Debt Structure and Its Impact on Financial Performance: An Empirical Study on the Palestinian Stock Exchange

• Autorzy: Mohamed Abuamsha , Suhair Shumali
• Języki publikacji: EN

Abstrakty

EN

The study aims to identify the impact that debt structure has on the financial performance of the organizations listed on the Palestinian Exchange (PEX). The sample of the study consists of 41 companies listed in the PEX, excluding the banking sector. The descriptive method is used, in addition to model measurement, to analyze the panel data using the multiple-regression method. The study concludes that the ROA increases when long-term debts are used for financing the assets in the insurance, investment, and industrial sectors. On the other hand, in the service sector, the ROA is negatively affected by the use of long-term debt, and only the industrial companies' ROA is significantly affected by the total debt. Furthermore, the study finds that the ROA of companies in the insurance and investment sectors is positively impacted by short-term debts. The main recommendation is that companies in the insurance, industrial, and investment sectors should depend on properly balanced long-term debts to increase their revenue. (original abstract)

Słowa kluczowe

EN

Capital structure; Debt structure; Financial performance

PL

Struktura kapitału; Struktura zadłużenia; Wynik finansowy

• Czasopismo: Journal of International Studies
• Rocznik: 2022
• Tom: 15
• Numer: nr 1
• Strony: 211--229

Twórcy

autor

Mohamed Abuamsha

• Palestine Technical University Kadoorie, Palestine

autor

Suhair Shumali

• Palestine Technical University Kadoorie, Palestine

Bibliografia

• Baker M. & Wurgler J. (2002). Market timing and capital structure, The Journal of Finance, 57(1), 1-32
• Baker, H. K., Veit, E. T., & Powell, G. E. (2001). Factors influencing dividend policy decisions of Nasdaq firms. Financial Review, 36(3), 19-38.
• Beck, T., & Demirguc-Kunt, A. (2006). Small and medium-size enterprises: Access to finance as a growth constraint. Journal of Banking & finance, 30(11), 2931-2943.
• Brealy Allen & Myers (2006). Principles of corporate financial, McGrawHill, New York/ Irwin.
• Hunjra, A. I., Butt, B. Z., & Rehman, K. U. (2010). Financial management practices and their impact on organizational performance. World Applied Sciences Journal, 9(9), 997-1002.
• Chandrakumarmangalam, S., & Govindasamy, P. (2010). Leverage-An Analysis and itsImpact on Profitability with Reference to Selected Cement Companies in India. European Journal of Economics, Finance and Administrative Sciences, 27, 53-66.
• Fama E.F. and French K.R. (1998). Taxes, financing decisions, and firm value, The Journal of Finance, 53(3), 819-843
• Gleason, K. C., Mathur, L. K., & Mathur, I. (2000). The interrelationship between culture, capital structure, and performance: evidence from European retailers. Journal of business research, 50(2), 185-191.
• Graham J.R. (1996). Proxies for the corporate marginal tax rate, Journal of financial economics, 42(2), 187-221
• Graham J.R. and Harvey C.R. (2001). The theory and practice of corporate finance: Evidence from the field, Journal of financial economics, 60(2), 187-243
• Grossman, S. J., & Hart, O. D. (1982). Corporate financial structure and managerial incentives. In The economics of information and uncertainty (pp. 107-140). University of Chicago Press.
• Jensen M.C. (1986). The Agency Costs of Free Cash Flow: Corporate Finance and Takeovers, American Economic Review, 76(2), 323-329
• Karadeniz, E., Kandır, S. Y., Iskenderoglu, O., & Onal, Y. B. (2011). Firm size and capital structure decisions: Evidence from Turkish lodging companies. International Journal of Economics and Financial Issues, 1(1), 1-11.
• Kim and Stulz, (1988). The Eurobond market and corporate financial policy: a test of the clientele hypothesis, Journal of Financial Economics, 22(2), 189-205
• Korajczyk R.A., Lucas D.J. and McDonald R.L. (1992). Equity issues with time-varying asymmetric information, Journal of Financial and Quantitative analysis, 27(03), 397-417
• Kraus A. and Litzenberger R.H. (1973). A State-Preference Model of Optimal Financial Leverage, The Journal of Finance, 28(4), 911-922
• MacKIE-Mason J.K. (1990). Do taxes affect corporate financing decisions? The Journal of Finance, 45(5), 1471-1493
• Masulis R.W. and Korwar A.N. (1986). Seasoned equity offerings: An empirical investigation, Journal of financial economics, 15(1), 91-118
• Moradi, M., Salehi, M., & Erfanian, Z. (2010). A study of the effect of financial leverage on earnings response coefficient through out income approach: Iranian evidence. International Review of Accounting, Banking and Finance, 2(2), 104-116.
• Modigliani, Franco, and Merton H. Miller. (1958). The cost of capital, corporation finance and the theory of investment. The American Economic Review, 48, 261-97.
• Modigliani, Franco, and Merton H. Miller. (1963). Corporate Income Taxes and the Cost of Capital: A Correction. The American Economic Review 53, 433-43.
• Singapurwoko, A., & El-Wahid, M. S. M. (2011). The impact of financial leverage to profitability study of non-financial companies listed in Indonesia stock exchange. European Journal of Economics, Finance and Administrative Sciences, 32(32), 136-148.
• Myers, Stewart C. (1984). The Capital Structure Puzzle. Journal of Finance 39, 575-92.
• Myers, Stewart C., and Nicholas S. Majluf. (1984). Corporate Financing and Investment Decisions when firms have Information that Investors do not have. Journal of Financial Economics 13, 187-221.
• Yazdanfar, D., & Öhman, P. (2015). Debt financing and firm performance: an empirical study based on Swedish data. The Journal of Risk Finance, 16(1), 102-118
• Ross, S. et al. (2001). Corporate Finance 6th ed McGraw.
• Safieddine, A., & Titman, S. (1999). Leverage and corporate performance: Evidence from unsuccessful takeovers. The Journal of Finance, 54(2), 547-580.
• Salim, M., & Yadav, R. (2012). Capital structure and firm performance: Evidence from Malaysian listed companies. Procedia-Social and Behavioral Sciences, 65, 156-166.
• Singapurwoko, A., & El-Wahid, M. S. M. (2011). The impact of financial leverage to profitability study of non-financial companies listed in Indonesia stock exchange. European Journal of Economics, Finance and Administrative Sciences, 32(32), 136-148.
• Singh, P., & Kumar, B. (2008). Trade off theory or pecking order theory: what explains the behavior of the Indian firms?. Available at SSRN 1263226.
• Stiglitz (1974). Incentives and Risk-Sharing in Sharecropping, Review of Economic Studies, 41, 219-55
• Hung, C. Y., Albert, C. P. C., & Eddie, H. C. M. (2002). Capital structure and profitability of the property and construction sectors in Hong Kong. Journal of Property Investment and Finance, 20(6), 434-453.
• Zulkafli, A. H., Hamzah, A. H., & Bakar, N. A. (2015). Board governance and financing policy: Evidence form public listed company in Malaysia. Advanced Science Letters, 21(4), 961-965.
• Roshan, B. (2009). Capital Structure and Ownership Structure: A Review of Literature. The Journal of Online Education, 1-8.
• Brendea, G. (2011). Capital structure theories: A critical approach. Studia Universitatis Babes-Bolyai, 56(2), 29.
• Nirajini, A., &Priya, K. B. (2013). Impact of capital structure on financial performance of the listed trading companies in Sri Lanka. International Journal of Scientific and Research Publications, 3(5), 1-9.
• Pandey, I. (2004). Capital structure, profitability and market structure: evidence from Malaysia, Asia Pacific. Journal of Economics and Business, 8(2), 78-91.
• Jensen, M. C., &Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of financial economics, 3(4), 305-360. https://doi.org/10.1016/0304-405X(76)90026-X
• Tailab, M. M. K. (2014). The effect of capital structure on profitability of energy American firms. International Journal of Business and Management Invention, 3(12), 54-61.
• Tifow, A. A., & Sayilir, O. (2015). Capital structure and firm performance: An analysis of manufacturing firms in Turkey. Eurasian Journal of Business and Management, 3(4), 13-22. https://doi.org/10.15604/ejbm.2015.03.04.002
• Ogebe, P., Ogebe, J., &Alewi, K. (2013). The Impact of Capital Structure on Firms' Performance in Nigeria.
• Pratheepkanth, P. (2011). Capital structure and financial performance: evidence from selected business companies in Colombo stock exchange Sri Lanka. Researchers World, 2(2), 171.
• Kajananthan, R., &Nimalthasan, P. (2013). Capital structure and its impact on firm performance: A study on Sri Lankan listed manufacturing companies. Merit Research Journal of Business and Management, 1(2), 37-44
• Zeitun, R., & Tian, G. G. (2007). Capital structure and corporate performance: evidence from Jordan. Australasian Accounting, Business and Finance Journal, 1, 4.
• Purohit, H. and Khanna, S. (2012). Determinants of capital structure in Indian manufacturing sector. Asia Pacific Journal of Management Research and Innovation, 8(3), 265-269
• Akeem, L. B., Terer, E. K., Kiyanjui, M. W., &Kayode, A. M. (2014). Effects of capital structure on firm's performance: Empirical study of manufacturing companies in Nigeria. Journal of Finance and Investment Analysis, 3(4), 39-57.
• ANH, Nguyen Thuy; THAO, Tran Thi Phuong. (2019). The Impact of Capital Structure on Firm Performance of Vietnamese Non-financial Listed Companies Based on Agency Cost Theory. VNU Journal of Science: Economics and Business, [S.l.], 35(2), june 2019. https://doi.org/10.25073/2588-1108/vnueab.4212
• Muritala, T. (2012). An Empirical Analysis of Capital Structure on Firms' Performance in Nigeria, International Journal of Advances in Management and Economics, 1(5), http://www.managementjournal.info/index.php/IJAME/article/view/214/207
• Yazdanfar, D. and Öhman, P. (2015), Debt financing and firm performance: an empirical study based on Swedish data, Journal of Risk Finance, 16(1), 102-118. https://doi.org/10.1108/JRF-06-2014-0085
• Rehman W, Goher F.,. Mehboob A (2012) ) Impact of debt structure on profitibily in textibl industry of Pakistan,Journal: International Journal of Economics and Research 3(2), 61-70. https://globaljournals.org/GJMBR_Volume16/5-Impact-of-Capital-Structure.pdf
• Sammoudi, A. A. A. (2019). The impact of the proliferation of the Israeli products on the performance, sustainability and development of the Palestinian products at the local market. Journal of Business and Retail Management Research, 14(01).
• Saif-Alyousfi, A.Y.H., Md-Rus, R., Taufil-Mohd, K.N., Mohd Taib, H. and Shahar, H.K. (2020). Determinants of capital structure: evidence from Malaysian firms, Asia-Pacific Journal of Business Administration, https://doi.org/10.1108/APJBA-09-2019-0202
• Turner, P. (2020). Critical values for the Durbin-Watson test in large samples. Applied Economics Letters, 27(18), 1495-1499.

Identyfikatory

DOI

10.14254/2071-8330.2022/15-1/14