Corporate Finance

Final Project
Section A

Submitted by:

Fareeha Shahid, Nawal Asif, Rameen Mahmood, Hamna Amer, Minhal

Khalid

Submitted to: Ms. Anam Tariq

Date of Submission: 3 – 5 - 2019

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 TABLE OF CONTENTS

ARTICLE REVIEW 2014 3-5

ARTICLE REVIEW 2015 6-9

ARTICLE REVIEW 2016 10-11

ARTICLE REVIEW 2017 12-13

ARTICLE REVIEW 2018 14-17

COMPARATIVE ANALYSIS 18

REFERENCES 19

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 Literature Review on: Refinancing, profitability, and capital structure

AndrásDanis a, DanielA.Rettl b, ToniM.Whited

Published: 2014

Journal: Journal of Financial Economics

Independent Variables

 Tangibility Dependent Variables

 Financial Distress
 Taxes
 Debt Issuance Costs
 Size  Capital structure
 Leverage
 Profitability

Discussion

The study in this article shows that when the firms are at their best level of leverage, there is a
positive relationship between leverage and profitability, but on the contrary, it is sometimes a
negative relationship. These results are consistent with dynamic trade-off models in which
infrequent capital structure rebalancing is optimal. This study also shows that how taxes,
tangibility, size of the firm and the debt issuance costs effect leverage and profitability, which
directly affect the capital structure.

Conclusion

This article is basically analyzing that how leverage and profitability are linked and also affect
each other, hence affecting the capital stock. The other independent variables such as size and
tangibility do not affect capital as such but leverage and profitability has a significant effect on
capital structure.

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 Literature Review on: Determinants of Capital Structure in Thailand

PornpenThippayana

Published: 2014

Independent Variables

 Long Term financing Dependent Variables

 Taxation
 Budgeting decisions
 Firm’s value under taxation
condition  Capital Structure
 Bankruptcy cost
 Non-debt tax shield
 Agency cost

Discussion

In this article, the study shows that long term financing has a great impact on the capital structure
of a firm. Capital structure decisions are one of the most important issues in financial
management which contribute to maximize a firm’s value. Similarly, the capital structure
decisions affect the cost capital and capital budgeting.

It also shows that how important budgeting decisions are. The taxes, firm’s value under taxation,
the agency and bankruptcy costs also play a role in affecting capital structure, but they are much
significant. The most significant independent variables that affect capital structure are the
budgeting decisions and the long term financing.

Conclusion

Hence, it can be concluded that how budgeting in affirm can significantly affect the capital
structure of a firm.

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 Literature Review on: Emerging markets queries in finance and business Determinant
factors of the capital structure of a firm- an empirical analysis

Laura Serghiescua ,Viorela-LigiaVăideanb,*

Published : 2014

Journal :Procedia Economics and finance

Independent variable

 Profitability Dependent Variable

 Tangibility

 Size  Capital Structure

 Liquidity

 Asset turnover

Discussion

In this research the independent variables taken are profitability, tangibility, size, liquidity, asset
turnover and the dependent variable taken in this research is the capital structure. The significant
variables in this study are asset turnover and size; the insignificant variables in this study are
liquidity, tangibility, profitability.

Conclusion

So, as found in the article it can be clearly concluded that the significant variables which are
asset turnover and size have a greater impact on capital structure.

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 Literature Review on: Capital structure and firm performance: Empirical evidence from
India

Writers: Saurabh Chadha, Anil K. Sharma

Published: 2015

Journal: Sage journal

Independent Variable                                                             

 Return on asset                                                  

 Return on equity                                               

 Financial leverage Dependent Variables

 Size
 Capital Structure
 Age  Firm’s Financial
Performance
 Sales growth

 Tangibility

 Asset turnover

 Ownership structure

Discussion:

The variables that are used in this research are firstly Independent variables: Return on asset,
Return on equity, financial leverage the dependent variable taken in this research is firm’s
performance. In these variables, significant variables are Return on assets, Return on equity, size,
age, tangibility, sales growth, asset turnover, ownership structure and In-significant variable is
financial leverage.

Conclusion

This paper basically is analyzing the effect of financial leverage on firm’s financial performance
taking into consideration different independent variables such as ROA, ROE, Size, asset
turnover, sales growth, tangibility etc. the sample that is used to analyze is Indian manufacturing
sector firms. This examines almost all of the Indian manufacturing firms.

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 Literature Review on: Capital structure of social purpose of companies- a panel data
analysis

Aleksandra Szymańska, Stijn Van Puyvelde and Marc Jegers

Published on 2015

Journal of sustainable finance and investment

Independent Variables                                     

Dependent Variable
 Profitability       
                                     
 Growth
 Capital Structure

 Tangibility

 Liquidity

Discussion

The variables used in this research are firstly independent variables: profitability, growth, nature
of assets, tangibility and liquidity and the dependent variable of this research is the capital
structure. The Significant variables in this study are tangibility and insignificant variable Firm
size, liquidity, profitability.

Conclusion

This study is analyzing the determinants of capital structure of Belgian SPC’S. taking into
consideration different independent variables such as profitability, growth, nature of assets i.e.
tangibility, liquidity and the dependent variable is the capital structure. The sample used to
analyze is Belgian social purpose companies.

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 Literature Review on: Relationship between Capital Structure and Firm Performance,
Evidence From Growth Enterprise Market in China

Accounting Department, Zhejiang University of Finance & Economics, Hangzhou

Published: 2015

Independent Variables

Dependent Variable

 Capital structure     

                                    
 Corporate Performance
 Growth ability

 Equity concentration

Discussion

In this research study the independent variables used are capital structure, growth ability, equity
concentration and the dependent variable of this research is the corporation’s performance. The
significant variables are equity concentration, capital structure, growth ability. There are no
insignificant variables described in this article which would affect the corporation’s performance.

Conclusion:

This study is analyzing the determinants of capital structure of enterprise market of china.
Taking into consideration different independent variables such as capital structure, growth ability
& equity concentration & dependent variable used are Companies Corporation’s .this is used to
study capital structure & firm performance.

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 Literature Review on: A Panel Data Analysis of Capital Structure Determinants: An
Empirical Study of Non-Financial Firms in Oman

Dharmendra Singh

Published; 2016

Journal: International Journal of Economics and Financial Issues

Independent Variables

 Tangibility

 Profitability Dependent Variables

 Size  Debt ratio

 Growth opportunity

 Liquidity

 Non-debt tax shields

Discussion

The variables used in this study includes the independent and dependent variables that includes
tangibility, profitability, size of the firm, growth opportunities, liquidity, non-debt tax shields,
degree of operating leverage and debt ratio. Among these the significant variables are;
profitability, liquidity, size of the company, tangibility of the assets. And some insignificant
variables include; taxes, bankruptcy cost, agency cost, asymmetric information cost.

Conclusion

In this study an attempt was made for the investigation of the determinants of capital structure of
61 firms (non-financing) that were listed on the security market of Muscat, Oman for the year
2011-2015. The debt ratio in this study is employed as dependent variable. Profitability is the
first and tangibility is the second most significant determinant of the capital structure.

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 Literature Review on: Capital Structure, Internationalization and Countries of Destination
of Brazilian Companies: An Analysis of the Upstream-Downstream Hypothesis

Rafael Borges Ribeiro ,Vinícius Silva Pereira , Karem Cristina de Sousa Ribeiro

Published: 2017

Journal: Sage Journal

Independent Variables                                       

 Size                                                       
Dependent Variable
 Tangibility

 Profitability

 Bankruptcy risk  Capital Structure

 Growth opportunities

 Type of industry

 Liquidity

Discussion

The independent variables used in this research study are size, tangibility, bankruptcy risk,
growth opportunities, type of industry, liquidity and the dependent variable of this research is the
capital structure. The significant variables are size, profitability, growth opportunities, and
liquidity; the insignificant variables are tangibility, type of industry.

Conclusion

This study is analyzing the determinants of capital structure, internationalization of Brazilian

companies. Taking into consideration different independent variables such as growth
opportunities, profitability nature of assets i.e. tangibility, liquidity and size, bankruptcy risk the
dependent variable is the capital structure. The sample used to analyze the upstream-downstream
hypothesis.

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 Literature Review on: The Impact of Capital Structure on Profitability of Commercial
Banks in Ghana

Alhassan Musahhana

Published in 2017

Journal: Economic Modeling

Independent Variables

 Short term debt ratio

 Long term debt ratio Independent Variable
 Total debt ratio
 Capital structure
 Debt financing
 Profitability
 Equity capital
 Firm size
 Foreign ownership
 Age
 Customer deposit

Discussion

In this article the independent variables are related to capital structure and include the short-term,
long-term, and the total-debt ratios and these are also the significant variables and play a role in
affecting the profitability of the commercial banks.

Conclusion

The significant variables include those related to capital structure, foreign ownership and the
customer deposit and the in-significant variables include debt financing, equity capital, firm size
and age.

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 Comparative Analysis

There is a range of different variables may it be dependent or independent which are being
compared with articles of years from 2014-2018.

Some of the most common independent variables in 2014-2015 are tangibility, financial distress,
taxes, size, long-term financing, budgeting decisions, leverage, agency cost and bankruptcy cost
and the new dependent variables existing in 2015 are profitability, rate on assets, return on
equity, age, equity, inflation, business risky, ownership structure, asset turn over, sales growth
and equity concentration. While, the dependent variable in both years remains the same, i.e.
capital structure.

From 2015-2016, the commonly used variable were size, sales growth, profitability, tangibility,
growth opportunity, liquidity, long term debt and total equity. However the newly introduced
variables were ROA, ROE, financial leverage, non-debt tax shield, short term debt, inflation,
business risk and cash flow.

From 2016-2017, the commonly used variable are tangibility, profitability, size, growth,
liquidity, short term debt ratio, long term debt ratio, total debt ratio and bankruptcy risk.
However, the newly used variables were type of industry, capital structure, debt financing, equity
capital, foreign ownership, customer deposit and age.

Lastly from 2017-2018 the common variables are *insert hamna and minhal’s work*

References

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http://dx.doi.org/10.1080/20430795.2015.1089829

https://onlinelibrary.wiley.com/doi/full/10.1111/j.1755-053X.2009.01026.x

https://onlinelibrary.wiley.com/doi/full/10.1111/j.1540-6261.2004.00706.x

https://ac.els-cdn.com/S2212567115015087/1-s2.0-S2212567115015087-main.pdf?
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b2043bb09573&acdnat=1524947872_ed6bcb0f975a250a3f44f2298a37c552

https://sci-hub.tw/https://www.scirp.org/journal/PaperInformation.aspx?PaperID=81917

https://doi.org/10.1080/01446193.2018.1435896

http://dx.doi.org/10.15728/bbr.2017.14.6.2

http://www.econjournals.com/index.php/ijefi/article/view/2998

https://www.researchgate.net/publication/306009724_Effects_of_Capital_Structure_and_Manag
erial_Ownership_on_Profitability_Experience_from_Bangladesh

https://www.tandfonline.com/doi/abs/10.1080/23322039.2017.1418609

https://www.emeraldinsight.com/doi/abs/10.1108/15265940510633505

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