Capital structure and return on capital employed of construction companies in Nigeria

Murtala, Sirajo; Ibrahim, Mohammed; Lawal, Sagir; Abdullahi, Buhari Baba

doi:10.1504/ajaaf.2018.091125

Cited by 8 publications

(11 citation statements)

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“…Our evidence indicates that higher debt levels, reduces ROAs but enhances Tobin's Q. Our finding confirms Anh et al (2018), Ebaid (2009), Hasan et al (2014), Majumdar and Chhibber (1999) and Murtala et al's (2018) evidence. In a further robustness test, we replace TDTAs with TDTE and rerun our random effects model.…”

Section: Descriptive Statistics and Correlation Matrixsupporting

confidence: 84%

“…Majority of extant literature in emerging countries document a negative association between capital structure measures and firm's performance (Majumdar and Chhibber, 1999;Le and Phan, 2017;Naseem et al, 2017;Anh et al, 2018;Murtala et al, 2018). Other studies find a positive association (e.g., Abor, 2005), while Ebaid's (2009) study concludes that capital structure is not related to firm's performance, in the Egyptian context.…”

Section: Total Debt and Corporate Performancementioning

confidence: 98%

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Financial leverage and corporate performance: does the duration of the debt ratio matters

Appiah

Gyimah

Razak

2020

IJBEM

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This paper examines the relationship between financial leverage and performance of listed firms in an emerging market, Ghana. Specifically, we examine the link between short-term, long-term and total debts on performance. We use data of 190 firm-year observations from 19 listed firms over a period of ten years (2005-2014). Fixed and random effects regression models are used to examine the financial leverage-corporate performance nexus. The result shows that total debt to total assets is negatively related to accounting and market performance. Short-term debt to total assets is also negatively related to return on assets and Tobin's Q but not return on equity. The long-term debt to total assets is negative and insignificantly related to corporate performance. Our contribution is that; short-term debt diminishes shareholder value in the developing economy context.

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Section: Descriptive Statistics and Correlation Matrixsupporting

confidence: 84%

Section: Total Debt and Corporate Performancementioning

confidence: 98%

Financial leverage and corporate performance: does the duration of the debt ratio matters

Appiah

Gyimah

Razak

2020

IJBEM

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“…However, Modigliani and Miller's (1963) theory was modified, when corporate taxes are introduced, the value of the firm increases with the leverage ratio (D/E) as a result of tax benefits associated with the use of debt. Thus, from this theory, there is a significant relationship between a firm's choice of capital structure and its market value (Murtala et al, 2018). M&M theory is still relevant in the field of finance research today, but it has been criticized, supported and extended in recent years.…”

Section: Literature and Hypotheses Development Theoretical Reviewmentioning

confidence: 99%

“…The second is the internal aspect, which focuses on the management that uses the COC to calculate the discount factor in project investment decisions (Swanson & Habibi, 2016). COCs play a very important role in the financing decisions of firms, so both scholars and practitioners try to learn a lot about them as it leads to a better understanding of business operations (Rad, 2014, Murtala, Ibrahim, Lawal & Abdullahi, 2018. The capital structure of a firm is mainly composed of two funds: equity and debt.…”

Section: Introductionmentioning

confidence: 99%

The Impact of Cost of Capital on Financial Performance: Evidence from Listed Non-Financial Firms in Nigeria

Ibrahim¹,

Abdulkarim²,

Muktar³

et al. 2021

gbmr

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This study examines whether Cost of Capital (COC) impact on the financial performance of listed non-financial firms in Nigeria for the period 2015-2019. Using two-step system Generalised Method of Moments (GMM), the study found a significant and negative impact of COC on financial performance of listed non-financial firms in Nigeria. This is because profitable firms have the opportunity to finance new investments with retained earnings rather than through a new debt and/or equity issuance. Also, raising the debt level of a firm may result in an increase in distress costs, and as such reduces benefits from the tax shield which consequently result in decline in the value of the firm. Thus, the finding of this study is in line with the pecking order theory of capital structure. The findings, which add to the existing knowledge with regard to the impact of COC on financial performance, should be interesting to the providers of finance. This is because the study helps them to make the decision whether or not to invest in these firms. Since they want their money to be invested where there will be maximum return. However, this result only hold for emerging economies like Nigeria where analyst cash flow forecast is difficult to predict. This is due to the underdeveloped nature of the capital market.

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“…Higher is the value of RONW, more favourable is the sentiment of the investors which gets reflected in an increase in the investment and stock prices (Hertina and Saudi, 2019). Murtala et al (2018) noted an inverse relationship between ROCE and Debt to Equity (DE) ratio. Therefore, the selection of ROCE in this paper is quite justified.…”

Section: Performance Indicatorsmentioning

confidence: 99%

A Performance based Ranking of Initial Public Offerings (IPOs) in India

Biswas

Joshi

2023

J. Decis. Anal. Int. Comp.

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In recent times, Indian Stock Market (ISM) has been witnessing a surge in the number of IPOs listed in stock exchanges. However, in many occasions it has been noticed that post-listing performance of several IPOs are below par to the expectations of the investors. IPO performance has been one of the major concerns. In this context, the present paper endeavours to carry out a comparative performance assessment of a list of IPOs. We consider a period of three years after listing. Our sample consists of a list of IPOs having heterogeneous nature of business operations and introduced in 2018. We consider two aspects of the performance such as market-based indicators and fundamental efficiency in terms of profitability, liquidity and risk. For comparison, LOgarithmic Percentage Change-driven Objective Weighting (LOPCOW) is used. The study period is considered as Fy 2020-21. The results reflect that for IPOs, market performance does not necessarily because of the fundamental efficiency. Further, we notice that the nature of equity ownership does not influence the market performance significantly. We surmise that during initial years, the performance of the IPOs at the marketplace is more driven by speculations and short-term goals of the investors. The result of validation test indicates that the ranking using LOPCOW method is comparable and consistent with a widely used model like Entropy.

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Capital structure and return on capital employed of construction companies in Nigeria

Cited by 8 publications

References 0 publications

Financial leverage and corporate performance: does the duration of the debt ratio matters

Financial leverage and corporate performance: does the duration of the debt ratio matters

The Impact of Cost of Capital on Financial Performance: Evidence from Listed Non-Financial Firms in Nigeria

A Performance based Ranking of Initial Public Offerings (IPOs) in India

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