Record Details

<p>Capital Structure Decisions and Corporate Performance: Does Firm’s Profitability Matter?</p>

Online Publishing @ NISCAIR

View Archive Info
 
 
Field Value
 
Authentication Code dc
 
Title Statement <p>Capital Structure Decisions and Corporate Performance: Does Firm’s Profitability Matter?</p>
 
Added Entry - Uncontrolled Name Ghardallou, Wafa ; Department of Accounting, College of Business Administration, Princess Nourah bint Abdulrahman University, P.O. Box 84428, Riyadh 11671, Saudi Arabia
Princess Nourah University
 
Uncontrolled Index Term Debts to equity, Equity financing, Financial performance, Quantile regression, Tadawul stock exchange
 
Summary, etc. <p>This study aims to investigate the relationship between financing decisions and firm performance. It particularly investigates the heterogeneous effects of capital structure ratios on financial profitability. The study employs the Quantile regression methodology on a sample of 120 non-financial companies listed on Tadawul stock exchange during the period 2017–2020. Financial performance was measured using return on assets, return on equities and Tobin’s Q variables in order to assess accounting and market performance. Data on the various variables is obtained from the companies’ annual reports. Quantile regression results show that debts to equity ratio hamper firms’ performance where as equity financing ratio increases business profitability. Additionally, findings demonstrate that this relationship is nonlinear. Particularly, a debt to equity ratio has a greater negative effect on performance of high-profitable firms. However, the positive effect of the equity financing ratio seems to be higher in high profitable companies than low ones. These results would help managers of non financial firms regarding optimal capital structure decisions. Indeed, managers of non-financial firms could use results of this study as a benchmark to make efficient decisions related to the structure of the capital such as reducing the proportion of debts in the capital and increasing the weight of equity financing. Particularly, enterprises in the early stages of development, with lower profits reflected in return on assets, return on equities, and Tobin’s Q should carefully avoid debt, whereas firms with big earnings are encouraged to raise their capital by issuing new shares in the financial market.</p>
 
Publication, Distribution, Etc. Journal of Scientific and Industrial Research (JSIR)
2022-08-05 17:01:39
 
Electronic Location and Access application/pdf
http://op.niscair.res.in/index.php/JSIR/article/view/59697
 
Data Source Entry Journal of Scientific and Industrial Research (JSIR); ##issue.vol## 81, ##issue.no## 08 (2022): Journal of Scientific and Industrial Research
 
Language Note en