The Impact of the Capital Structure on the Performance of Companies – Evidence from Albania

Abstract

In this study, we investigate the relationship between the capital structure and the profitability of the firms. We focus our study unto 53 construction companies of Albania for years 2016 -2019, and by calculating variables to measure both capital structure and profitability, we run multiple regression analysis. We use Return on Assets and Return on Entity to measure profitability and up to five different variables to measure the capital structure. We notice that the construction companies use mainly the short-term leverage to fund their activities. The regression results show that there is no significant impact of the capital structure on the profitability of the firm, whereas we notice a significant relationship between the capital structure and the Return on Entity of these firms. More specifically, our results show that the current liabilities to total assets ratio and the current liabilities to total liabilities ratio have a negative correlation with the Return on Assets of the entities. The non-current liabilities to total assets, current liabilities to total assets and total liabilities to total equity ratios have a positive relationship with the Return on Equity of these firms, with the last ratio having the biggest impact. These findings contribute to the existing literature on the relationship between capital structure and performance and give hints to more profitable ways of financing for these companies such as relying on long-term financing or finding alternative ways in regional capital stock markets.

The moderating and mediating effects of corporate governance and capital structure on firm performance: empirical evidence from an emerging market

“…Other studies finding a negative linkage between CS and FP are Seetanah et al (2014) in Mauritius, Li et al (2018) in European small and medium enterprises (SMEs) and Doorasamy (2021) in East Africa. Abata et al (2017) and Perri and Cela (2022) report mixed results in South Africa and Albania, respectively. However, Connelly et al (2012) find no link between CS and FP and claim that by taking on more debt, companies may fall under the control of creditors, who will monitor the firms more closely resulting in highly leveraged companies performing better than low leveraged firms.…”

Impacto de la información financiera en la consecución del desarrollo empresarial en Colombia

“…No obstante, cuando se trata de medir la rentabilidad de la inversión, y la capacidad de la empresa, se procura orientar la toma de decisiones de inversión desde el ámbito externo, mediante el índice de rentabilidad financiera; a partir del resultado neto de impuestos, el cual debe medirse respecto al capital que lo produce (Shkurti y Cela, 2022). A nivel global, es conocido como ROE (Return on equity), permite calcular el rendimiento de la inversión de los socios o propietarios en términos porcentuales, en relación con el capital invertido en el período (Melnychuk et al, 2020).…”

“…La toma de decisiones también incluye las fuentes de financiación (Shkurti y Cela, 2022), y su coherencia con el destino de los recursos (Mbona y Yusheng, 2019), así como los plazos de recuperación de la inversión respecto al período de amortización de la 309 Revista de Ciencias Sociales, Vol. XXIX, No.…”