity. ACE tends to balance out this kind of case. Compared to Italy and Belgium where the ACE is in force for a longer period of time, Poland has introduced it in 2019 and has also limited its amount to PLN 250,000 in a tax year. The impact of the reform on the level of equity and debt for firms will be appreciated.
Methods:
To evaluate the impact of the ACE in Poland, Polish firms’ data from the BACH database over six years, from 2015 to 2021, is subject to analysis. Three criteria are analysed: the impact on equity as a percentage of total balance sheet assets (1), the impact on the Net debt (2) and the impact on the financial debt (3).
Results:
With regard to the level of equity, the reform in Poland does not reach the expected result, as the ratio has decreased for almost all firms. In any case, Poland has still the higher level of equity compared to Belgium/Italy.
With regard to debt, for both net debt and financial debt, a decrease is observed for all countries and in that case also, Poland has the “best picture” with a lower level. As a result of the reform, Polish firms have not increased their equity nor their debt. It seems that the reform does not have a real effect on Polish firms.
Conclusions:
The ACE in Poland with a limited threshold of PLN 250,000 appears to be too small to be indeed a game changer in the firms’ behaviour. Even if Poland’s level of Equity and level of debt is still lower compared to those in Belgium or in Italy, a higher level of the threshold or a less restrictive one must be implemented if the equity needs to be enhanced.
... The theoretical framework takes into account the imperfections of financial markets and shows that the capital structure of firms emerges from both macroeconomic environmental factors and firm-specific factors. Modigliani and Miller (1963) add the tax rate effect to their theory, which encouraged firms to include more of using more debt in the capital structure in order to maximize firm value. Miller (1977 ) advanced the theory of capital structure by adding three types of tax rates which are the corporate tax rate, the tax rate to be applied on dividends, and the tax rate to be imposed on interest income. ...
Financing decisions of firms have been a topic interest for financial economists for a long time. In this study, we aim to contribute to this area by examining the impact of macroeconomic determinants on capital structure in emerging markets. Utilizing the panel quantile regression method (QREG) and analyzing data from listed Tunisian firms between 2011 and 2021, this paper investigates the relationship between macroeconomic determinants and capital structure across different quantiles. The research findings suggest that both firm size and growth options are positively correlated with leverage. Additionally, this paper finds that return on assets has a negative and significant effect at 1% in the first to third quantiles on leverage. The results of this paper have important implications since they can interest firm executives, policymakers, and investors operating in emerging markets.
... Modigliani Miller's model (Modigliani and Miller, 1958), that later also included taxes (Modigliani and Miller, 1963), was an important element in the development of research on the structure of capital. The authors showed that the cost of capital did not depend on the capital structure, assuming functioning in a perfect capital market. ...
... Even though, their work is marked as the beginning of modern capital structure research. Later Modigliani and Miller (1963) adjusted their 1958 theory by considering the benefit of tax shield by decreasing net income before tax through deducting interest expense. This resulted from the tax code that allows corporations to deduct interest payments as an expense, but dividend payments to stockholders are not deductible. ...
... Using tax-deductible expenses incurring interest reduces tax liabilities, enhancing a company's cash inflows (Miller and Modigliani, 1963). These two economists revealed that there is now a positive relationship between firm value and financial leverage, suggesting that companies can enhance their worth by increasing their levels of indebtedness. ...
This study aimed to examine the impact of capital structure on bank performance using data from nine listed banks on the Ghana Stock Exchange. The study utilised secondary panel data extracted from the published financial statements of these banks. Bank performance was measured using return on assets and return on equity as proxies, while the ratio of total debt to total assets served as the independent variable. Additionally, firms' age, size, and liquidity were control variables. The random effect technique was used for analysis, employing Ordinary Least Squares (OLS) and Autoregressive methods. The results indicated a positive and significant relationship between total debt to total assets, return on assets and equity. Furthermore, firms' age positively and significantly impacted the return on assets and return on equity in both models. Interestingly, the study found a negative effect of firms' liquidity on return on assets in model one, while the size of the firms had no impact on bank performance. Policymakers can encourage financial institutions to provide accessible and affordable lending options to businesses, enabling them to leverage debt effectively. This can be particularly beneficial for small and medium-sized enterprises (SMEs) that often face challenges accessing capital.
... According to the literatures, the most reliable indicators for describing corporate leverage are the following: pro tability, size of rm, tangibility, median industry leverage, expected in ation rate, and market-to-book ratio. These are the "core leverage factors" that determine capital structure decisions, according to ( Frank & Goyal, 2009) To clarify, according to the capital structure theory, the value of a rm increases if the capital structure includes a high amount of debt due to the tax bene ts afforded by the debt (Modigliani & Miller, 1958, 1963. The authors believe that if the neutrality theory is contested, two competing theories must be considered while choosing external nancing: the pecking order theory and the trade-off theory. ...
Purpose –
The purpose of this research is to investigate the moderating role of corporate governance on the relationship between earnings management and debt level in capital structure.
Design/methodology/approach –
This paper used a hypothesis-testing research approach to gather data from the annual reports of 13 industrial companies listed on Palestine Exchange and 25 Jordanian corporations listed on Amman Stock Exchange from 2013 to 2020. Descriptive and inferential statistics were employed, along with correlation analysis to evaluate linear relationships between variables. The fixed and random effect regressions were utilized to develop the research model.
Findings –
In the case of Palestinian manufacturing firms, the results revealed that Earnings Management (EM) had a significant negative impact on debt level. According to the moderating role of Corporate Governance (CG), larger boards and the existence of female members on the board of directors causes an increase in the high-leverage impact of EM, whereas CEO duality mitigates the high-leverage impact. However, in the case of Jordanian manufacturing firms, EM showed an insignificant impact on debt level. Regarding the moderating role of CG, it was proved that the presence of female members on the board of directors increased the firm’s reliance on debt financing as a result of EM practices, while institutional investors mitigate the effect of EM on debt financing, leading to a decrease in reliance on debt.
Research limitations/implications –
A few CG variables that may have a direct impact on financing decisions, such as management expertise, CEO compensation, CEO tenure and ownership concentration, are not included in this study. The absence of a unanimous CG index to measure the compliance of CG practices, as well as the existence of the reciprocal effect of capital structure on CG, is also a limiting factor. Additionally, due to the small sample size and time period, the findings cannot be generalized to other samples outside of the manufacturing sector or other time frames.
Originality/value –
The findings of this research are suitable for the regulators while formulating policies on the Corporate Governance and the Impact of Earnings Management on Capital Structure. These findings have guided the policymakers that they should enhance their focus on Palestine and Jordan companies to test Corporate Governance Moderates the Impact of Earnings Management on Capital Structure. This study is also helpful for the new researcher while investigating this area in the future.
... 2. Literature review and hypotheses 2.1 Theoretical background Capital structure is one of the most investigated subjects in finance, beginning with Modigliani and Miller (1958), who contend that the capital structure has no implications on the firm's value and that there is no inducement for it to converge to a target capital structure. Conversely, Modigliani and Miller (1963) modified their model by incorporating business taxes and demonstrated that the involvement of debt in capital structure mitigates the negative effect of income taxes. Similarly, Kraus and Litzenberger (1973) suggested that the best capital structure is determined by balancing the advantages of indebtedness (tax shield) against the cost of debt. ...
Purpose
This study aims to understand how quickly Japanese banks readjust their capital ratios (leverage, regulatory capital, tier-I capital and common equity) following an economic shock.
Design/methodology/approach
This study uses a two-step system GMM framework to test the study's hypotheses using the annual data of Japanese commercial and cooperative banks ranging from 2005 to 2020.
Findings
The findings show that banks adjust their leverage ratio faster than regulatory capital, tier-I capital and common equity ratios. In addition to that, the results reveal that the speed of capital adjustment is higher for commercial banks than for cooperative banks, suggesting higher economic costs and implications for commercial banks. Furthermore, it is worth noting that well-capitalised (under-capitalised) banks tend to prioritise the adjustments to common equity (leverage) before considering the adjustments to leverage (common equity). According to the results, high-liquid (low-liquid) banks alter their regulatory capital and tier-I capital ratios (leverage) more quickly (more slowly) than low-liquid (high-liquid) banks.
Practical implications
The findings suggest that when formulating and implementing new banking regulations, particularly in assessing and adjusting specific capital requirements under Pillar II of Basel III, management (including bankers, regulators and policymakers) should consider the heterogeneity observed in the rate of capital adjustment across various bank characteristics. Additionally, bank managers should also consider the speed of adjustment when determining optimal half-life and target capital structures.
Originality/value
To the author's knowledge, this study represents a pioneering investigation into the rate of adjustment of capital ratios (leverage, regulatory, tier-I and common equity) within Japan's banking sector. The study employs a comprehensive dataset encompassing both commercial and cooperative banks to facilitate this analysis. A notable contribution to the existing body of literature, this study offers a detailed analysis and emphasises the varying degrees of adjustment in capital ratios. The study also highlights the heterogeneous nature of the adjustment rate in these ratios by categorising the data into well-capitalised, under-capitalised, highly liquid and low-liquid banks.
... Specifically, IL's capital structure tends to be lower or more conservative than non-IL companies (Alnori and Alqahtani, 2019; Kutan et al. 2018;Cheong, 2021). According to the financial flexibility hypothesis, a conservative capital structure can help companies become financially flexible (Marchica and Mura, 2010) by maintaining unused borrowing power (Modigliani & Miller, 1963). Therefore, unused debt capacity is closely related to and seen as the main source of financial flexibility (Hess & Immenkötter, 2014;DeAngelo et al. 2011;Denis & McKeon, 2012), and companies with a conservative capital structure tend to have high financial flexibility (Xie and Zhao, 2020). ...
Resources are considered a key driver of organizational performance. However, the means to improve performance through resources remains an issue that is yet to be conclusively addressed in both theoretical and practical terms. This study aims to examine the roles of competitive advantage and Islamic Label (IL) in the relationship between financial flexibility and the performance of companies listed on the Indonesian Sharia Stock Index (ISSI). Using a longitudinal approach covering the period 2012–2021 and observing 88 companies, a total of 880 observations were obtained for this study. The statistical technique used for the analysis was variance-based structural equation modeling utilizing partial least squares with the statistical tool of WarpPLS. The study revealed that competitive advantage is able to partially mediate the impact of financial flexibility on firm performance. Proxies of competitive advantage, such as receivable turnover and financial leverage, were found to be significant to all performance proxies, namely ROA, ROE, and Tobin’s Q. However, IL did not significantly enhance the link between financial flexibility and performance. It was found that the mediating impact of competitive advantage on the relationship between financial flexibility and performance indicated that improving performance through financial flexibility is indirect. Thus, contingency factors should be given due consideration in enhancing resource-based performance. For Islamic label companies, competitive advantage can be built to enhance performance by optimizing resource utilization. Keywords: competitive advantage, contingency factors, financial flexibility, financial performance, Islamic label
... They also discovered that a perfect market does not reflect any leverage level that a company uses to finance its events. Modigliani and Miller (1963) further define that asset risk and Profitability examine the firms' market value and that the firm's market value is an independent way to finance their investments or distributions of dividends. After that, Mr. Durand David proposed the Net income approach (NI) in 1959. ...
The objective of this study is to find out how financial leverage influences the financial performances of the chemical sector listed companies in Pakistan. The economic data of 18 listed companies in the chemical industry has been included in this study. Financial leverage is used as an independent and profitability, assets turnover, Tobin q, and Liquidity are used as dependent variables. Unit root test is applied for data stationery and all the variables stationary at level. The Hausman test is applied to select the appropriate model, the random effect model is found as the suitable model, and hypotheses are tested by regression analysis. This study found a significant negative influence of financial leverage on Profitability, while there is no significant influence on Tobin Q, Assets Turnover, and Liquidity. This study suggests that financial managers should include a minimum portion of leverage in the combination of capital structure to boost profitability and the market value of the firm; asset efficiency and liquidity are not relevant to the financial leverage for chemical sector companies in Pakistan.
... When perfect market assumptions are relaxed, different types of analytical and economic issues arise. The existence of market imperfections, such as corporate taxes, implies that financing decisions may affect the value of the firm through the risk-return tradeoffs inherent in the use of debt versus equity capital (Miller and Modigliani 1963). The differen-tial personal taxes on interest versus dividend income provide a different picture of the risk-return tradeoffs in the use of debt versus equity capital (Miller 1977). ...
Establishing an enterprise risk management (ERM) system is widely viewed as providing firms with the tools and processes needed to build resilience and expertise, enabling them to manage the consequences of crises that have led to the collapse of major firms across different industries globally. Intended for use in advanced accounting, auditing, and finance courses, this case study (of a true event) describes the development and implementation of an ERM system for a U.S. multinational nonprofit firm during the 2015–2021 period. The case study’s main learning objectives are several-fold. First, couched within the recent economic environment, it informs students on some of the more important academic and applied research on corporate risk management. Second, students will learn to analyze the content of a questionnaire designed to capture the integrated effects of the firm’s risk culture, risk structure, risk governance, and control for establishing its risk profile. Third, they will learn to create and apply multi-dimensional risk indices to measure and prioritize the firm’s risk exposures. Finally, the last learning outcome focuses on strategies to triangulate the firm’s overall risk profile and risk prioritization results to construct mitigation strategies that build resilience and create value through risk diversification, information signaling, the exploitation of natural hedges, and enhancing the board’s governing efficiency. The nonprofit nature of the firm in this case study introduces no methodological or conceptual constraints or limitations in applying the proposed risk management methodologies to for-profit or publicly traded firms.
... Trade-off theory is a theory that explains that companies are trying to optimize the value of the company using debt to a certain level, so that taxes can be utilized by the company. Through this theory, interest payments arise due to external debt funding which becomes a tax deduction so that the burden of debt will be cheaper when compared to shares [29]. This theory shows that funding with debt carried out by companies in large amounts can create interest expenses which have an impact on reducing corporate taxes and causing an increase in company profits. ...
The goal of this study was to gather empirical data on how firm value in manufacturing enterprises is impacted by factors such as profitability, capital structure, asset structure, and firm age. In this study, 89 manufacturing businesses that were listed on the Indonesia Stock Exchange between 2018 and 2020 are used as a sample. The sample selection used purposive sampling method and obtained a sample of 89 companies. The EViews 10 program was used to process the data for this investigation. The findings of this study suggest that firm value is significantly positively influenced by profitability and capital structure. Asset composition has no significant impact on firm value. Firm age has a significant negative effect on firm value. This research is expected to provide benefits for investors by increasing knowledge about company values and is expected to be used as consideration in making investment decisions to visualize company assets so that investors can achieve the expected returns.
... On the one hand, the high risk of long-term debt repayment leads to the improvement of the financing allocation efficiency due to the management pressure effect of high-tech SMEs mentioned above. On the other hand, assets provided by creditors, that is, assets acquired from debt financing, are considered to be more favorable to the return on assets than assets acquired from equity financing, according to the tax shield effect (Miller, 1963); therefore, benefiting from the better use of financial leverage, enterprises with high asset-liability ratio can maintain enough lower-cost available cash flow so as to improve financing efficiency. (3) The coefficient of R&D investment is significantly negative at a 1% level, indicating the existence of a statistically significant negative relationship between R&D investment and financing efficiency. ...
High-tech small and medium-sized enterprises (high-tech SMEs) play a driving role in the economic transformation of the China Yangtze River Delta. However, comparatively little research and attention has been paid to evaluating the financing efficiency and investigating both external and internal influencing factors on financing efficiency based on the information of these enterprises. This study evaluates the financing efficiencies in a homogeneous environment of high-tech SMEs of information technology industry in the China Yangtze River Delta for the period 2014 to 2020 employing the panel three-stage Data Envelopment Analysis model. We have concluded that the financing technical efficiency presents a U-shaped trend from 2014 to 2020, at a moderate level due to the low pure technical efficiency; financing efficiency shows different spatial distribution patterns; most decision-making units are in the quasi-relatively inefficient range, while only a minority are at the efficiency frontier. Furthermore, the external and internal environmental factors are investigated based on Panel Stochastic Frontier Analysis and Tobit model. According to the empirical results, the optimization of the financial and technical environment contributes to financing efficiency; by contrast, a good economic and policy environment appears to restrict it; internal environmental factors such as growth ability, debt solvency, and the average age of managers have significant impacts on financing efficiency.
... In the real world, there are transaction costs, taxes, and information asymmetry are inevitable, hence the lack of applicability of the irrelevance proposition. Modigliani & Miller (1963) later show that debt financing reduces the cost of capital in the presence of an interest tax shield. Stressing the existence of market frictions, several studies such as Myers & Majluf (1984) and Jensen & Meckling (1976) challenged the irrelevance proposition, and variations of the capital structure theory were developed based on the existence of asymmetric information, imperfect markets and agency costs. ...
Derivatives products have become essential in portfolio diversification, price discovery and risk hedging. Derivatives are complex instruments; their role is twofold, risk management and speculation, and their actual Impact on the underlying assets’ behaviours are not well understood. Little is documented empirically on how these instruments’ two-edged roles influence firms’ financing decisions, firm risk exposures, and stability. Given the growing interest in using derivatives in risk management and portfolio engineering, this study examines the practical impact of derivatives usage on the underlying firm’s financing policy and stability. The paper uses data from South African listed non-financial firms for the period 2000 to 2019. The study employs a dynamic panel model estimated with System Generalised Methods of Moments (GMM). The initial analysis shows that derivatives use reduces the cost of capital and increases firm stability. However, further in-depth analysis provides evidence that extensive use of derivatives increases firms’ capital costs and negatively impacts financial stability. These findings imply that the risk embedded in derivatives’ speculation dominates their risk management function. The results are subjected to numerous controls for robustness, including financial leverage, firm size, cashflows and asset tangibility.
... Likewise, according to Modigliani and Miller (1963): "the existence of profits derived from taxes using debt for financing ... does not always mean that companies must always try to use as much debt as possible in the capital structure. There are several obstacles imposed by creditors, coupled with other dimensions of the problem of financial strategy in the real world that are not fully understood using a static equilibrium model framework. ...
This study aims to prove the influence of Company advantages - company profitability and size, and company limitations - systematic risk and leverage, on the Investment Opportunity Set (IOS) in automotive companies listed on the Indonesia Stock Exchange during the period 2013 to 2017. There are 5 automotive companies that used as samples based on purposive sampling technique. The results of the study prove that the company's advantages have an effect on IOS, while the company's limitations have no effect on IOS. These results prove that the company must be able to maintain its advantages so that it can have greater growth opportunities. On the other hand, with the lack of evidence of company limitations as a factor affecting IOS, it does not mean that companies are not careful in making financial policies.
Small and medium enterprises (SMEs) serve as pivotal drivers of global economic growth, a consensus reiterated by influential scholars. Yet, a critical challenge impeding their progress is the limited access to capital financing, hampering the expansion prospects of countless small businesses worldwide. In South Africa, this dilemma is especially pronounced, with many SMEs either struggling or shuttering due to financial constraints. The Johannesburg Stock Exchange (JSE) devised a solution: The Alternative Exchange (AltX), a dedicated platform designed to ease capital financing for SMEs and boost their growth. In this study, we used secondary data obtained from the lower bourse, as well as other relevant databases for the period 2003 to 2019 to ascertain its impact on SME performance. Eviews 12 statistical software package was used to carry out an Ordinary Linear Regression (OLS) empirical analysis. We find that SME listing positively influences small business performance in South Africa. Furthermore, these listed firms’ continued expansion is propelling them to become larger enterprises within a remarkably short span, transcending national borders. Our results robustly affirm a positive correlation between AltX listing, market capitalization, revenue, their Broad-Based Black Economic Empowerment (B-BBEE) score, Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), and improved SME performance. Moreover, this contributes to the existing literature by empirically proving that the boost in SME performance aligns with heightened GDP growth, suggesting a symbiotic relationship between the two. We recommend that policymakers should offer incentive schemes to enhance their performance given its impact on sustainable national growth and development.
Perkembangan ekonomi yang pesat dan persaingan global yang semakin ketat mendorong perusahaan untuk terus meningkatkan daya saing mereka. Salah satu aspek penting yang perlu diperhatikan dalam konteks ini adalah struktur modal perusahaan. Artikel ini bertujuan untuk mendalam tentang bagaimana struktur modal dapat menjadi faktor kunci dalam memperkuat posisi daya saing suatu perusahaan. Melalui tinjauan literatur secara menyeluruh, kami mengidentifikasi bahwa pemilihan proporsi utang dan ekuitas dapat mempengaruhi berbagai aspek kinerja perusahaan. Selain itu, struktur modal berperan dalam mendukung inovasi dan adaptasi terhadap perubahan pasar dan teknologi. Beberapa penelitian telah menunjukkan bahwa perusahaan dengan struktur modal yang seimbang cenderung memiliki kemampuan lebih besar untuk bersaing dalam industri dan mampu menghadapi perubahan industri. Kami juga menganalisis dampak struktur modal terhadap kemampuan perusahaan untuk beradaptasi dengan perubahan pasar dan teknologi. Dengan mempertimbangkan faktor-faktor ini, artikel ini memberikan wawasan strategis bagi manajer keuangan dan eksekutif perusahaan untuk mengelola struktur modal mereka dengan bijak guna meningkatkan daya saing di pasar yang dinamis.
Kata Kunci : Struktur Modal , Daya Saing Perusahaan , Inovasi dan Adaptasi
The authors adopt the resource-based view (RBV) and information processing theory to discover the problems that impact the capital structure of financial institutions in the UK. Five firm-level explanatory variables (profitability, size, tangibility, age, and growth) were selected. The relevant capital structure measure was then regressed against the dependent variable leverage (debt-to-equity ratio). Consequently, correlation and multivariate regressions are applied to firm financial data from the selected financial institutions during the fiscal years 2011–2022. The primary conclusions of the study indicate that important information resources management variables for financial institutions in the UK are profitability and size. While the two other factors, profitability and growth, exhibit negative associations with capital structure, the remaining four variables, tangibility, size, age, and profitability, did not. The study reveals that optimal determinants of information resources management enhance financial performance in the case of top UK banks.
This paper theoretically examines the viability of agribusiness crowd funding, characterized by the promise of very high returns on investment (ROI) to subscribers. To do this, we develop a capital allocation model that analyzes the impact of the cost of capital on the optimal behavior of the agribusiness firm. Then, we compare this optimal behavior with the observed behavior of the firm (stylized facts), in this context of very high cost of capital. The model results show a significant behavioral bias with respect to optimality, which reflects the inability of the agribusiness firm to reasonably and legally serve very high ROIs to crowd funding underwriters. The strategy of crowd funding agribusiness via very high ROIs is therefore not economically viable, thus confirming the results of the financial audit carried out on this sector in Côte d'Ivoire.
Despite growing attention on the role of internationalization in capital structure and the increasing adoption of zero-leverage policies by multinationals (MNC), no study examines the effect of internationalization on zero leverage. Using data from the United Kingdom (UK), we present the first empirical evidence of a positive and significant relationship that increases in the level of internationalization both statistically and economically. We find that the motivation for zero leverage differs between MNC and domestic firms (DOM). Whilst the major driving factor for MNC is the maintenance of financial flexibility, financial constraints motivate DOM.
This chapter discusses our current financial value paradigm and analytical framework built around risk and time parameters, serving one stakeholder, the mortal risk-averse return-maximising investor. Our current value framework in finance theory and practice is structured around two principles of value, risk and return, and time value of money. These principles discriminate against our evolutionary investments given their internal biases towards highly risky and very distant cash flows. Furthermore, the discussion identifies a missing analytical dimension in finance, i.e., space, our physical context, and reveals spaceless equations, often focused on future non-actual expected cash flows, while omitting the actual space impact it would take to achieve or expect them. Thus, sustainability in finance must surely address these omissions and make room for planet and humanity as equal stakeholders in the value and return equations that have shaped our markets and investments for the last many decades.
In line with the wide implementation of IFRS around the globe, the significant shift in the Indian accounting system appertained to the Ind AS is expected to have a substantial impact on the firm‐level information environment. Nevertheless, the question of whether the adoption of such standards moderates the relationship between leverage and firm performance remains unanswered. In this backdrop, we aim to close this research gap employing 3120 firm‐year observations from 401 Indian non‐financial firms for a period from 2013 to 2022. Notably, we found that the leverage among Indian firms discourages profitability. Further, the adoption of Ind AS negatively moderates the leverage and firm performance association. The findings suggest that the enhanced transparency and the firm's reporting quality dissuade risk‐averse investors from investing in highly levered companies. As a result, investors avoid risky investments, and firms must strive to foster their trust and motivation. The conclusion of the present research draws significant implications for management and policymakers while also contributing to the ongoing debate on capital structure and firm performance.
The asset structure of a firm plays a pivotal role in determining its leverage. A higher proportion of physical assets is often associated with high debt ratios. This study explores the impact of investment tangibility on financial leverage, examining both tangible and intangible investments. Using a dynamic panel data model estimated through the two-step system generalized method of moments (GMM), we analyse a dataset encompassing 815 non-financial listed firms from 22 African stock markets. The results show that African firms have higher inclinations to invest in physical assets. We found a statistically significant negative relationship between leverage and tangible and intangible investments. The findings indicate that African firms tend to maintain lower leverages regardless of whether they invest in tangible or intangible assets. The observed relationship aligns with the hypothesis that high-growth firms, in their expansion efforts, strategically tend to opt for low debt to mitigate the agency costs associated with debt and to help prevent underinvestment. This outcome underscores the interconnected nature of financing and investment decisions. This research contributes to the literature on financial leverage and investment by dissecting investments into tangible and non-tangible components and highlighting their distinct impacts on leverage. Moreover, it provides empirical evidence for previously unexplored African firms, shedding light on the reasons behind the relatively low leverage levels observed in African firms.
The study assesses the impact of factors affecting the financial leverage of Vietnamese firms. This paper uses Bayesian linear regression model to estimate the relationship of the data series to examine the impact of the characteristics of Vietnamese firms on financial leverage. The results demonstrated that there are a number of factors that positively affect the financial leverage of firms, including: workforce, annual turnover, and export status, gender of business owners and qualifications of the business owner. However, the age of the business has a negative impact on financial leverage. On the basis of these findings, the paper also suggests a number of policies to use financial leverage more effectively on firm value: (1) large-scale, low-debt firms have may consider increasing the debt ratio to take advantage of the tax shield. (2) financial managers of the enterprise need to establish, forecast and evaluate in detail the company’s growth ability in different periods (3) train to improve professional knowledge courses for business owners and staff of economic and financial managers; (4) increasing the gender diversity of board members as a tool to control the level of financial leverage of the company.
This study aims to find out the factors affecting the capital structure of construction enterprises listed in Vietnam Stock Exchange in the period from 2014 to 2019. Using secondary data from 94 construction enterprises listed, including 472 observations with Bayesian regression technique to find out the factors affecting the overall debt ratio of enterprises. Regression results show that there are 6 important factors affecting capital structure which are enterprise size (SIZE), liquidity (LIQ), profitability (ROA), corporate income tax rate (TAX), age of the company (AGE) and growth opportunity (GROW). From there, business managers can refer to the research results to make decisions on capital structure, ensuring that it is consistent with the development goals of enterprises in the construction industry.
The article investigates the impact of the gender difference of entrepreneurs on the debt ratio of small and medium enterprises in Vietnam. The data source is based on survey results from 2007 to 2015 with more than 2600 enterprises. Research results through Bayesian estimation method show that male entrepreneurs use a higher corporate debt ratio than women. The study also found that the size of the enterprise, the education and training level of the entrepreneurs, and the export factor have a positive impact while the age of the enterprise has a negative impact on the debt ratio of the enterprise.
This study aims to find out the effects of debt on profitability of construction companies listed on the Stock Exchange in Vietnam in the period from 2010 to 2020. Using secondary data from 72 enterprises listing construction, including 792 observations with Bayesian regression technique to find out the factors affecting the overall debt ratio of enterprises. Regression results show that there are 6 important factors affecting the profitability ratio, namely short-term debt to total assets (SDA), long-term debt to total assets (LDA), liquidity (LQ), annual revenue growth (GROWTH), firm size (SIZE), inflation rate (INF). From there, business managers can refer to the research results to make decisions in the course of business operations, ensuring compliance with the development goals of enterprises in the construction industry.
This chapter presents the data selection process and methodology utilized in this book. It begins by defining the dependent variables, financial performance, and financial resilience. The independent variables are subsequently introduced, supported by references to relevant literature. Descriptive statistics are provided to offer initial insights into the correlation and behavior of the chosen variabsles. Finally, the study provides a comprehensive description of the panel regression and Cox hazard regression models utilized in this research, offering an in-depth explanation of their respective methodologies.
ResearchGate has not been able to resolve any references for this publication.