Capital structure, product market competition and firm performance: Evidence from South Africa

Fosu, Samuel

doi:10.1016/j.qref.2013.02.004

Cited by 170 publications

(164 citation statements)

References 65 publications

(133 reference statements)

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“…The influence of debt on output growth of firms are determined from the slopes of the line segments. Similar relationship between output market performance and leverage has also been reported by [3]. Recent studies having shown the importance of country specific factors in determining capital structures of firms [4], [5], it may reasonably be expected that output growth-debt relationships will be different in different economies reflected through different knots and slopes for the piecewise line segments.…”

Section: Introductionsupporting

confidence: 70%

“…Product market performance has been represented by various proxies like pricing policies [23], Profitability [3], or Growth in annual sales [1]. As explained in section 1, the infusion of debt in capital structure is likely to influence a firm's policy towards increased level of output.…”

Section: Variables and Modelmentioning

confidence: 99%

“…Starting with [13], recently there has been a few efforts to understand the systemic issues specific to emerging markets in capital structure product market intervention ( [14], [3]. Although as a part of BRIC 1 , India represents a unique opportunity for global investors, there has been only couple of studies conducted on Indian market to the best of the knowledge of the present authors [15], [16].…”

Section: Introductionmentioning

confidence: 99%

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Product Market Performance and Capital Structure: A Hierarchical Bayesian Semi-Parametric Panel Regression Model

Mukhoti

Guhathakurta

2015

SSRN Journal

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The relationship between product market performance of a firm and its capital structure has drawn considerable amount of attention recently amongst corporate finance researchers. The same was established to be non-monotonic in the context of a developed market. The non-monotonicity in the functional form could be expressed by pieces of straight lines joined at different values of debt (or knots). In this paper we address the issue of estimating the slopes of different line segments along with the positions of the knots from a panel of firms using an adaptive hierarchical Bayesian semi-parametric regression model.Further,keeping in mind that such a relationship is less investigated in emerging economies where the debt market dynamics may be different we investigate the same for an emerging economy. In the process we provide the economic rationale for varying sign and magnitude of the slopes of the line segments discussed above.

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Section: Introductionsupporting

confidence: 70%

Section: Variables and Modelmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Product Market Performance and Capital Structure: A Hierarchical Bayesian Semi-Parametric Panel Regression Model

Mukhoti

Guhathakurta

2015

SSRN Journal

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“…In the context of financial leverage, which is in one of the significant indicators, there is evidence that competitive environment has non-linear influence within relevant levels (Fosu, 2013). Since reduced levels financial leverage have been linked with cost mitigation (Jensen & Meckling, 1976), and higher competitive environments have an inverse relationship with leverage ratios (Guney, Li & Fairchild, 2011), it can be inferred that the competitiveness driver of access to financing (Aggarwal & Goodell, 2014) as a resulting consequence to financial performance.…”

Section: Results Analysismentioning

confidence: 99%

Relationship between competitiveness and operational and financial performance of firms: An exploratory study on the European brewing industry

Zanotti

Reyes

Fernández

2018

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Purpose: The purpose of this paper is to provide the underlying constructs that connect the operational and financial performance of firms with the competitive environment surrounding the brewing industry in Europe. Design/methodology:The selected method of study is exploratory and confirmatory factor analysis, and subsequently applying structural equations modelling. We have sampled 214 brewing companies distributed in over 12 European economies. Findings:The study provides a comparison between different antecent studies, including contextual contrast in both an industry and a methodologic perspective. The study shoes that the competitive construct of the industry is significantly related with the financial performance of firms, however not necesarilly to the operational results. Additionally, the operational structure of the firm does not necesarilly provide significant relationship to the firms' financial results. Research limitations/implications:The research is segmented within the European brewing industry, hence we find potentian geographic delimiations in terms of the conclusions of this paper.Originality/value: Significant relationships between competitive variables and financial performance in the brewing industry remains evasive in research thus far. Additionally, sustained in the potential the brewing industry represents within Europe, it is significant to identify these relationships for readers on both an academic and industrial background.

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“…This goes in agreement with some authors who have argued that capital structure affect firm performance negatively (Avci 2016;Foo et al 2015). On the contrary, other scholars said capital structure and firm performance shares a positive relationship (Fosu 2013;Majumdar and Sen 2010). Still, there are those who argued that there is no relationship (Chaudhuri et al 2016;Davydov 2016;Chadha and Sharma 2015).…”

Section: Introductionmentioning

confidence: 98%

Contrasting the Effect of Risk- and Non Risk-Based Capital Structure on Insurers’ Performance in Nigeria

et al. 2017

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Literature on capital-based regulation and performance of insurers in emerging market is not only limited; it is incomplete, particularly on a comparative basis. This has continuously attracts researchers' interest and concerns for practitioners and policy makers. This paper therefore examines the effect of capital structure on performance of insurers comparatively before and after the implementation of risk-based capital (RBC) policy in Nigeria to determine which policy regime enables insurers to perform better. Descriptive statistics are employed to describe the characteristics of the data while the hypotheses are tested using two-stage estimation procedure of fixed and random effect models. Results reveal that insurance capital structure (measured by technical provision ratio) has a significant positive effect on insurance performance (measured by earnings per share and return on asset) during non-RBC regime when compared to RBC regime. Based on these findings, it is concluded that insurers in Nigeria performed better under non-RBC than RBC era. This finding provides important insight to managers, regulators and investors by fostering more understanding of how to manipulate and regulate insurance capital for performance optimization under RBC scenarios.

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Capital structure, product market competition and firm performance: Evidence from South Africa

Cited by 170 publications

References 65 publications

Product Market Performance and Capital Structure: A Hierarchical Bayesian Semi-Parametric Panel Regression Model

Product Market Performance and Capital Structure: A Hierarchical Bayesian Semi-Parametric Panel Regression Model

Relationship between competitiveness and operational and financial performance of firms: An exploratory study on the European brewing industry

Contrasting the Effect of Risk- and Non Risk-Based Capital Structure on Insurers’ Performance in Nigeria

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