The Effect of Capital Structure on Profitability

Erdoğan, Seda

doi:10.4018/978-1-4666-6635-1.ch018

Cited by 5 publications

(9 citation statements)

References 17 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The results of the study of the second independent variable were in line with previous empirical findings conducted by Salim & Yadav (2012), Addae et al (2013), Le & Phan (2013), Tailab (2014), and Tifow & Sailir (2015). Similar to the first independent variable, the results of hypothesis testing on the second variable and previous empirical research were following the pecking order theory which, prioritizes the use of internal funds to meet the company's shortterm and long-term funding needs.…”

Section: B Long-term Debt Ratio To Profitabilitysupporting

confidence: 90%

“…Capital structure is a very sensitive subject in the field of financial management because it partly affects its profitability (Tailab, 2014). Thus, the intended aim of conducting this study was to investigate the effect of capital structure, consisting of short-term debt ratio (STD), long-term debt ratio (LTD), total debt ratio (TD), debt equity ratio (DER), and firm age and size, on profitability as measured by operating income margin (OIM), return on equity (ROE), and return on assets (ROA) of electricity companies in Southeast Asis for a period of eighth years (2009)(2010)(2011)(2012)(2013)(2014)(2015)(2016).…”

Section: Resultsmentioning

confidence: 99%

“…Furthermore, Tailab (2014) conducted a study of the relationship of capital structure (short term debt, long term debt, total debt, debt to equity ratio, and firm size) with profitability (ROE, ROA) in energy companies in America during the time period of 2005-2013. The empirical results showed that total debt had a significant negative impact on ROE and ROA.…”

Section: Empirical Evidence and Hypothesismentioning

confidence: 99%

See 2 more Smart Citations

The Effect of Capital Structure on Profitability of Electricity Companies In Southeast Asia

Wibowo¹,

Rahim²

2019

j. Organisasi dan manaj.

View full text Add to dashboard Cite

Capital structure is increasingly important in determining the optimal combination of funding for investment needs that can increase firm value from profitability. The study aims to examine the effect of capital structure on profitability of electricity companies in Southeast Asia. The study used multiple regression model represented by pooled least square to calculate 48-panel data from the annual financial report during the time period of 2009-2016. We utilized short-term debt to total assets (STD), long-term debt to total assets (LTD), total debt to total assets (TD), and debt to equity ratio (DER) as proxies of capital structure (independent variables). Operating income margin (OIM), return on asset (ROA), and return on equity (ROE) were the profitability proxies (dependent variables). Firm size and firm age were used as control variables in the study. The results of this study indicate that STD and LTD have a negative relationship that consequently has significant effect on LTD and OIM. Other than positive and negative relationships between the capital structure (TD and DER) and profitability, this study also finds that TD and DER have positive significant influence on OIM and ROE, but have negative insignificant relation with ROA. Thus, it is necessary to optimize the capital structure by adjusting the target of capital structure that can provide a balance on the marginal cost and marginal benefit.

show abstract

Section: B Long-term Debt Ratio To Profitabilitysupporting

confidence: 90%

Section: Resultsmentioning

confidence: 99%

Section: Empirical Evidence and Hypothesismentioning

confidence: 99%

See 1 more Smart Citation

The Effect of Capital Structure on Profitability of Electricity Companies In Southeast Asia

Wibowo¹,

Rahim²

2019

j. Organisasi dan manaj.

View full text Add to dashboard Cite

show abstract

“…The result shows 0.5549 at a 95% confidence interval and a positive 339.8008-point coefficient. The beta coefficient of positive 339.8008 for long-term debt (LTD), the Shariah firm's performance of Return on Equity (ROE) will increase by 339.8008 points for every 1 unit in long-term debt (LTD) (Erdoğan, 2014). This indicates that using a low level of debt might affect a company's return on equity.…”

Section: Return On Equity (Roe) In Shariah Firm Variables P-value Resultsmentioning

confidence: 99%

Determinants of Capital Structure from Shariah-Compliant Firms in Travel, Leisure and Hospitality Sector in Malaysia

Rohaizan¹,

Latif²,

Zulkifli³

et al. 2021

IJARBSS

View full text Add to dashboard Cite

Capital structure is essential to a firm as it influences both profit and risk to investors. A balanced capital structure reflects the overall health of the company. As a result, the goal of this research is to look into the capital structures of publicly listed Shariah-compliant firms in the travel, leisure, and hospitality sectors. This study examines 5 publicly listed Shariahcompliant companies in Malaysia throughout 2011 -2020, and the total number of observations utilized is 50. Independent variables such as tangible assets, debt-to-equity, and long-term debt are chosen to indicate capital structure. Profitability or performance is identified as the dependent variable of return on assets (ROA) and return on equity (ROE). The majority of the independent factors in Shariah firms showed a substantial association with the firm's success, according to the study's findings. Shariah businesses' asset tangible (TANG) and debt-to-equity (DTE) ratios have a positive connection with return on asset (ROA), but have an insignificant negative link with return on equity (ROE). Long-term debt (LTD), on the other hand, provided a negative insignificant return on asset (ROA) and a positive insignificant return on equity (ROE).

show abstract

“…The study by Akhtar et al (2012) shows that financial leverage improves financial performance for firms that have higher profitability. In contrast, Mohamed (2014) studies the financial performance of 30 American energy firms during the period of 2005-2013 and concludes that leverage and size in terms of sales negatively influenced the performance. Only the short-term debt enhances financial performance.…”

Section: Literature Reviewmentioning

confidence: 99%

Understanding Drivers of Renewable Energy Firm’s Performance

Morina

Ergün

Hysa

2021

EREM

View full text Add to dashboard Cite

The purpose of this study is to identify the drivers of profitability for renewable energy companies in the European Union (EU) during the period of 2004–2018. Specifically, the study investigates the effect of firm-specific, country-specific, and macroeconomic factors on the profitability of the listed renewable energy companies that have their headquarters in the EU. The profitability is measured as return on assets (ROA) and Tobin’s q. Factors that affect profitability are divided into three groups such as firm-specific, country-specific, and macroeconomic factors, and to provide consistent and unbiased results, distinct methods are used. The ordinary least square (OLS) and random effect Generalized Least Squares (GLS) model are employed first. Also, the two-step system generalized method of moments estimation is used to validate the hypotheses. The empirical findings show that firm-specific factors are more dominant in explaining profitability rather than macroeconomic factors. The dynamic models show that profit persists over the years. Also, it is revealed that firm size has a positive effect on profitability in all models. The hypothesis that firms’ growth enhances profitability is evident in the short run, but in the long run, it is insignificant. The leverage has a positive effect on Tobin’s q. In addition, the study finds that tradable green certificate schemes enhance long-term profitability (Tobin’s q). The financial crises discourage the financial performance of renewable energy firms. The study has implications for managers and policymakers that should give importance to firm-specific factors and country-specific factors to promote the profitability of renewable energy companies in order to be sustainable by reducing energy import dependency and ensure energy for the future generation. Special attention should be given to support schemes toward renewable energy to be more effective and enhance firm profitability. The contribution of this paper is that it is the first study that examines the drivers of profitability for renewable energy companies by accounting for firm-specific, country-specific and macroeconomic factors. The study includes a long-time period by using advanced panel data techniques. To add robustness, alternative measures of profitability are used.

show abstract

The Effect of Capital Structure on Profitability

Cited by 5 publications

References 17 publications

The Effect of Capital Structure on Profitability of Electricity Companies In Southeast Asia

The Effect of Capital Structure on Profitability of Electricity Companies In Southeast Asia

Determinants of Capital Structure from Shariah-Compliant Firms in Travel, Leisure and Hospitality Sector in Malaysia

Understanding Drivers of Renewable Energy Firm’s Performance

Contact Info

Product

Resources

About