Corporate Taxation and Firm-Specific Determinants of Capital Structure: Evidence from the UK and US Multinational Firms

Ali, Sarmad; Rangone, Adalberto; Farooq, Muhammad

doi:10.3390/jrfm15020055

Cited by 16 publications

(10 citation statements)

References 93 publications

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“…The results of this study conclude that there is no significant effect between the Effective tax rate on leverage. This study's results align with the research of Ali et al (2022) and Widayanti et al (2016), which state that corporate taxes do not affect capital structure. Where companies with high or low tax rates will not affect the capital structure, the company will not use debt that is too large in its operational activities to save taxes, and the use of loans will cause the company's image to decline.…”

Section: B T-test H1: There Is An Influence Between Corporate Taxes O...supporting

confidence: 91%

“…Meanwhile, tangibility, risk, profitability, and non-debt tax shields are significantly positively related to leverage. In this study, liquidity has a significant negative relationship with leverage (Ali et al, 2022) The Pefindo index consists of shares of Small and Medium Enterprises (SMEs). Based on data from the Ministry of Kementrian Koperasi dan Usaha Kecil dan Menengah (Kemenkop UKM) in 2021, the number of MSMEs in Indonesia reached 64.2 million with a contribution to the Gross Domestic Product (GDP) of 61.07% or Rp.…”

Section: Introductionmentioning

confidence: 91%

“…One of them is the effect of corporate tax on leverage. Ali et al (2022) saw no effect of corporate tax on leverage. Firm size from the results of Lim (2012) research shows a significant positive effect on leverage.…”

Section: Introductionmentioning

confidence: 99%

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Determinants Capital Structure of Small and Medium Enterprises in Indonesia

Hailla,¹,

Leon²

2022

IJSSHR

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This research aims to analyze the determinants of capital structure. The independent variables in this study are corporate taxes, company size, tangible assets, corporate risk, profitability, non-debt tax protection, and liquidity. While the dependent variable is short-term debt, long-term debt, and total debt. The sample of this study uses 61 Small and Medium Enterprises companies listed on the Pefindo Index for the period of 2019-2021. The sampling technique uses purposive sampling and the analysis method uses panel data regression. The results explained that corporate taxes, tangible assets, and non-debt tax shields do not affect capital structure. Company size does not affect short-term debt and total debt. However, it has a significant negative effect on long-term debt. Company risk and liquidity significantly negatively affect short-term debt and total debt. However, it does not affect long-term debt. Profitability has a significant positive effect on short-term debt and a significant negative effect on long-term debt. The implication of the research that has been done is to provide direction for financial managers regarding the optimal use of capital structure to achieve the company's goal of increasing the welfare of shareholders. As for investors, investors should choose companies that have high company size, low risk, and high liquidity.

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Section: B T-test H1: There Is An Influence Between Corporate Taxes O...supporting

confidence: 91%

Section: Introductionmentioning

confidence: 91%

See 1 more Smart Citation

Determinants Capital Structure of Small and Medium Enterprises in Indonesia

Hailla,¹,

Leon²

2022

IJSSHR

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“…In [10] authors investigate the differences in the factors determining the capital structure in both developed and developing countries and found a negative association between profitability and leverage in all investigated countries. On the other hand, [11] find a positive relationship between leverage and profit when investigating a sample of US and UK firms over the period 2011-2019. Lastly, [12] predicted a negative relationship between profitability and profit when investigating the factor affecting the capital structure in Indonesian market from 2017 to 2021.…”

Section: Profitabilitymentioning

confidence: 95%

Determinants of Capital Structure Evidence from Saudi Arabia

Alabdulkarim

2023

JEMT

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This study aims toinvestigate the most important determinants of capital structure in non-financial Saudi Arabian firms listed in Saudi Stock Exchange (TADAWUL) from 2010-2021, using a fixed effect with robust standard regression. Theories of capital structure have different views and conclusions as well as the empirical works. Thus, determining the factors affecting the capital structure in a different context like Saudi Arabia that has a unique feature such as the absence of corporate tax, undeveloped and illiquid bond market, will add to the existing literature. The study finds a positive relationship between each size, asset tangibility, and market- to book with firm leverage On the other hand, there is a negative relationship is found between profitability and sales growth. Some of the findings are consistent with the trade-off theory such as firm size while some of the findings support the picking order theory. Empirical findings should help corporate managers understand the nature of the market and make optimal capital structure decisions.

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“…Further, increase in profitability is associated with a decrease in leverage indicating a negative relationship [19]. Studies claim that positive and significant effect of tangibility in long-term debt while short-term debt reveal significantly negative relations and hence in multinational firms, unequivocally response to the capital structure exists [20].…”

Section: Tangibilitymentioning

confidence: 98%

Capital Structure Decisions of Listed Firms in Transport Equipment Industry in India

Shilpa

Amulya

2022

AJEBA

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Aims: The study predominantly attempts to examine the capital structure decisions of listed firms in Transport Equipment Industry by analyzing the relationship between leverage and profitability. Study Design: Descriptive research design is used to describe the characteristics of the firms belonging to industry. The study envisages an extensive use of data extracted from professional database CMIE prowess and from reports Ministry of Statistics and Programme Implementation, Annual Survey of Industries and Satista. Place and Duration of Study: The sample for the study consists of all listed firms National Stock Exchange (NSE) affiliated under Transport equipment Industry (CMIE classification). There were totally 86 firms as on 31st March 2018. The relevant data sets are retrieved for a period of 10 years (2008-2018). Thus, a panel data of 860 different observations were considered for study. Methodology: To analyze the data collected, Econometric model for longitudinal data with repeated measures known as Hierarchical linear regression model is adopted. This helps in estimation of industry grand mean, segment mean and firm mean for multilevel nested data. Results: The result of the study indicates that segment means are approximately equal to industry mean of 0.2898. Further, the segment-level means of all eight segments follows normal distribution with firms having high and low leverage firms. Finally, the firm-level variance is comparably high indicating that firms’ influence on capital structure decisions is predominant of all in this industry which has been found to be consistent over past decade. Conclusion: The underleveraged firms in Transport Equipment Industry exhibit relatively higher average Return on Equity (ROE) and Return on Capital Employed (ROCE) compared to optimal leveraged firms. On the other hand, overleveraged firms indicate inverse relationship with profitability. This is justified by the pecking order theory that higher profitable firms incorporate internally generated funds available at lower cost compared to external financing.

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Corporate Taxation and Firm-Specific Determinants of Capital Structure: Evidence from the UK and US Multinational Firms

Cited by 16 publications

References 93 publications

Determinants Capital Structure of Small and Medium Enterprises in Indonesia

Determinants Capital Structure of Small and Medium Enterprises in Indonesia

Determinants of Capital Structure Evidence from Saudi Arabia

Capital Structure Decisions of Listed Firms in Transport Equipment Industry in India

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