Capital Structure and Its Impact on Profitability

This thesis titled the impact of capital structure on the financial performance of MFIs was aimed at investigating the impact of Equity financing, Debt financing and Grant funding (capital structure) on the financial performance of MFIs in Cameroon using CamCCUL, MC2, and CCA as case study. Capital structure variables employed in the study was Equity, Debt and Grant financing while financial performance was measured in terms of profitability. Panel data was collected from an online data base, marketmix, where data was gathered for the various MFIs for a period of fourteen years each and was analyzed using descriptive and inferential statistics. Descriptive statistics was done in the form of time series charts, and lines fit plots.  Inferential statistics made use of the Multiple Linear Regression Analysis using GLM. The results indicated that about 60% of variations in financial performance can be explained by variations in capital structure. Equity financing presented a positive and significant impact on the financial performance, Debt financing has a negative and significant impact on the financial performance and Donations or grant funding has a negative and insignificant impact on the financial performance of microfinance institutions. The study therefore concluded that capital structure has a significant impact on the financial performance of microfinance institutions and recommends that Microfinance institutions should adopt a capital structure that minimizes the cost of capital and respect the optimum capital structure of the microfinance industry.

Penelitian ini bertujuan untuk mengetahui pengaruh struktur modal terhadap pertumbuhan aset, risiko bisnis, dan profitabilitas. Penelitian ini dilakukan pada perusahaan jasa dan penelitian ini menggunakan jenis penelitian kuantitatif. Populasi penelitian ini yakni seluruh perusahaan jasa yang terdaftar pada Bursa Efek Indonesia (BEI) 2009-2013 pada sektor restaurant, hotel, and tourism, sedangkan sampel dalam penelitian ini yakni 10 perusahaan industri jasa. Metode pemilihan sampel menggunakan purposive sampling. Periode pengamatan dalam penelitian ini selama 5 tahun yaitu dari tahun 2009-2013. Sumber data yang digunakan adalah laporan keuangan tahunan yang diproleh melalui www.idx.co.id. Data dianalisis dengan menggunakan analisis regresi linier sederhana dan diolah dengan menggunakan bantuan software SPSS versi 19.

"The Industrial Development of Bengal, 1900-1939. By A. Z. M. IFTIKHAR-UL-AWWAL. Delhi: Vikas Publishing House, 1982. pp. 256 (Distributed in the U.S. and Canada by Advent Books, New York.) "

PREFACE:

The present work examines the industrial experience of Bengal during the period 1900 to 1939 with particular emphasis on the role of the government as the main instrument for growth. For this work, available statistical material has been utilized for the sake of precision as well as to strengthen the qualitative evidence. The book contains eight chapters. While Chapter I builds up the case for industrial development, Chapter II examines in detail the industrial policy of the Bengal government in the light of its own limitations as a subordinate authority to the Government of India and that of Whitehall. Chapter III is an investigation of the labour market in Bengal with emphasis on the supply of labour to jute, tea and coal industries in relation to wages and conditions of work. In Chapter IV, I have examined the rates of profitability and security of industrial investments. In this chapter, I have also examined the financial institutions of the time and their role in the industrial development of the province. Chapter V points to some of the difficulties experienced by Indian entrepreneurs, and in the above light looks at their contribution to the larger industrial establishments of Bengal. The next two Chapters VI and VII examine the growth and development of the two biggest manufacturing industries of our period--jute and handloom cotton weaving industries. The concluding chapter is an estimate of the industrial progress made in the province during the period under review.

This book is a slightly revised version of my Ph.D. thesis submitted to the University of London in 1978. In the preparation of this thesis, I have accumulated an enormous debt of gratitude to my Supervisor, Dr. K. N. Chaudhuri whose careful vigilance and timely intervention saved me from many factual errors and infelicities of style. My thanks are also due to Mr. I. B. Harrison, who went through some of my preliminary chapters during the absence of Dr Chaudhuri in 1975-76 and made many useful observations. I am also indebted to Dr. Sirajul Islam of Dacca University for helping me with some necessary corrections.

Here I take this opportunity also to express my deep gratitude to the UK Commonwealth Commission which offered me a scholarship for three years which enabled me to undertake this research work. Needless to say, without their financial help it would have been virtually impossible to pursue this course of studies. I also wish to thank the University of Dacca for granting me the necessary study leave.

There remains also a special group of people - without whose co-operation, patience and tolerance, this work would not have seen the light of day. In this group belong the library staff of the British Library (including the Newspaper Section at Colindale), Senate House Library, the library of the School of Oriental and African Studies, and particularly, the India Office Library and Records (including their Newspaper Section at the Bush House). I take this opportunity to thank Mr. J. Sims of the India Office Library and Records for being so helpful in tracking down apparently untraceable official documents. I wish to thank the staff of the Bangladesh Secretariat Record Room and of the Secretariat Library, Dacca for extending me all possible facilities in carrying out my research work. Finally, I owe a special debt of gratitude to my wife, Lilly whose support and constant encouragement over these years was invaluable in completing this work.

This research aims to establish the relationship between capital structure and financial performance in North Iraq aka (Kurdistan). The capital structure indicators refer to long-term debt, short-term debt; total debt and total equity, while return on assets and return on equity are the performance proxies. Previous studies indicate asset tangibility, tax, risk, liquidity and inflation as capital structure determinants outside manufacturing companies. As long as these factors have an important impact on financing decisions, they will be included in the analysis as they are expected to also influence performance. Results indicate that performance in Kurdistan companies is higher when they avoid debt and operate based on equity based on the financial crises that is happening now. However, it seems that manufacturing companies do not have sufficient internal funding to undertake profitable investments and do not use their assets effectively. During times of increased taxes and inflation profitable companies divest part of their assets reducing their costs. There is an indication of risk-taking behavior across manufacturing companies. This show a preference for debt when they are in financial difficulties and they face high business risks, or when they cannot settle their debts due to a lack of cash. Due to missing data regarding long-term debt ratios, those regression results are not statistically significant. Moreover, the regression models referring to return on equity explain a reduced proportion of its variation.

The present research investigates the effects of cash conversion cycle on economic value added among companies listed on Tehran's stock exchange. The sample of study includes 118 companies. The multivariate-regression method has been used for analysis of research hypotheses. Results indicated that a reverse and statistically significant relationship exists between companies' cash conversion cycle and their economic value added. In other words, by reducing the length of cash conversion cycle within reasonable limits, companies are able to increase their economic value added.

The concept of capital structure is extremely important because it can influence not only the return a company earns for its shareholders, but whether or not a firm survives in a recession. Maximizing shareholder's wealth has become the new corporate paradigm. The thrust area for today's management is to find means to create value for the owners. Many traditional models are present which may not measure the actual value created for its share holders. Decision-making about the capital structure meaning company's finance, like other managers' decisions has an impact on the company's value. Therefore, determining an optimal capital structure in order to select financial sources is of crucial importance. To do so, the managers must be aware of the effects of influential variables on the capital structure. In order to assess the performance of business, different criteria have been presented, among which are the relationships of the value-based performance assessment. The present study aims at showing the correlation between the capital structure and the variables of the value-based performance assessment .Thus, it is necessary for the usage of modern tool EVA to determine whether the wealth had been made use of or been destroyed. The firms can even plan optimum capital structure to increase their value where, Maximizing shareholders value has become the new corporate paradigm in recent years. The Corporates, which gave the lowest preference to shareholders curiosity, are now bestowing the utmost preference to it. Shareholder's wealth is measured in terms of returns they receive on their investment. It can either be in forms of dividends or in the form of capital appreciation or both. Capital appreciation depends on the changes in the market value of the stocks. The market value of stocks depends upon number of factors ranging from company specific to market specific. Financial information is used by various stakeholders to assess firm's current performance and to forecast the future as well. The study aims in the assessment using the smart financial metrics Economic Value-Added (EVA) and Market Value-Added (MVA).

The extensive issuance of Islamic bonds in different parts of the world raises the question of whether such a financing activity leads to better firm performance or not and what the determinants are of this performance. The literature offers scant answers. Thus, this study measures the long-run performance of Malaysian firms following their Islamic debt issues and explores the agency cost explanations of the performance. One-, two-, and three-year stock return performances are measured by the buy and hold abnormal return (BHAR) of Islamic debt issues using samples of 113, 101, and 86 Islamic debt issues, respectively, in the 20012009 period. The significance of the performance is tested by heteroscedasticity-and-serial correlation-consistent t-statistics. The determinants of BHAR are investigated using the ordinary least square regression method. The results show a significant positive long-run performance beyond a one-year period that is negatively influenced by growth opportunity and free cash flow when the issue increases the debt ratio.