Taxes and Capital Structure: Evidence from Firms’ Response to the Tax Reform Act of 1986

Givoly, Dan; Hayn, Carla; Ofer, Aharon R.; Sarig, Oded

doi:10.1093/rfs/5.2.331

Cited by 196 publications

(112 citation statements)

References 33 publications

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“…Table 3 shows that profitability has a significant negative relation between the profitability and the gearing. This result is consistent with the pecking order theory and, also, matches with the empirical results of Titman and Wessels (1998), Rajan and Zingales (1995), Booth et al (2001) and Bevan and Danbolt (2002), but it contradicts with the tradeoff theory and the empirical results of Bowen et al (1982), Givoly et al (1992) where profitable firms should use more debt to benefit from the tax shield. Table 3, it is found that tangibility has the biggest coefficient indicating the importance of tangibility in the capital structure decision and the degree to which capital structure is influenced by tangibility.…”

Section: Regression Resultssupporting

confidence: 76%

Capital structure and performance of Middle East and North Africa (MENA) banks: an assessment of credit rating

El‐Masry

2016

Banks and Bank Systems

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The firm's credit rating is an important communication tool and previous research has shown that many companies consider it important in capital structure decisions. This study examines the determinants of capital structure in MENA banks. In addition, it investigates the determinants of credit rating. Further, the impact of credit rating and capital structure on banks' performance is examined. Therefore, this study is an attempt to answer the following questions: 1) what are the main determinants of capital structure? 2) how does credit rating affect capital structure? 3) what are the main determinants of credit rating? and 4) what is the effect of capital structure and credit rating on bank performance? The sample covers 169 banks and is divided into two sub-samples: rated (79) and non-rated banks (90). The results indicate that credit rating directly affects the capital structure decisions as rated banks use more debts than non-rated banks. Banks' performance is positively associated with credit rating and negatively with the capital structure. This study has an implication on investors in their decisions to invest in the banking industry. It also helpful for policy makers to understand how bank's capital structure behaves so they could take it into consideration when issuing new regulations such as Basel.

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Section: Regression Resultssupporting

confidence: 76%

Capital structure and performance of Middle East and North Africa (MENA) banks: an assessment of credit rating

El‐Masry

2016

Banks and Bank Systems

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“…Inconsistently, Drobetz et al (2013), and Arvanitis et al (2012) found that profitability is negatively and significantly correlated with leverage for the shipping firms. The finding of this study is also contradicting with Ozkan (2001), Kester (1986), Friend and Lang (1988), Shyam-Sunder and Myers (1999), and also Baskin (1989) with inverse relationship, and Bowen et al (1982), Dammon and Senbet (1988) and Givoly et al (1992)'s positive relationship between profitability and leverage.…”

Section: Results Of Panel Data Regressionscontrasting

confidence: 99%

Sermaye Yapısını Etkileyen Faktörler: BIST Ulaştırma Endeksinde Bir Uygulama

Akgül¹,

Sigali²

2018

Muhasebe Ve Finansman Dergisi

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“…A number of prior studies provide empirical evidence supporting a positive relationship International Finance and Banking ISSN 2374-20892016 between capital structure and corporate financial performances like Nirajini & Priya (2013), Abu Rub (2012), San & Hang (2011), Margaritis & Psillaki (2010), Frank & Goyal (2003), Holz (2002), Hadlock & James (2002), Ghosh et al (2000), Champion (1999), Roden & Lewellen (1995), Petersen & Rajan (1994), Givoly et al (1992); Malanic et al (2013). As for this positive relationship, these studies concludes that profitable firms (either firms with higher financial performance) will tend to have a large portion of debt finance in their capital structure, there are several reasons behind this situation.…”

Section: A Significant Positive Relationship Between Capital Structurmentioning

confidence: 99%

Does Corporate Capital Structure influence Corporate Financial Performance in Developing Economies? Evidence from East African Stock Markets

Mwambuli¹

2016

IFB

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This paper examines the statistically significant influence which capital structure has had on corporate financial performance of listed non-financial companies in East African stock markets. It used panel data of 272 observations including 34 East African non-financial listed firms listed in East African stock markets such as Dar Es Salaam Stock Market (DSE), Nairobi Securities Exchange (NSE) and Uganda Securities Exchange (USE) for a period of 8 years (i.e., 2006-2013). Using the Panel Corrected Standard Errors (PCSEs) and Fixed Effect (FE), the study formulated two econometric models with return on assets (ROA) and return on equity (ROE) as dependent variables and measures of corporate financial performance respectively, three independent variables such as short term debt ratio (STDR), long term debt ratio (LTDR) and total debt ratio (TDR) as a measure of capital structure, furthermore the study used size of the firm (SIZ) as a control variable in order to control the differences in firm's operating environment. The result indicates that capital structure has a negative and statistically significant influence on East African listed firm's financial performance at 5% significance level. These results show that in average profitable listed firms in East African prefers to use internal source of financing in their capital structure as compared to external source of financing (like Debts-STDR, LTDR and TDR) and this results are supporting pecking order theory. Lastly the study recommends to corporate financial managers of East International Finance and Banking ISSN 2374-2089 2016 African non-financial listed firms should reduce financing their operations and growth by debt (STDR, LTDR and TDR) on their capital structure in order to enhance their corporate financial performance, regulatory authorities in East African region such as East African member states securities regulatory authority (EASRA) to formulate policies that will improving of financial markets in the region in order to reduce the cost of debt, further research could examine the influence (if any) of capital structure on sector wise (as per industry-like Manufacturing firms) for East African non-financial listed firms, take into account more control variables which are likely to influence financial performance such as macroeconomic variables (like gross domestic product-GDP) and consider other capital structure theories like, market timing theory, agency theory which were not considered in our study.

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Taxes and Capital Structure: Evidence from Firms’ Response to the Tax Reform Act of 1986

Cited by 196 publications

References 33 publications

Capital structure and performance of Middle East and North Africa (MENA) banks: an assessment of credit rating

Capital structure and performance of Middle East and North Africa (MENA) banks: an assessment of credit rating

Sermaye Yapısını Etkileyen Faktörler: BIST Ulaştırma Endeksinde Bir Uygulama

Does Corporate Capital Structure influence Corporate Financial Performance in Developing Economies? Evidence from East African Stock Markets

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