Master of science in accounting and finance thesis, st. The study aims at examining the statistical significance between companys working capital management and profitability. The final sample comprises 4 countries, 5,112 firms and 46,301 firmyear. Chapter iii concepts and theories of capital structure and profitability. Capital structure has a crucial role to play on determining companys financial performance and fulfills the expectations of stakeholders who always demand the increase of their companys value. Before analyzing it, the research gives a brief information about literature view of this subject. Financial management and profitability of small and medium. Introduction a business organization is so called due to its economic objectives viz. How important is the concentration of control for the company performance or the type of investors exerting that control are questions that authors have. The effect of capital structure on profitability of insurance companies in ghana. There are several researchers who analyzed the effect of capital structure. Tanzania that this dissertation paper is the result of my original work, and that it has. Perhaps a study which will analyze the impact of capital structure on the profitability of listed firms in namibia by using a descriptive quantitative.
The capital structure of the nonbanking finance companies are represented by variables debt to equity ratio, debt to total assets, short term debt to total assets ratio and long term debt to total assets ratiotable 2. The impact of capital structure on profitability of. The influence of capital structure on firm performance a quantitative study of swedish listed firms authors. The effect of capital structure on the profitability of. The effect of bank capital on profitability and risk in. In terms of structure, the thesis has six chapters. This first chapter of thesis intends to introduce the background, the knowledge we intend to. The purpose of this study is to find out the effect of working capital management on company profitability. In the context of a financial shock, this study further studies whether the industries chosen capital structure even. Thesis for the master of management in finance and investments topic. A thesis submitted in partial fulfillment for the degree of doctor of philosophy in business administration in the jomo kenyatta university of agriculture and technology. The influence of capital structure on firm performance.
The relationship between capital structure and financial performance is one that received considerable attention in the finance literature. Kipesha 2014 and kaaya 20 conducted the study on the relationship between commercial bank performance and capital structure in tanzania. Capital structure is thus the mix of companys long term debt, specific short term debt, common equity and preferred equity. Impact of capital structure on firms profitability and. Pdf the effects of capital structure on profitability. Capital structure is a very debatable topic in finance mainly in regard to the optimal capital structure that will result to maximum value of a firm. This work examined capital structure and profitability of the nigerian listed firms from the agency cost theory perspective with a sample of seventy 70 out of population of two hundred and fortyfive firms.
The effect of capital structure on profitability of. The relationship between capital structure and profitability. Many studies have been carried out to examine the effect of capital structure on the profitability. Does a higher level of capital structure refer to a lower risk for banks. This paper investigates the impact of capital structure on profitability of the manufacturing companies in india and attempts to establish the hypothesized relationship as to how far the capital structure variables affect the business revenue of companies and what the interrelationship is between capital structure variable and profitability. Capital structure decision is the vital one since the profitability of an enterprise is directly affected by such decision. In the chapter two, the theories of capital structure. Emerging markets queries in finance and business the impact of capital structure on financial performance in. The capital structure and its impact on firm value of jse securities exchange listed companies name. Because interest payment on debt is tax deductible, the addition of debt in the capital structure will improve the profitability. A study of the relationship between capital structure and profitability case study of selected doi. Study the impact of growth, firm size, capital structure. Pdf impact of capital structure on profitability irfan mehdi.
Because interest payment on debt is tax deductible, the addition of debt in the capital structure will improve the profitability of the firm. The successful selection and use of capital is one of the key elements of the firms financial strategy kajananthan, 2012. Therefore, it is necessary to differentiate between profit and profitability at this juncture. The impact of capital structure on firm performance.
Panel evidence of listed firms in kenya abstract this paper investigates the relationship between leverage and the financial. Capital structure is related to the marketing, because different firms issue different securities in many different combinations, which maximize the market value. The objective of the study was to determine whether relationship exist between capital structure and profitability. This is to certify that the entitled a study on the thesis determinants of capital structure and profitability with special reference to food industry in india submitted for the award of the. Pdf capital structure is one of the most complex areas of financial. To qualify as a valid proxy for expected profitability, import competition should be exogenous to domestic firms profitability and capital structure choices. The effect of working capital management on profitability. Capital structure, financial leverage, profitability, four asian tigers. Several theories have been postulated to try to contribute to this broad topic. A study of the relationship between capital structure and. Further many of the reported studies on the relationship between financial leverage and performance have been conducted in developed countries where capital. The results of empirical literature on the relationship between capital structure and performance are contradictory which justifies further research. The study targeted the 78 real estate firms in kenya covering a period of 7 years, 2008 2014. One of the most perplexing issues faced by finance managers is to know about the effect of capital structure on the profitability of firm.
Instead, the aim of this paper is to test whether capital structure affects firm performance in ukraine. The relationship between capital structure and profitability cannot be ignored because the improvement in the profitability is necessary for the longterm survivability of the firm. The explanatory independent variables in this thesis are profitability, size, growth. This research explores the effect of capital structure on profitability of listed insurance companies in ghana on the ghana stock exchange for a five year duration. In future research on impact of capital structure on profitability of a company should be conducted based on data of more then ten years, it is recommended to analyze the impact of capital structure on profitability. For example, an omitted factor could affect both import competition and firm characteristics including profitability and capital structure. Thesis for the master of management in finance and. This research is aiming to analyze the relationship between capital structure of the uk banks and its profitability. Pdf the effect of capital structure on profitability of insurance. Capital structure, profitability, performance analysis. He examined the effect of capital structure on profitability of the american service and manufacturing firms listed in new yolk stock exchange where empirical results indicated a positive relationship between shortterm debt to total assets and profitability, total debt to total assets and profitability. Using the two stage least squares, 2sls the results show a significant relationship with capital structure and profitability. The effect of bank capital on profitability and risk in turkish banking hasan ayaydin assistant professor.
The profitability is measured by the net profit, return on capital. The success of financial institutions in kenyas dynamic business environment depend on their ability to effectively determine the optimum and appropriate capital. The focus of this thesis will be on the effect of capital structure on firm performance of unlisted smes in the netherlands in general and during as well as after the financial crisis of 2008. Hitherto, there has been no study analyzing the determinants of capital structure and the impact of capital structure on. Panel evidence of listed firms in kenya abstract this paper investigates the relationship between leverage and the financial performance of listed firm in kenya.
Summary of the relationships between the determinants of capital structure and financial leverage of dutch listed non. A new business requires capital and still more capital is needed if the. Lastly, the results of the study showed that there is no significant statistical relationship between capital structure and financial profitability. The impact of capital structure on financial performance. Abor 2005 1 investigated the relationship between capital structure and profitability of listed firms on the ghana stock exchange and found that a significantly positive relation between the. Relationship between capital structure and performance of. The issue of external equity is seen as being the most expensive and. The study looked at the effects of growth, firm size, capital structure, and profitability on enterprise value. Regression analysis were used to determine and estimate the statistical relationship between profitability and capital structure ratios. The effect of capital structure on profitability of listed manufacturing firms in ghana.
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