Tag Archives: Capital Structure

Effect of Capital Structure on Financial Performance of Quoted Manufacturing Companies in Nigeria (Published)

Capital structure is a mixture of the financing options a company uses to finance its investments. However, deciding on an optimal capital mix has been a huge task for most manufacturing companies. This paper therefore examined the effect of capital structure on financial performance of quoted manufacturing companies in Nigeria. The study covered ten companies for a period of seven years from 2013 to 2019. Panel data analysis was used to test the hypothesis. The independent variables used are total debt to total asset ratio (TDTAR), long-term debt to total assets (LDTAR), short-term debt to total assets (SDTAR) and total debt to total equity (TDTER) while the dependent variables are return on asset (ROA) and return on equity (ROE). The results of the study showed that SDTAR and LDTAR have positive but insignificant effects on ROA, and TDTAR has a negative significant effect on ROA and ROE respectively. Also, TDTAR and TDTER have negative insignificant effect on ROE. The study concluded that SDTAR, LDTAR, TDTER have no significant effect on ROA and ROE but TDTAR have effect on ROA. This study therefore recommended that firms should be cautious in accumulating debt that could eventually have adverse effects on their value and financial performance.

Keywords: Capital Structure, Return on Assets, Return on Equity, Total Assets, total debts

Intellectual Capital Profile: Is it Efficient in Islamic Banks? (Published)

The purpose of this research is to identify the extent of Intellectual Capital Efficiency which consists of Human, Structure and Relational Capital in Islamic banks, in creating Value Added. Intellectual Capital measurement method uses the model VAIC (Value Added Intellectual Capital).The research method used is descriptive quantitative, which is a study that aims to explain the characteristics of research variables. In describing the Intellectual Capital License consisting of Human capital, Capital Structure and Relational capital in Islamic banks. The population of this study was 11 Islamic banks during 2016- 2018. This study uses secondary data obtained from Islamic Banking financial statements.The results of the study show that on average there is an inefficiency in Human Capital and Relational Capital while the capital structure shows the condition of efficiency.

Keywords: : Human Capital, Capital Structure, Relational capital, value added intellectual capital.

CEO Characteristics and Capital Structure in Listed Sub-Saharan African Firms (Published)

The study focuses of five CEO characteristics with the aim of discovering the possible link between these characteristics and the capital structures of the firms they are attributed to. The study applied parametric or non-parametric test (depending on the outcome of the normality test) to determine the nature of relationship between CEO characteristics and capital structure. Data for this study was obtained from three sub-Saharan African countries: Kenya (twenty companies), Nigeria (twenty-three companies) and South Africa (twenty-one companies) for a period of five years (2012 to 2016). CEO nationality characteristic (which is a proxy for international experience/competence for the CEO) was found to be significant to the capital structure of companies.

Keywords: CEO gender, CEO nationality, CEO share ownership, CEO tenure, Capital Structure, sub-Saharan Africa

Capital Structure Composition and Financial Performance: Empirical Evidence From Quoted Deposit Money Banks in Nigeria (Published)

This study investigates the effect of capital structure composition on the financial performance of deposit money banks in Nigeria. This study employs the ex post facto research design, and data were obtained for the selected deposit money banks from factbook covering 2009-2018 financial year. Data estimation was done using the Ordinary Least Square (OLS) techniques. Descriptive statistic, correlation, and time-series regression analysis were further conducted. Some residual diagnostic test and model selection criteria were employed to ascertain the good  fit of the model using E-views 9 econometric package. Findings from the empirical analysis show that debt-equity ratio, debt-capital employed ratio, and equity-capital employed ratio have significant and positive correlation with return on total assets which is the surrogate for firm performance for the study period. The study recommends that in the face of trade-off in capital structure decision, DMBs should have an optimal mix of capital structure, and should also monitor the dynamics and level of leverage that could eliminate the tax shield and reduce return on total assets.

Keywords: Capital Structure, DMBs, Financial Performance

Capital Structure and Earnings per Shares in Listed Conglomerates in Nigeria (Published)

This research work studied the effect of capital structure on earnings per shares of listed conglomerate firms in Nigeria. The objective of the study was to examine the effect of between Capital Structure and Earnings per Share of Conglomerate Firms in Nigeria. The secondary data are obtained from annual reports of companies, relevant literatures and Nigerian Stock Exchange Fact Books. The multiple regression analysis i.e Ordinary least square (OLS) was used to test the relationship between Capital Structure Indicators; Ratio of Total Debt to Equity (TDE), Ratio of Short Term Debt to Total Assets (STDTA) and Ratio of Long term Debt to Total Assets (LTDTA) and Firms’ financial performance indicator; Earnings per Shares (EPS). The result shows that all Capital Structure indicators have significant impact on the performance of firms. The study concluded that a well configured capital structure management function plays a vital role on the level of profitability of the conglomerate firms. The study then recommends that Nigerian firms should try to match their high market performance with real activities that can help make the market performance reflect on their internal growth and accounting performance.

Keywords: Capital Structure, Earnings per share, Total Assets, conglomerates, total debt.

Capital Structure: Definitions, Determinants, Theories and Link with Performance Literature Review (Published)

The theory of capital structure and its relationship with a firm’s value and performance has been a puzzling issue in corporate finance and accounting literature since the Modigliani and Miller theory (MM) (1958) argue that under the perfect capital market condition which assume that, if without bankruptcy cost and capital markets are frictionless, if without taxes, and without asymmetric information the firm’s value is independent from capital structure. According to MM theory, the only variables that determined firm value was its future earnings power (expected cash flow) and hence the capital structure decision is irrelevant. Since that time, several theories have been developed to explain the capital structure of a firm including the Pecking Order Theory, Trade off theory, and the Agency Cost theory. This paper will shed light on the concept of capital structure, its theories and link with firms’ performance.

Keywords: Capital Structure, Performance

An Empirical Study on the Relationship between Capital Structure and Corporate Performance in China’s Food and Beverage Industry (Published)

The listed companies in China’s food and beverage industry have good profitability and low risk. They have the characteristics of stable performance growth and broad space for development. These companies have always attracted the attention of many investors and have become a unique sector in the stock market. This paper firstly sort out literature review on impact mechanism between capital structure and firm performance, and then use 58 listed companies in China’s food and beverage industry from 2011 to 2015 as sample, meanwhile dividing the companies into high-growth and low-growth companies. Finally, the empirical test was conducted with fixed effect regression respectively. The empirical results show that there is a weak degree of negative correlation between asset-liability ratio and performance of listed companies in China’s food and beverage industry. It concludes that: China’s food and beverage companies prefer equity financing, failing to make full use of financial leverage, meanwhile there is a structural imbalance in the development of capital markets.

Keywords: Beverage Industry, Capital Structure, Corporate performance, Food

The Relationship of the Capital Structure and Financial Performance: Empirical Evidence of Listed Banks in Thailand (Published)

This paper aims to determine the relationship between capital structure and banks’ performance in Thailand. We utilize the quarterly data set containing firm-specific characteristics and profitability from 1997 to 2016. By employing the random effect model and robustness check to tackle the endogeneity problem, the result proves that capital structure is significant and negatively correlated with profitability which implies that pecking order theory is valid in data set used. Moreover, credit risk and liquidity risk significantly decrease the financial performance. Based on the result and the theoretical background, this paper would like to suggest that governments and banks should focus on controlling the credit process to reduce the non-performing loans. Moreover, they should pay attention to the fund allocation to avoid the shortage of funding which may be costly to banks. Also, while improving banks’ financial performance, banks’ managers should be aware of over utilizing debt which reduces banks’ profitability.

Keywords: Capital Structure, Financial Performance, Thai Banks

Capital Structure Impact on Financial Performance of Sharia and Non-Sharia Complaint Companies of Pakistan Stock Exchange (Published)

For a firm to be profitable, it is necessary to create an optimal capital structure that contribute towards desired performance level. This study was conducted to explore the relationship between capital structure and financial performance of firms specifically with respect to shariah complaint and non shariah complaint companies. The analysis was conducted on panel data of 8 companies (3 shariah complaint and 5 non shariah complaint) listed under technology and communication sector of Pakistan Stock Exchange under the period 2009-2015.  Financial Performance was the dependent variable measured by ROA and ROE while capital structure was independent variable measured by indicators, LTDR, STDR, SGR, NDTS and INSHOL. Multiple linear regression and correlation were used as statistical tools to run the model. On the basis key findings we concluded in Pakistan Shariah and non shariah companies have different pattrens of capital structure. We further concluded that capital structure effect the performance of firm in case of non-shariah but do not significantly affect performance of shariah complaint.

Keywords: Capital Structure, Financial Performance, Non- Sharia complaint, Pakistan, Return on Asset, Return on Equity, Sharia complaint, Technology and Communication

Good Corporate Governance, Capital Structure, and Firm’s Values : Empirical Studies Food and Beverage Companies In Indonesia (Published)

This study aims to determine the effect of good corporate governance and capital structure to the firm’s value on food and beverage companies listed on the Indonesia Stock Exchange. This study used a sample of 7 food and beverage companies listed in Indonesia Stock Exchange 2010-2014. Data type of research is secondary data obtained from the annual financial statements of the company. The analysis technique used is multiple linear regression methods using panel data random effect model approach. The results showed that simultaneous two independent variables, namely good corporate governance which is proxied by an independent commissioner, institutional ownership, managerial ownership and quality auditors, and the company’s capital structure together affect the value of the firm. Partially show that institutional ownership, managerial ownership and quality auditor affect the value of the firm. While independent and its capital structure does not affect the value of the firm.

Keywords: Capital Structure, Good corporate governance, firm’s value

The Effect of Capital Structure on the Financial Performance of Nigerian Quoted Conglomerates (Published)

This study investigated the effect of Nigerian banks’ capital structure on the performance of conglomerates quoted on the floor of the Nigerian stock exchange from 2011 to 2015. The paper identified four levels of dependent variables such as return on assets, ratio (ROA), return on equity ratio (ROE), assets turnover ratio (AT) and earnings per share whereas the independent variable is financial leverage. Essentially the paper sets out to determine the effect of capital structure on the above dependable variables hence return on assets of quoted conglomerates, return on equity of quoted conglomerates, asset turnover of the quoted conglomerates and on the earnings per share of quoted conglomerates. Descriptive statistics and the pooled ordinary least square (POLS) regression analytical method were used for data analysis. The study finds that capital structure has effect on both return on assets and asset turnover of the conglomerates but no effect on return on equity and earnings per share of the conglomerate. It is then concluded that an in-depth analysis of business factors which affect a particular industry should be considered so as to obtain the benefits of the debt-equity mix. The result of the study is in agreement with most previous studies on other sectors that discovered mixed results on the effect of capital structure on financial performance. It is therefore necessary to employ a critical analysis of the appropriate debt-equity mix suitable for the company.

Keywords: Capital Structure, Financial Leverage, POLS, ROA, ROE, conglomerates

Speed of Adjustment towards the Leverage Target Plantation Companies in Indonesia (Published)

The aim of this paper is to analyze the speed of adjustment towards the leverage target of plantation companies especially oil palm in Indonesia. The data which were used in this paper covered the years of 2009 – 2013. The used sample of the plantation companies was listed on the Indonesia Stock Exchange (IDX) and the analysis was based on the partial adjustment model. The results showed the plantation company’s internal characteristics in which the financing deficit and market capitalization affected the speed of adjustment, whereas macroeconomic condition relatively did not affect at all. This was due to the long-term investment of oil palm plantation. Although macroeconomic factors in this paper relatively did not affect the speed of adjustment of the capital structure of the oil palm plantation companies, the government must keep macroeconomic in a good condition to support the business. If an economic crisis happens, it will adversely affect the palm oil business and the financial aspect will affect the condition of the company’s capital structure to make adjustments to the target.

Keywords: Capital Structure, Oil Palm Plantation Companies, Partial Adjustment Model, Speed of Adjustment.

Stimulants of Profitability of Non-Bank Financial Institutions: Evidence from Bangladesh (Published)

Financial institutions both Bank and Non-Bank play a significant role in the economy of a country. Like other developing countries Beside the Banking industry necessarily of Non-Bank financial institutions cannot overlook in Bangladesh. This study inspects the profitability of firms in the Non-Banking Financial Institutions (NBFIs) diligence of Bangladesh. Financial Enactment of a financial organization fundamentally depends on its some key financial factors. Specially operating efficiency is main inducing factor which is designed through operating income. Besides it capital Structure combination of equity and liability, term deposit, total asset considerably affect the profitability of any NBFI company. In addition operating expense also upsets the profitability though that is not statistically significant. Different Statistical procedures such as correlation matrix, multiple regressions have been used to determine the associations between variables. And before doing regression analysis normality distribution test has been accomplished by One-Sample Kolmogorov- Smirnov Test. This research is an effort to find out the statistically significant key stimulants variable and their level of impact over net profit.

Keywords: Capital Structure, Financial Performance, Non-Bank Financial Institutions (NBFI), Operating efficiencies, Profitability


The study is focused on the analysis of the determinants of capital structure of Nigeria companies for 2013. The cross-sectional least squares regression is applied to determine the impact of two independent variables on debt ratio. The independent variables are represented by company size and profitability. It is found that profitability is not a significant determinant and has a negative impact on leverage while the impact of company size was not confirmed in the model. The analysis of the determinants of corporate capital structure has valuable implications for finance managers who can make better capital structure decisions to maximise the wealth of the shareholders.

Keywords: Capital Structure, Firms in Nigeria


The main objectives of this empirical study are: to investigate which factors affect the textile firms of Pakistan and which type of capital structure theory does more prevail in textile sector of Pakistan. This empirical study is done by applying the panel data techniques in analyzing sample of 68 textile firms of Pakistan listed on Karachi Stock Exchange during 2006-2012. The determinants of this study like liquidity of firms, non debt tax shields like depreciation, more collateral net fixed assets, earnings volatility, size of firms, net commercial trade position and firms’ profits have impact on the capital structure choice.

Keywords: Capital Structure, Stock exchange and Pakistan, Textile firms


Public transport in Kenya and, especially in urban areas, is dominated by Matatu vehicles. This venture involves substantial capital outlay and, therefore, requires sound financial management. A proper balance between return and risk should be maintained to maximize the market value of an investor. The current study investigated how cost of capital affected returns and the impact of capital structure on returns in the public service vehicle Matatu industry in Nakuru Municipality in Kenya. The findings indicated that most respondents preferred equity (μ = 4.25; SD = 0.907) to debt (μ = 3.47; SD = 1.030) as a source of capital. A major hindrance to the use of debt is its high cost. However, debt was invariably used because of its security and access. Capital structure consisted of shareholders and non-shareholders. In conclusion, MSL should seek alternative ways for members to access loans at lower rates; for instance entering into funding commitments with the financial institutions. Additionally, it should plan to access a wider pool of equity financing by listing in the capital markets

Keywords: Capital Structure, Kenya, Public transport; Matatu; Cost of Capital

An Empirical study of the Capital Structure of Micro, Small and Medium Scale Enterprises in Nigeria (Review Completed - Accepted)

The analysis of capital structure of organizations has conventionally been applied to corporate entities. Previous studies on Microfinance have classified enterprises into two broad categories-the Small and Medium scale enterprises respectively. Micro-scale businesses are conventionally grouped with Small scale enterprises without specifically analysing their businesses. The research therefore examines the capital structure of micro, small and medium scale enterprises (MSMEs) as well as the factors influencing it. Primary data were collected by administering 300 copies of research instrument with a combination of cluster and simple random sampling techniques. The research discovered that there is a significant difference in the Capital Structure of Nigerian MSMEs; there is no statistically significant difference between the Capital Structure of Nigerian MSMEs at start-up and the Capital Structure at continuation; and the factors influencing the patronage of bank and non-bank finance providers among MSMEs do not significantly differ

Keywords: Capital Structure, Financial exclusion, Venture Capital, developing countries