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Interrelationships Among Capital Structure Dividends
Interrelationships Among Capital Structure Dividends
Interrelationships Among Capital Structure Dividends
Topic
Relationship among financing decision,
Hypothesis
There are a relationship between debt policy,
Variable used
Firms leverage (LEV): The ratio of total debt to book value
of total assets.
Dividends (DIV): The ratio of cash dividends to operating
income.
Firms ownership (OWN): Measured by the percentage of
stock owned by insiders
Firms cash flow (CF): Calculated as the ratio of net income
plus depreciation to total assets.
Firm liquidity (CR): Measured as the ratio of current assets
to current liabilities.
Profitability (PRO): The ratio of net income to net sales.
Firms size (SIZE): Characterized by the natural log of
market value of equity.
Method of analysis
Simultaneous equations model is estimated
Result
The debt equation result
Conclusions:
The 3SLS regression results suggest that higher
Topic
influence of financial decisions and ownership
Hypothesis:
H1a: For firms with growth opportunities a negative relation exists
Variable used
They measure the growth opportunities with the equity market-to-book
ratio (MBE).
Two additional measures of growth opportunities: the price-earnings ratio
(PER) and investment intensity (INV). PER is the market value-to-net
profit ratio. Investment intensity is measured as the ratio of investment,
including plant, property and equipment (PPE) and R&D, to the existing
capital stock.
The explanatory variables are different measures of financial leverage,
dividend policy and ownership structure. With regard to debt, this work
uses the financial leverage ratio (LEV), defined as the book value of debt
divided by total assets. Dividend policy (DIV) is introduced through the
ratio dividends over total assets.
Concerning ownership structure, the work uses the proportion of shares
owned by the largest shareholder (C1) as a measure of ownership
concentration. It also uses C1 squared (C1 2) to test a possible non-linear
effect of ownership concentration. Firm size is a control variable,
measured as the log of total assets (SIZE).
Method of Analysis
They defined a multivariate regression model in which the q ratio
Result
Conclusion
The results of this work show that leverage and dividends