The Impact of Financial Leverage on Firm’s Profitability: An Empirical Evidence from Listed Textile Firms of Bangladesh

Rahman, Md. Musfiqur; Saima, Farjana Nur; Jahan, Khurshid

doi:10.13106/jbees.2020.vol10.no2.23

Cited by 32 publications

(32 citation statements)

References 26 publications

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“…For Floros & Voulgaris (2016) and Almaqtari et al (2019) [ 42 , 62 ], indebtedness does not affect profitability. In contrast, Rahman et al (2020), Alarussi & Alhaderi (2018), and Asimakopoulos et al (2009) [ 9 , 63 , 64 ] conclude that the degree of leverage has a negative effect on profitability. On the contrary, Singapurwoko and El-Wahid (2011) [ 65 ] and Becker-Blease et al (2010) [ 66 ] state that debt has a positive impact on ROA but a negative effect on ROE.…”

Section: Literature Review and Research Hypothesesmentioning

confidence: 98%

“…According to the literature, the degree of leverage is one of the most widely used indicators in profitability research. 2009) [9,63,64] conclude that the degree of leverage has a negative effect on profitability. On the contrary, Singapurwoko and El-Wahid (2011) [65] and Becker-Blease et al ( 2010) [66] state that debt has a positive impact on ROA but a negative effect on ROE.…”

Section: Literature Review and Research Hypothesesmentioning

confidence: 99%

“…It is calculated as the ratio of the company's net profit after tax to shareholders' equity. This indicator has been widely used in studies such as Al-Jafari & Alchami (2014), Alarussi & Alhaderi (2018), Banerjee (2015), Burja (2011), and Rahman et al (2020) [9,36,38,63,89].…”

Section: Financial Profitabilitymentioning

confidence: 99%

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Profitability determinants of the natural stone industry: Evidence from Spain and Italy

Farías

Martínez²,

Martín-Cervantes³

2022

PLoS ONE

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The natural stone sector is an important driver of the Spanish and Italian economies, which underwent internationalization after the financial crisis of 2008 as part of a survival and development strategy. This article aims to study the financial and economic profitability of this sector in the two leading European production countries, as well as its determinants. For this purpose, the economic-financial data of a sample composed of 453 companies (203 Spanish and 250 Italian) from 2015–2019 were analyzed using the multiple linear regression methodology. To address the problems of possible endogeneity and omission of variables in the model, the dependent variable was used as a regressor with one and two lags, and panel data with fixed effects were considered after performing the Hausman test. The results show significant differences between the two countries, with higher profitability in Italy. Company size, company growth (measured as the change in assets), and the variation in the country’s GDP all positively affected profitability. At the same time, the level of indebtedness showed a negative relationship. The country’s inflation rate and gender diversity in top management were shown to be non-relevant variables. The research conducted indicates that, to increase profitability, Spanish and Italian companies in the natural stone sector should undergo mergers in order to grow in size, increase efficiency in the use of assets, reduce their dependence on external financing, and promote equity capital. In addition, Italian companies should reduce the average period of payment to suppliers to lower deferral costs, and boost exports to become less dependent on the country’s domestic economy.

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Section: Literature Review and Research Hypothesesmentioning

confidence: 98%

Section: Literature Review and Research Hypothesesmentioning

confidence: 99%

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Profitability determinants of the natural stone industry: Evidence from Spain and Italy

Farías

Martínez²,

Martín-Cervantes³

2022

PLoS ONE

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“…The aim of [48] is to assess the impact of financial leverage on a company's profitability in the Bangladeshi textile sector. A company's profitability is measured by the return on equity (ROE) and short-and long-term debt are used as financial leverage proxies.…”

Section: Firm Size and Corporate Financial Performancementioning

confidence: 99%

The Impact of Size on the Performance of Transnational Corporations Operating in the Textile Industry in Portugal during the COVID-19 Pandemic

Santos

Castanho

2022

Sustainability

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The aim of this work is to understand the impact of size on the performance of transnational corporations (TNCs) operating in the textile and clothing industry in Portugal during the COVID-19 pandemic. For this purpose, we used ORBIS data for the period 2019–2020 and narrative, financial and correlation analyses to assess the performance of five companies. Thus far, the impact of company size on the competitiveness of Portuguese textile affiliates during the pandemic has remained unexplored. The results show that smaller firms performed better than larger ones, likely due to the higher fixed costs of the latter at times when orders declined worldwide. Our analysis suggests that there are some characteristics of TNCs that matter in explaining company-level performance during crises, such as management experience and flexibility. Furthermore, as Portugal is a major European textile exporter, it is useful for the host country to assess the economic sustainability of its foreign investors. The results provide some policy recommendations regarding the promotion of foreign direct investment (FDI) in Portugal.

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“…Kekuatan laba yang tinggi dianggap memberikan sinyal positif bagi pemegang saham maupun kreditur karena pemegang saham mengharapkan dividen yang tinggi dan kreditur mengharapkan perusahaan dapat melunasi utangnya dalam jangka panjang sesuai dengan masa jatuh tempo pelunasan utang. Rahman et al (2020) menjelaskan bahwa perusahaan yang memiliki keuntungan tinggi cenderung tidak memerlukan pembiayaan eksternal karena perusahaan memiliki laba ditahan yang tersedia sebagai sumber dana internal. Apabila sumber dana internal tidak dapat mendukung kebutuhan investasi, maka perusahaan menggunakan utang untuk membiayai kebutuhan perusahaan.…”

Section: Hasil Dan Pembahasanunclassified

Fenomena Kekuatan Laba di Masa Covid-19: Suatu Pengujian Keputusan Pembiayaan Utang dan Tindakan Penghindaran Pajak

Rossa

2022

sakman

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Purpose: This study aims to determine the effect of debt financing decisions and tax avoidance actions on earnings power during the COVID-19 period. Method: The sample of this study uses the property and real estate sub-sector companies listed on the Indonesia Stock Exchange (IDX) in 2020. The sample determination uses the purposive sampling method, so that this study obtains a final sample of 33 issuers. The analytical tool used to test the hypothesis is eviews version 11. Results: This study finds that debt financing decisions and tax avoidance have a negative and significant effect on earnings power during the COVID-19 period. Limitations: This study found that debt financing decisions and tax avoidance measures can only affect profit strength during the Covid-19 period by 14,07%. This condition shows that there are other variables that can affect the phenomenon of earnings power during the Covid-19 period, but are not included in this study. In addition, this study is limited to using a final sample of 33 companies out of a total of 77 companies in the property and real estate sub-sector due to the large number of issuers who suffered losses during the COVID-19 period. Contribution: to companies belonging to the property and real estate sub-sector as a form of evaluation of low earning power that can be influenced by debt financing decisions and tax avoidance actions. In addition, this study can also be used as a reference for companies that have the potential to experience a crisis in deciding whether or not to take action to finance debt and even avoid tax. This study also seeks to fill the void of previous studies which were still limited to examining the effect of debt financing decisions and tax avoidance measures on profit strength during the Covid-19 period by involving the property and real estate sub-sectors that had the most impact on the Covid-19 condition.

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The Impact of Financial Leverage on Firm’s Profitability: An Empirical Evidence from Listed Textile Firms of Bangladesh

Cited by 32 publications

References 26 publications

Profitability determinants of the natural stone industry: Evidence from Spain and Italy

Profitability determinants of the natural stone industry: Evidence from Spain and Italy

The Impact of Size on the Performance of Transnational Corporations Operating in the Textile Industry in Portugal during the COVID-19 Pandemic

Fenomena Kekuatan Laba di Masa Covid-19: Suatu Pengujian Keputusan Pembiayaan Utang dan Tindakan Penghindaran Pajak

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