Impact of Capital Structure on Firm's Value: Evidence from Bangladesh

• Autorzy: Anup Chowdhury , Suman Paul Chowdhury
• Języki publikacji: EN

Abstrakty

EN

Modigliani & Miller (1958) show the impact of debt-equity ratio on firm value in their capital structure theory. Economist and financial researchers have spent time to develop new thoughts around this theory. Despite their effort the Modigliani & Miller (MM) model is still in vague. In this paper attempt has been made to empirically support the argument of MM. The paper tests the influence of debt-equity structure on the value of shares given different sizes, industries and growth opportunities with the companies incorporated in Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) of Bangladesh. For the robustness of the analysis samples are drawn from the four most dominant sectors of industry i.e. engineering, food & allied, fuel & power, and chemical & pharmaceutical to provide a comparative analysis. A strong positively correlated association is evident from the empirical findings when stratified by industry.(original abstract)

Słowa kluczowe

EN

Capital structure; Enterprise value; Society affluence; Financial leverage; Time-series

PL

Struktura kapitału; Wartość przedsiębiorstwa; Zamożność społeczeństwa; Dźwignia finansowa; Szeregi czasowe

• Czasopismo: Business and Economic Horizons
• Rocznik: 2010
• Numer: vol. 3, iss. 3
• Strony: 111--122

Twórcy

autor

Anup Chowdhury

• BRAC Business School, BRAC University, Bangladesh

autor

Suman Paul Chowdhury

• BRAC Business School, BRAC University, Bangladesh

Bibliografia

• Arestis, P., Luintel, A., Luintel, K., 2004. "Does financial structure matter?", Economics Working Paper Archive 399, The Levy Economics Institute.
• Arsiraphongphisit, O., and Ariff, M. 2004. "Optimal capital structure and firm value Australian evidence: 1991-2003," Monash University, http://www.efmaefm.org/efma2005/papers/17-arsiraphongphisit_paper.pdf
• Babenko, I., 2003. "Optimal capital structure of the firm in the presence of costs of financial distress," University of California at Berkeley, EFA 2004 Maastricht Meetings Paper No. 5179: http://papers.ssrn.com/sol3/ papers.cfm?abstract_id=559410&
• Benito, A., 1999. "The capital structure decisions of firms: Is there a pecking order?" BENCO DE ESPANA, Madrid.
• Berens, J., Cuny, Winter, C., 1995. "The capital structure puzzle revisited," The Review of Financial Studies, Vol.8, No4, pp.1185-208.
• Bradley, M., Jarrell, G. and Kim, E., 1984. "On the existence of an optimal capital structure: Theory and evidence," Journal of Finance, Vol.39, pp.857-78.
• Ehrhardt, M. and Brigham, E., 2003. "Corporate finance - A focused approach," 1st Edition, Mason, Thomson.
• Gemmill, G., 2001. "Capital structure and firm value a study of split-capital closed-end funds in the UK," City University Business School.
• Hatfield, G., Cheng, L., Davidson, W., 1994. "The determination of optimal capital structure: The effect of firm and industry debt ratios on market value," Journal of Financial And Strategic Decisions,Vol.7, No3, pp.1-14.
• Harris, M., and A. Raviv, 1991. "The theory of capital structure," Journal of Finance, Vol. 46, pp.297-355.
• Givoly, H., Hayn, C., Ofer, A, and Sarig, O., 1992. "Taxes and capital structure: Evidence from firms' response to the tax reform Act of 1986," Review of Financial Studies, Vol.5, pp.331-55.
• Johannes vH de We; Kivesh Dhanraj, 2007. "Unlocking shareholder value by moving closer to the optimal capital structure," Accountancy SA, Accounting and Tax Predictions, pp.28-32.
• Kinsman, M. and Newman, J., 1998. "Debt tied to lower firm performance: Finding calls for review of rise in debt use," Pepperdine University.
• Kochhar, R., 1997. "Strategic assets, capital structure, and firm performance," Journal of Financial and Strategic Decisions, Vol.10, No3, pp.23-36.
• Leland, H. and Pyle, H., 1977. "Informational asymmetries, financial structure, and financial intermediation," Journal of Finance, Vol.32, No2, pp.371-87.
• Mackie-Mason, J., 1990. "Do taxes affect corporate financing decisions?, " Journal of Finance, XLV, 5, pp.1471-493.
• Masulis, R., 1983. "The impact of capital structure change on firm value: Some estimates," The Journal of Finance, 38 (1), pp.107-26.
• Masulis, R., 1988. The debt-equity choice, Institutional Investor Series in Finance, Ballinger Press.
• Mayer, C., 1986. "Corporation tax, finance, and the cost of capital," Review of Economic Studies, Vol.53, pp.93-112.
• McConnel, J. and Servaes, H., 1995. "Equity ownership and the two faces of debt, " Journal of Financial Economics, Vol.39, pp.131-57.
• Messbacher, U., 2004. "Does capital structure influence firms value?", University of Ulster.
• Miller, M., 1977. "Debt and tax," Journal of Finance, Vol. 32, pp.261-75.
• Modigliani, F., and Miller, M., 1963. "Corporate income taxes and the cost of capital: A correction," American Economic Review, Vol.53, pp.433-43.
• Ross, S., 1977. "The determination of financial structure: The incentive signalling approach," Bell Journal of Economics, 8, pp.23-40.
• Spiegel, Y. and Spulber, D., 1997. "Capital structure with countervailing incentives," London School of Economics.
• Stulz, R., 1990. "Managerial discretion and optimal financing policies," Journal of Financial Economics, 1990, Vol.26, pp.3- 27.
• Trezevant, R., 1992. "Debt financing and tax status: Tests of the substitution effect and the tax exhaustion hypothesis using firms responses to the economic and recovery tax of 1981," Journal of Finance, 47, pp.1557-568.

Identyfikatory

DOI

10.15208/beh.2010.32