Capital Structure, Share Price, and Profitability

2020 ◽  
Author(s):  
Marselinus Asri ◽  
Divine Yolanda ◽  
Feby Amely ◽  
Nieken Pirena philips
Keyword(s):  
Capital Structure ◽  
Share Price

Effect of Profitability, Company Size, Capital Structure, and Liquidity Risk on Firm Value of Indonesian Banks

2021 ◽  
Vol 4 (1) ◽  
pp. 14-27
Author(s):  
Fenty Fauziah ◽  
Rafiqoh Rafiqoh
Keyword(s):  
Capital Structure ◽  
Firm Value ◽  
Stock Exchange ◽  
Linear Regression Analysis ◽  
Sample Selection ◽  
Liquidity Risk ◽  
Share Price ◽  
Company Size ◽  
The Public ◽  
Retained Earnings

The main objective of any firm is to maximize shareholder's wealth, which can be seen from firm value.  This study aims to analyze and explain the effect of profitability, company size, capital structure, and liquidity risk on firm value banking companies in Indonesia. The population of this study is all banking companies listed on the Indonesia Stock Exchange, with an observation period of 2017-2018. The sample selection using a purposive sampling method. Data have both cross-section and time variation. Analysis and hypothesis testing were carried out by using a linear regression analysis using Eviews 11. The results showed that investors viewed that the company's overall profits from its business activities could increase its share price. The capital structure owned by the public relatively small, which meant that the company could provide a source of funds from within the company in the form of the owner's capital or retained earnings. Funds obtained from loans, if they were not followed by the ability to manage funds or were not channeled back to the community, would cause interest expenses and destroy profits. This condition results in investors selling their shares. Investors in making investment decisions paid attention to one indicator at a time and paid attention to all the factors that determined the company's value.

scholarly journals Key Fundamental Factors and Long-run Price Changes in an Emerging Market—A Case Study of Karachi Stock Exchange (KSE)

2002 ◽  
Vol 41 (4II) ◽  
pp. 517-533 ◽  
Author(s):  
Mohammad Irfan Chaudhary ◽  
Mohammed Nishat
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Emerging Market ◽  
Share Price ◽  
Relevant Factor ◽  
Direct Relation ◽  
Price Changes ◽  
Important Indicator ◽  
Share Prices ◽  
Long Run

Share prices are the most important indicator readily available to the investors for their decision to invest or not in a particular share. Theories suggest that share price changes are associated with changes in fundamental variables which are relevant for share valuation like payout ratio, dividend yield, capital structure, earnings size of the firm and its growth, [Wilcox (1984); Rappoport (1986); Downs (1991)]. Linter (1956) linked dividend changes to earnings while Shapiro valuation model (1962) showed dividend streams discounted by the difference in discount rate and growth in dividend should be equal to share price. This predicts direct relation between pay out ratio and the price-earning multiple. Conversely it means that there is an inverse relation between pay out ratio and share price changes. Several eventbased studies established direct relation between share price changes and either earnings or dividend changes [Ball and Brown (1968); Baskin (1989)]. Sharpe (1964) and Hamada (1972) suggested direct relation between share price changes and capital structure. Beaver, Kettler and Sholes (1970) showed that firms appear to pay less of their earnings if they have higher earning volatility. This suggests payout ratio as relevant factor for share price changes. Investigations of share price changes appear to yield evidence that changes in fundamental variable(s) should jointly bring about changes in share prices both in developed and emerging markets. However, the actual fundamental factors found to be relevant may vary from market to market. For example, changes in asset growth of firms are significant in the case of Japanese shares while earnings appear to be universally a relevant factor [Ariff, et al. (1994)]. However, it is widely agreed that a set of fundamental variables as suggested by individual theories is no doubt relevant as possible factors affecting share price changes in the short and the long-run [Ariff and Khan (2000)].

scholarly journals The Determinan Kinerja Keuangan Perusahaan Pada Perusahaan Manufaktur Yang Terdaftar Di Bursa Efek Indonesia

2021 ◽  
Vol 4 (2) ◽  
pp. 455-463
Author(s):  
Jusmarni Amir
Keyword(s):  
Capital Structure ◽  
Capital Market ◽  
Stock Price ◽  
Stock Exchange ◽  
Regression Method ◽  
Financial Information ◽  
Share Price ◽  
Linear Regression Method ◽  
Multiple Linear Regression Method ◽  
Food And Beverage

Stocks are currently a popular investment product among investors. Stocks that are of interest to investors are stocks that have a high selling value because the stock price is a very important factor to pay attention to and indicators are used to measure the welfare of shareholders. The higher the share price, the higher the value of the company and vice versa. However, investing in stocks in the capital market is also filled with an element of uncertainty or risk, this is because investors do not know with certainty the results they will get from their investments. Company specific financial information is one of the important internal company factors that can influence investors to invest. The research aims to analyse the effect of Capital Structure, liquidity, and profitability on stock price. Samples used in this study are food and beverage companies listed in the Indonesian Stock Exchange during 2016-2018 periods. Multiple linear regression method used to anlyse the effect of DER,CAR,  and NPM on Stock Price. The results showed that DER and CAR have not significant effect on Stock Price. NPM have a significant effect on Stock Price. Keywords: Capital Structure, liquidity, Profitability, Stock Price

scholarly journals The choice of the capital structure of the company according to the framework of theories of capital structure

2015 ◽  
Vol 4 ◽  
pp. 22-27
Author(s):  
Mitenkova E.N.
Keyword(s):  
Capital Structure ◽  
System Analysis ◽  
Credit Rating ◽  
Developed Countries ◽  
Order Theory ◽  
Share Price ◽  
Actual Problem ◽  
Pecking Order Theory ◽  
Tax Shield ◽  
The Capital Structure

This article deals with the actual problem of choosing capital structure of a company, because debt ratio has an influence on making strategic decisions of the long-term company’s development, its investment risks, potential interest conflicts between management, owners and lenders. The article analyzes the principles of the construction of capital structure in terms of classical and modern theories of capital structure using methods of scientific knowledge: system analysis, synthesis, logical analysis, empirical researches. According to the first theory of the capital structure, developed by M. Miller and F. Modigliani through a number of strict preconditions, capital structure does not affect the company’s value. By adding a tax factor authors showed that in this case the choice of capital structure affects the company’s value, because debt capital increases it by the value of the tax shield. According to trade-off theory the main determinants of capital structure are the size of the tax shield, the probability of bankruptcy and the credit rating. According to the theory of the signal the capital structure depends on such factors as the information asymmetry and the credit rating. According to the pecking order theory capital structure the choice of it is determined by the hierarchy of sources of financing: firstly companies prefer to use internal sources of financing, then - debt financing. According to the market timing theory the key factors of capital structure are share price fluctuations. Analysis of various theories of the capital structure has showed that most theories have been developed by economists represented countries with developed markets. But developed countries and emerging countries have a lot of differences, which have an impact on choosing capital structure by companies.

scholarly journals The Announcement Effect of Open-Market Share Buybacks: The Case for European Firms

2018 ◽  
Vol 10 (8) ◽  
pp. 117
Author(s):  
Jyoti Gupta ◽  
Florian Wagner
Keyword(s):  
Capital Structure ◽  
Abnormal Return ◽  
Market Timing ◽  
Structure Optimization ◽  
Share Price ◽  
Open Market ◽  
Timing Ability ◽  
Announcement Returns ◽  
Positive Abnormal Return ◽  
Book Values

Using a comprehensive sample of 1830 open-market repurchases of 15 European countries encompassing the period from 1998 until 2013, we analyzed the magnitude and determinants of the share price reaction on announcement. Our results indicate that buyback announcements in Europe lead on average to a significantly positive abnormal return of 0.92% on announcement day, however, decreasing in firm size and announcement frequency. Additionally, our findings show that the market does not particularly greet the distribution of excess cash to shareholders, but rather when companies take advantage of undervalued stock as market-to-book values are inversely related to announcement returns. Looking at the companies’ leverage ratios, the motive of capital structure optimization cannot be supported by the empirical findings. Lastly, with respect to managerial market timing ability we could not observe that buybacks are following a period of share price underperformance, concluding that managers are not able to time the implementation of buyback programs.

scholarly journals Pengaruh Likuiditas, Profitabilitas, Struktur Modal, dan Harga Saham terhadap Kebijakan Dividen pada Perusahaan Consumer Goods

2020 ◽  
Vol 30 (12) ◽  
pp. 3240
Author(s):  
Nina Purnasari ◽  
Sylvia Sylvia ◽  
Vivian William
Keyword(s):  
Capital Structure ◽  
Consumer Goods ◽  
Quantitative Research ◽  
Dividend Policy ◽  
Stock Exchange ◽  
Share Price ◽  
Research Approach ◽  
Multiple Linear Regressions ◽  
Research Model ◽  
Linear Regressions

The purpose of the research is to know and analyze the influence of liquidity, profitability, capital structure and share price on dividend policy on Consumer Goods Companies listed on the Indonesia Stock Exchange period 2014-2018. This research uses quantitative research. Quantitative research approach. The nature of research is a causal relationship. The collection of this research data by means of documentation. The population of this study is 51 Consumer Goods Companies listed on the Indonesia Stock Exchange for the period 2014-2018. A research sample of 16 Consumer Goods Companies listed on the Indonesia Stock Exchange period 2014-2018. The research model is multiple linear regressions. The results of this study are Liquidity, profitability, capital structure and share price simultaneously and partially affect the dividend policy on Consumer Goods Companies.  Keywords: Liquidity, Profitability; Capital Structure; Share Price; Dividend Policy.

scholarly journals An Investigation Of The Determinants Of BTs Debt Levels From 1998-2002: What Does It Tell Us About The Optimal Capital Structure?

2011 ◽  
Vol 2 (5) ◽  
Author(s):  
Richard J. Fairchild
Keyword(s):  
Capital Structure ◽  
Firm Value ◽  
Share Price ◽  
Optimal Capital Structure ◽  
Trade Offs ◽  
Equity Ratio ◽  
Optimal Capital ◽  
British Telecom ◽  
Debt Levels

Over the period 1998-2001, British Telecom (BT) dramatically increased its debt levels, from 4.8bn in 1998 to 31bn in 2001. This was accompanied by a dramatic decrease in the firms share price. Subsequent pressure from analysts and investors induced BT to use a rights issue to substantially reduce debt in 2002 (from 31bn to 18.4bn). However, the share price has continued to fall, but not so dramatically. Hence, BT provides an ideal case study of the effects of capital structure on firm value. In this case study, we will consider such questions as:a) Why did BT take on so much debt? Why did it cause firm value to fall, when many capital structure theories suggest a positive relationship between leverage and firm value?b) Why has the reduction in debt not caused an increase in equity value?c) Was BT beyond its optimal debt/equity ratio from 1998-2001? Is it still beyond the optimum?d) Does BT have an optimal capital structure? What is it? Is it static? What are the trade-offs involved?e)Does BTs case hold lessons for other firms?

scholarly journals TESTING THE DIRECT AND INDIRECT EFFECT OF CAPITAL STRUCTURE ON THE STOCK PRICE OF THE SELECT INDIAN PUBLIC SECTOR BANKS

2017 ◽  
Vol 5 (6) ◽  
pp. 495-501
Author(s):  
M.S. Ramaratnam ◽  
R. Jayaraman
Keyword(s):  
Public Sector ◽  
Capital Structure ◽  
Indirect Effect ◽  
Structural Equation ◽  
Market Price ◽  
Market Value ◽  
Share Price ◽  
Equation Modeling ◽  
Coverage Ratio ◽  
Public Sector Banks

Market Value of Share of a company is determined by various factors. So many studies were conducted in finding the determinants of share price. Some of the studies found that Capital Structure is a determinant of the market price of the share and some of the studies found that Earning per Share is a determinant of the market price of the share. Even some studies proved that Capital Structure is also determining the Earning per Share. With this ideology an attempt was made in this study by using Structural equation modeling to see how for the Capital Structure of the firm has got a direct and indirect effect over the Market value of share. Debt to Total Assets, Equity to Total Assets, Coverage Ratio, Earning per share and Market price of share of eleven Indian public sector banks were taken for the study for five years from March 2013 to March 2017.

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