The heterogeneous impact of leverage on firm performance: empirical evidence from Bangladesh

Das, Nirmol Chandra; Chowdhury, Mohammad Ashraful Ferdous; Islam, Nazrul

doi:10.1108/sajbs-04-2020-0100

Cited by 19 publications

(15 citation statements)

References 55 publications

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“…The results are in contrast to the study by Das, Chowdhury, and Islam (2021) in Bangladesh which found a negative relationship between financial leverage and firm performance proxied as ROE and ROA. Also, Samo and Murad (2019) in Pakistan found a negative relationship between leverage and profitability (ROA and ROE).…”

Section: Discussion Of Findingscontrasting

confidence: 99%

“…Prior studies have explored the firm's debt-equity mix and performance nexus from several perspectives in different countries (Akeem, Terer, Kiyanjui, &Kayode, 2014;David &Olorunfemi, 2010;Nima, Mohammad, Saeed, &Zeinab, 2012;Salim&Yadav, 2012;Uremadu&Onuegbu, 2019;Vătavu, 2015). Empirically, Das, Chowdhury, and Islam (2021) in Bangladesh, Chakraborty (2010) in India, and the study by Huang and Song (2006) in China found a negative relationship between leverage and firm performance, proxied using ROA, ROE, and EBIT. Others, such as Khan (2012) in Pakistan; Sadeghian, Latifi, Soroush, and Aghabagher (2012) in Iran also find a negative relationship.…”

Section: Introductionmentioning

confidence: 99%

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Debt Financing And Firm Valuation Of Quoted Non-Financial Firms In Nigeria Stock Exchange

Oranefo

Egbunike²

2022

IJFAM

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Purpose: This study examined the effect of debt financing on the firm valuation of quoted non-financial firms on the Nigerian Stock Exchange (NSE). The study specifically evaluated the effect of short-term debt to equity, long-term debt to equity, and total debt to assets on Tobin’s Q for the period 2011 to 2019. Methodology: The study adopts the ex post facto research design. The sampling technique utilized in the study was non-probability sampling. The final sample comprised seventy-five firms quoted non-financial firms on the Nigerian Stock Exchange (NSE). The secondary data obtained from MachameRATIOS®were analyzed using panel regression techniques. Unlike prior studies, the study also employs the Arellano Bond Dynamic Panel-data Estimation Model for robustness analysis. Results: There is a negative effect of short-term debt to equity on Tobin’s Q. The effect of long-term debt to equity and total debt to assets was positive and significant. Limitations: The main limitation is the unbalanced nature of some sectors due to data unavailability. Contribution: The study contributes to the literature in the context of developing countries, on the effect of long-term debt on firm valuation; consistent with the trade-off theory of the cost of long-term debt financing as an alternative to internal funding. Keywords: 1. Debt financing 2. Short-term debt 3. Long-term debt 4. Tobin’s Q

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Section: Discussion Of Findingscontrasting

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Debt Financing And Firm Valuation Of Quoted Non-Financial Firms In Nigeria Stock Exchange

Oranefo

Egbunike²

2022

IJFAM

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“…Financial leverage is a financial policy related to a company’s decision to finance and shows the investment of its domestic resources compared with financing through loans (Irwansyah et al , 2017). Leverage indicators have a negative impact on a firm’s value and performance in terms of return on equity and return on asset and a greater negative impact of leverage on performance in high-profitable firms than in low-profitable firms (Das et al , 2022).…”

Section: Methodsmentioning

confidence: 99%

Nonfinancial sustainability reporting, management legitimate authority and enterprise value

Arianpoor

Salehi

Daroudi

2023

SRJ

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Purpose The purpose of this study is to assess the impact of nonfinancial sustainability reporting (NFSR) on enterprise value moderated by the management legitimate authority (MLA) for companies listed on the Tehran Stock Exchange. Design/methodology/approach To this aim, 190 firms were assessed during 2014–2019. This study used Arianpoor and Salehi’s indicators. The scoring method for NFSR, environmental sustainability reporting (ESR), social sustainability reporting (SSR) and governance sustainability reporting (GSR) was based on Zimon et al. Also, the CEO pay slice index was used to calculate the management’s legitimate authority. Tobin’s Q was used as a standard measure for the firm value, providing a suitable means of comparison. Findings The results revealed that NFSR affects enterprise value positively. In addition, ESR and SSR positively affect the enterprise value. However, GSR did not affect the enterprise value. MLA affects the relationship between NFSR/ESR/SSR/GSR and enterprise value, resulting from the effect of MLA on firm-related information quality and transparency. Practical implications Linking NFSR and management’s legitimate authority to firm value will enable managers to lead in helping firms enhance transparency and disclosure, improving their reporting standards and increasing the enterprise value. This, in turn, will ultimately result in better sustainability and governance practices. Social implications The results can help understand that analysts and investors somehow consider discussions related to the NFSR in decisions related to the company’s value, and positive market reactions to these practices’ disclosures can motivate firms to improve value and performance. Originality/value The majority of prior research in this field has focused on developing countries. An international perspective is critical, and this study helps draw a more contextualized picture of sustainability than before. In addition, the present research explored the management’s legitimate authority role, which is considered an innovative aspect.

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“…As a control variable, financial leverage (LEV), which is calculated as the ratio of total debt to total assets, has been utilized. Using dynamic panel techniques, Das et al (2021) looked at the heterogeneous impact of leverage on the performance of 165 listed nonfinancial companies in Bangladesh from 2007 to 2016 and discovered that the firms" performance was negatively impacted by leverage. However, Vo and Ellis (2017) found that there is a positive relationship between leverage and performance when the firm is using optimal leverage, and when the firm is unable to modify its capital structures, the relationship turns negative.…”

Section: Variable Descriptionmentioning

confidence: 99%

Ownership Structure, Board Characteristics and Firm Performance: Evidence from Bangladesh

Salema¹

2023

IJEF

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Using a panel of listed manufacturing companies in Bangladesh, this paper intends to empirically assess the relationship between firm-level governance mechanisms and firm performance using an integrated theoretical framework. For this purpose, data has been compiled from Dhaka Stock Exchange (DSE); and published yearly annual reports of particular organizations. The empirical findings of this paper shed light on the impact of ownership structure and board characteristics on its firm’s performance measure by the accounting rate of the return on assets. Although these results are in line with the majority of the literature, this model can still be examined using other proxy measures of firm performance and/or more years of observation. Findings of this study can be useful to managers, investors, and regulators, especially those who want to change their company’s ownership structure and board composition to increase its performance on the stock market.

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The heterogeneous impact of leverage on firm performance: empirical evidence from Bangladesh

Cited by 19 publications

References 55 publications

Debt Financing And Firm Valuation Of Quoted Non-Financial Firms In Nigeria Stock Exchange

Debt Financing And Firm Valuation Of Quoted Non-Financial Firms In Nigeria Stock Exchange

Nonfinancial sustainability reporting, management legitimate authority and enterprise value

Ownership Structure, Board Characteristics and Firm Performance: Evidence from Bangladesh

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