Chapter three compares the capital structures of large, quoted firms and smes in ghana. In their study, modigliani and miller 1958 argued that capital structure was irrelevant to firm value. Thesis for the master of management in finance and. This research led to the development of a model of capital structure. Capital structure was proxied by debt equity ratio while performance focused on return on equity. During the depression period, the companys capital structure generally consists of debentures and loans. In that respect, the thesis bychapter format may be advantageous, particularly for students pursuing a phd in the natural sciences, where the research content of a thesis consists of many discrete experiments.
Capital structure decisions and the relative efficiency of chapter 11. A study on determinants of capital structure in india. Three essays on bank capital structure, performance, and. Capital structure and firm performance federal reserve. The capital structure theory was pioneered by modigliani and miller 1958. Financial management and profitability of small and medium. Clarity is paramount when determining the structurelayout of your dissertation. It is the employment of an asset source of finance for which. Determinants of capital structure univerzita karlova.
To evaluate the interrelationship between capital structure and performance to determine the determinants of a capital structure 5. It specifically examines the market timing theory of capital structure in the three different empirical chapters. The impact of capital structure on firms performance in nigeria. Three different areas of research are followed and, employing different estimation techniques and methods, this thesis offers the following results.
In this section, we analyze the optimal capital structure of the firm with the option to reorganize or liquidate. Gajurel, dinesh prasad 2005, capital structure management in nepalese enterprises, masters degree thesis, kathmandu. Modigliani and miller 1958 were the first ones to landmark the topic of. In this thesis, the researcher will enhance understanding in the area of capital structure. Download fulltext pdf download fulltext pdf determinants of banks capital structure. The first essay investigates the determinants of bank capital structure taking into account the impact of the crisis, banks systemic size and risks. Pdf capital structure management in nepalese enterprises. Krauseova 1995 describes the capital structure of czech firms in the period from 1990 to 1993. Akoya develops points of view about valuation and capital structure and economic models which bring together strategy, valuation and capital, creating a credible and compelling story for investors. Ogebe, patrick and ogebe, joseph and alewi, kemi 27 march 20 online at mpra paper no.
Irrelevance theorem a benchmark striking result is that under fairly general conditions, the value of the firm defined as the sum of value of debt and. Ubira etheses capital structure and dividend policy. Download latest collection of mba projects on capital structure from this site for free of cost. There is a negative relationship between capital structure and financial performance. One of the most perplexing issues faced by finance managers is to know about the effect of capital structure on the profitability of firm. The aim of this empirical study is to explore the factors that affect the capital structure of manufacturing firms and to investigate whether the capital structure models derived from western settings provide convincing explanations for capital structure decisions of the pakistani firms. This thesis consists of three empirical essays on contemporary issues related to the banking and financial sector, particularly banks capital, performance, and financial inclusion. The value of an enterprise depends on expected earnings and cost of capital. The data are downloaded from the wellused database datastream that is used by. The thesis begins by defining the research problem and questions, and providing a justification for the research study. There is also significant theory on the capital structure of firms and its determinants. Clarity is paramount when determining the structure layout of your dissertation. A thesis submitted in fulfilment of the requirements for the.
Our experienced deal team guides all aspects of the transaction in order to ensure certainty of close. Capital structure, corporate cash holding and dividend. The thesis consists of seven chapters, including five main standalone research papers. When the stock is traded and markets are viewed to be efficient, the objective is. Given that the market timing theory is new relative to the tradeoff and pecking order explanations of firms. Using a sample of the european economic areas listed. Pdf determinants of capital structure and testing of theories for. Capital structure theory asks what is the optimal composition between debt and equity. Pdf the impact of capital structure on firms performance. Lambrinoudakis submitted in fulfillment of the requirements for the degree of doctor of philosophy department of banking and financial management university of piraeus piraeus 2012. As is standard in capital structure models, the equityholders internalize the inefficiency of their expost optimal bankruptcy procedure when they issue debt. For a description of this les purpose, and instructions on its use, see below. Aswath damodaran 3 the objective in decision making n in traditional corporate finance, the objective in decision making is to maximize the value of the firm.
Capital structure a reading prepared by pamela peterson drake outline 1. Due to the homogeneous accounting standard, singlecountry study is preferable over multicountry studies. The capital structure puzzle is unravelled and a clear. Firstly, the leverage trends across the countries are very low and stable, with country and firm specific factors playing a significant.
The paper identifies the most important determinants of capital structure of 870 listed indian firms comprising both private sector companies and government companies for the period 20012010. This thesis centres on capital structure, corporate cash holdings, and dividend policy in african countries. Dissertation capital structure and firm performance. The sample of this research is smes in the east coast region of malaysia. The author wishes to express gratitude to his thesis supervisor, professor. Students can find project reports, seminar topics, ppt, pdf, abstracts for free download. We argue that the use of leverage either to discipline managers or to achieve economic gain is the easy way out, and, in many instances, can lead to the demise of the organization. Chapter 3 develops a model where capital structure decisions are centered around the firms liquidity needs, while still accounting for tax benefits, the cost of financial distress and collateral. This decision in a private enterprise is directed towards the achievement of maximization of the shareholders wealth or value of the firm. The main question posed by capital structure research is whether the value of a firm is affected by its capital structure. This thesis studies capital structure of nonfinancial firm in the uk.
Capital structure denotes means a firm funds its operations using some blend of equity plus debt. Capital structure can be of various kinds as described below. Capital structure is also referred as financial structure of a firm. This study makes several important contributions to the existing studies of capital structure. The impact of capital structure on firms performance in. Hypotheses the following hypothesis is formulated for the study h 0.
This thesis aims to add empirical evidence to the corporate finance literature by looking at two main financing issues, namely firms payout policies and capital structure decisions, in the context of emerging markets. Ten independent variables and three dependent variables have been tested using regression analysis. Modigliani and miller 1958 were the first ones to landmark the topic of capital structure and they argued that capital structure was. This thesis consists of a study of english and us corporate finance law and, in particular, the law in relation to hybrid financial instruments. The goal of this chapter is to discuss the various theories that help to explain the determination of capital structure. Structure theories capital structure capital structure is the proportion of debt and preference and equity shares on a firms balance sheet optimum capital structure is that at which the weighted average cost of capital is minimum and thereby maximum value of the firm traditional approach the traditional approach argues that moderate degree of debt can lower the firms overall. Capital structure theories introduction capital structure decision is a significant decision in financial management. Relationship between capital structure and performance of. These les are distributed under the gpl which should be included here in the future. In order to answer this question, capital structure literature explores the following issues. Bauer and bubak 2003 test for the existence of optimal capital structure and for relevance of signaling theory in the case of czech listed firms. Therefore this thesis excludes from examination all the derivative instruments, while it focuses on two main types of hybrid security, in relation to. The theory and practice of corporate capital structure january 2006 2 liability strategies group executive summary this paper discusses the theory and practice of corporate capital structure, drawing on results from a recent survey. Chapter iii concepts and theories of capital structure and profitability.
While in period of boons and inflation, the companys capital should consist of share capital generally equity shares. Capital structure, corporate cash holding and dividend policy. Please credit all quotes and references from this publication as sierracedar global human capital management best practices white paper by lexy martin and stacey harris, vice presidents, research and analytics at sierracedar. This thesis is an empirical investigation of three related capital structure dynamics. Firms that incur external financing costs face a complex decision when they optimize the capital structure. In that respect, the thesisbychapter format may be advantageous, particularly for students pursuing a phd in the natural sciences, where the research content of a. Take an investor holding share s of firm 2, for a total of o 6.
Optimal corporate investments and capital structure. A read is counted each time someone views a publication summary such as the title, abstract, and list of authors, clicks on a figure, or views or downloads the fulltext. Many studies have been carried out to examine the effect of capital structure on the profitability of firms, but most of them belong to other parts of the world, and only few studies have been conducted in india. A theoretical and empirical study of how capital structure. Capital structure of a firm is a reflection of the overall investment and financing strategy of the firm. The combination of the sources of business funding is referred to, as the capital structure of that business. Trends of capital structure of companies in hanoi stock market are identified and discovered.
This study investigates relationship between the capital structure and firm. Introduction the influential paper of modigliani and miller on capital structure irrelevancy has been followed by extensive theoretical research to determine the optimal capital structure. Capital structure meaning and factors determining capital. Instead, the aim of this paper is to test whether capital structure affects firm performance in ukraine. The issue of external equity is seen as being the most expensive and also dangerous in terms of potential loss of control of the enterprise by the original ownermanagers. I consider hybrids any financial instrument that presents a mix of equity and debt characteristics. In chapter six, determinants of capital structure, the study identifies a significant difference between the capital choices of family and nonfamily saudi firms.
Brigham and gapenski 1996, however, assert that the millermodigliani mm. The capital structure of a firm is very important since it related to the ability of the firm to meet the needs of its stakeholders. Kaumbuthu 2011 carried out a study to determine the relationship between capital structure and return on equity for industrial and allied sectors in the nairobi securities exchange during the period 2004 to 2008. This study was implemented through a quantitative approach. This thesis is made of standalone essays on the capital structure and financing of small and medium enterprises smes in ghana and south africa. Top 4 theories of capital structure with calculations. Simply speaking, capital structure mainly contains two. Relationship between capital structure and performance of non.
The relationship between capital structure and corporate. Capital structure is one of the five major fields that corporate finance research consists of. A theoretical and empirical study of how capital structure influences the performanceandenterprisevalue. Modigliani and miller 1963 argued that due to tax deductibility of interest payments the appropriate capital structure for a firm is composed entirely of debt. The purpose of this study is to empirically examine the effect of capital structure and profitability on firms value. The study sample included 41 manufacturing companies out of a total of 63. Evidence from vietnamese commercial banks article pdf available june 2017 with 1,085 reads. Three essays on capital structure phd thesis constantinos v. In terms of structure, the thesis has six chapters.
To participate in next years research and receive an early copy of the annual survey white paper, please submit. Click here to submit mba projects capital structure to us. Capital market conditionin the lifetime of the company, the market price of the shares has got an important influence. Averages and the sample target debt level retail sector 232. Capital is the financing for a business and is made up of, primarily, owners funding and funding from lenders. Theoretical considerations a firm could use three methods to determine its capital structure. Many studies have been carried out to examine the effect o. Berger board of governors of the federal reserve system washington, dc 20551 u. The objective of this thesis is to describe and analyze the relationship between. A new approach to testing agency theory and an application to the banking industry allen n. Overall, there is a difference between family and nonfamily firms performance and determinants of capital structure. Objective of capital structure management free essays. Capital structure is thus the mix of companys long term debt, specific.