scholarly journals An analysis of factors influencing the capital structure of small, medium and micro enterprises : a growth and survival perspective

2018 ◽  
Author(s):  
◽  
Zunckel Sharon
Keyword(s):  
Capital Structure ◽  
Empirical Studies ◽  
Firm Level ◽  
Growth And Survival ◽  
Factors Influencing ◽  
Kwazulu Natal ◽  
Survival And Growth ◽  
Retained Earnings ◽  
Micro Enterprises ◽  
The Capital Structure

In South Africa, there is a need for small, medium and micro enterprises (SMMEs) to become established and be sustainable. These organisations play a crucial role in the economy of South Africa, as well as across the globe. Empirical studies have acknowledged the contribution of SMMEs to the economy, as well as to the gross domestic product. However, the failure rate of these firms has also been emphasised in the same studies. The lack of finance has been identified as one of the contributing factors towards the discontinuance of small firms, hence, managing capital is an importance task for organisations. Managers need to understand the capital structure of the firm in order to make the best decisions regarding the finances of the firm. The growth of SMMEs is also crucial to all economies around the world. Despite many empirical studies on capital structure decisions in large firms, minimal studies have investigated the capital structure decisions in SMMEs. Therefore, this study is expected to shed more light on the capital structure of SMMEs and enlighten owners/managers on the importance thereof. The aim of this study was to identify the factors influencing the capital structure in terms of the survival and growth of SMMEs in KwaZulu-Natal. The study addressed the following primary questions: what factors influence the capital structure of small, medium and micro enterprises in Durban, KwaZulu-Natal? Furthermore, what is the influence of the capital structure on the survival and growth of small, medium and micro enterprises in Durban, KwaZulu-Natal? The study used a quantitative research design and was cross-sectional in nature. A survey questionnaire was the primary data collection tool utilised. The target population was 204 SMMEs from the retail and wholesale sectors. A convenience sampling method was adopted which resulted in a sample size of 136, with 103 responses received. The Partial Least Squares Structural Equation Modelling 5.0 software was utilised to determine the statistical results. The findings revealed that both managerial and firm-level factors influence the capital structure of SMMEs. Managerial factors included individual goals and financing preferences of the owner/manager, network ties, attitude to debt, asymmetric information and maintaining control; whilst the firm-level factors were size of the firm, profitability and firm age. The findings also revealed that personal savings was the most important financing choice at the initial phase of the firm, however once the firm was established, retained earnings was utilised more than any other source of finance. Retained earnings was also revealed to have a significant influence on the growth and survival of small, medium and micro enterprises

scholarly journals Interplay between capital structure choice and survival and growth of small, medium, and micro enterprises: A South African context

2019 ◽  
Vol 17 (4) ◽  
pp. 121-130 ◽  
Author(s):  
Celani John Nyide ◽  
Sharon Zunckel
Keyword(s):  
Capital Structure ◽  
Significant Influence ◽  
Structural Equation ◽  
Trade Credit ◽  
Empirical Studies ◽  
Statistical Tool ◽  
Growth And Survival ◽  
Survival And Growth ◽  
Retained Earnings ◽  
Micro Enterprises

It is essential for small, medium, and micro enterprises (SMMEs) to become established, be sustainable and grow. These firms play a vital role in the economy of both developed and developing countries. Empirical studies have acknowledged the contribution of SMMEs to the economy, as well as to the gross domestic product. However, the failure rate of these firms has also been emphasized in the same studies. SMME survival is critical for economic growth, which is measured by increases in profits. Capital structure decisions are significant to the survival and growth of these entities. This study was conducted to examine the interplay between capital structure and SMMEs` survival and growth in a developing economy. A sample size of 103 SMMEs was chosen on a non-probability basis using convenience sampling within the eThekwini area, KwaZulu-Natal, South Africa. The statistical tool used for analysis in this study was the Partial Least Squares Structural Equation Modelling (PLS-SEM) 5.0 software. Capital structure was found to have a significant influence on the growth and survival of small, medium, and micro enterprises. The study concludes that utilizing retained earnings, personal savings, trade credit and funds from friends and family has a significant influence on the growth and survival of the firm. Debt and external equity financing, on the other hand, have an insignificant influence on the growth the firm.

scholarly journals Capital structure of small, medium and micro enterprises: major factors for a developing economy

2019 ◽  
Vol 17 (2) ◽  
pp. 124-133
Author(s):  
Sharon Zunckel ◽  
Celani John Nyide
Keyword(s):  
Capital Structure ◽  
Structural Equation ◽  
Empirical Studies ◽  
Research Approach ◽  
Developing Economy ◽  
Firm Level ◽  
Cross Sectional ◽  
Major Factors ◽  
Micro Enterprises ◽  
The Capital Structure

Managing capital structure is an imperative decision made by all firms. The manner in which financing is organized is a strategic financial decision and managers must settle on the amount of debt in relation to equity that it requires to maintain. Despite many empirical studies investigating the choice of capital structure for large corporates, minimal research has been conducted on capital structure decisions in small, medium, and micro enterprises (SMMEs). This study identifies major factors influencing the capital structure of SMMEs in a developing economy and enlightens owners/managers on the importance thereof. This investigation used a quantitative research approach, which was cross-sectional. A convenience sampling method was adopted, and data were collected from 136 respondents, only confined to the retail and whole sector, which is the second largest sector in KwaZulu-Natal, South Africa. The partial least squares structural equation modelling was utilized to determine the statistical results. It was discovered that managerial factors such as individual goals and financing preference of the owner/manager, network ties, attitude to debt, maintaining control and asymmetric information; and firm-level factors such as size of the firm, profitability and firm age are major factors that influence the capital structure of SMMEs. Therefore, capital structure decisions are made motivated by the attitudes of the owners/managers.

Factors influencing the structure of the Russian companies' capital

2020 ◽  
Vol 26 (7) ◽  
pp. 1647-1660
Author(s):  
O.N. Likhacheva ◽  
A.S. Belikevich
Keyword(s):  
Correlation Analysis ◽  
Capital Structure ◽  
Systems Approach ◽  
Empirical Studies ◽  
Factors Influencing ◽  
Oil Contracts ◽  
Economic Landscape ◽  
Relationship Of ◽  
Trade Wars ◽  
The Capital Structure

Subject. In the uncertain market environment, the optimal structure of capital is getting more important because it influences the competitiveness of a firm, its financial sustainability and solvency and, consequently, a success. Herein we dwell upon the hypothesis presuming the existence of capital structure determinants. Objectives. We review empirical studies on the subject, analyze determinants of the Russian companies’ capital structure. Methods. The study is based on the systems approach and methods of statistical analysis. Results. It is necessary to monitor how capital is shaped and formed. We investigated proceedings on factors influencing the capital structure and discovered relevant hypotheses, carrying out the correlation analysis of such factors. Conclusions and Relevance. It is especially important to examine factors influencing the capital structure, and find the appropriate format for the economy struggling through the crisis. The coronavirus pandemic unavoidably reshapes the global economic landscape, which has already been under the pressure of deglobalization processes (trade wars, repudiation of oil contracts). The correlation analysis did not reveal any relationship of the variables in question (the company’s age, ROE, ROA, MOEX, key rate, GDP, PPI) and the capital structure. Further research should be devoted to other factors and consider the unreasonableness and psychological background of managers’ behavior who make decisions concerning the capital structure.

scholarly journals Capital Structure Choice in SMEs: Evidence from Kazakhstan

2019 ◽  
Vol 2 (2) ◽  
pp. 77-87
Author(s):  
Samal Kokeyeva ◽  
Ainagul Adambekova
Keyword(s):  
Capital Structure ◽  
Panel Data Analysis ◽  
Empirical Studies ◽  
Economic Activities ◽  
Industry Group ◽  
Factors Influencing ◽  
Industry Affiliation ◽  
The Impact ◽  
The Capital Structure

Background - The article examines the factors influencing the decision on the company's capital structure. Along with the standard factors of the company, we also analyze the impact of the industry affiliation of the company on its capital structure. Purpose - to test standard firm factors and industry affiliation of firms affecting the capital structure of SMEs. Design/Methodology/Approach – the non-financial firms in Kazakhstan with all types of economic activities for 2015-2018 under consideration. In order to study the determinants of capital structure such as asset tangibility, size, growth, liquidity, profitability across the industry group of SMEs for non-financial SMEs in Kazakhstan the authors use panel data analysis. Findings - The results indicate that the main factors influencing the process of capital structure management in Kazakhstan SMEs are asset tangibility, size and profitability.  It was confirmed that sectoral implications also affect the long-term debt and total debt of SMEs. Research limitation - it is necessary to provide further research concerning this topic. It is needed to study the capital structure of SMEs in the long term and across multiple countries, which will give us a more accurate concept of decisions on the capital structure taken in companies. Originality/value - the study of capital structure determinants of SMEs in Kazakhstan was not conducted yet. The empirical analysis in many aspects gives the same results as other related studies in emerging markets.  However, the size has a negative relation to the capital structure, which does not correspond to most empirical studies. 

scholarly journals Features of the formation and management of the capital structure of state-owned enterprises

2020 ◽  
pp. 40-50
Author(s):  
С.Г. Макарова ◽  
Е.И. Андрианова
Keyword(s):  
Capital Structure ◽  
Financial Stability ◽  
Stock Exchange ◽  
Negative Influence ◽  
State Ownership ◽  
State Participation ◽  
Retained Earnings ◽  
The Capital Structure

Окончание. Начало в №5 за 2020 г. Вопрос о влиянии собственности государства в крупных российских компаниях на их структуру капитала остается открытым и пока не получил окончательного разрешения в литературе. Результаты работ, проведенных для российского рынка, свидетельствуют о значительной роли государственного участия в российских компаниях [5], а также о том, что российские компании с государственным участием имеют значительно более высокие значения долга в структуре капитала, чем частные [34]. В данной публикации для оценки роли государственного участия на структуру капитала российских компаний был проведен эмпирический анализ 139 публичных компаний за 2014-2018 гг. (выборка представлена государственными и частными компаниями), котирующихся на Московской бирже. В рамках проведенного исследования было выявлено, что отечественные публичные государственные компании при прочих равных условиях имеют более высокое значение долга в структуре капитала, чем частные. Кроме этого, компании с государственным участием имеют также более высокие значения коэффициента долгосрочных обязательств в сравнении с частными. Это подтверждает гипотезу о том, что деятельность государственных компаний связана с большими финансовыми рисками, чем частных, особенно в долгосрочной перспективе. В данной ситуации целесообразно ввести политику, направленную на повышение финансовой устойчивости государственных компаний, а именно, осуществлять деятельность по расширению производственных процессов за счет собственных средств и нераспределенной прибыли, а не за счет заемных средств. Также было получено положительное значимое влияние на структуру капитала компаний с государственным участием таких факторов, как размер компании, рентабельность продаж, рентабельность собственного капитала, было выявлено отрицательное влияние таких детерминант, как величина чистых активов, коэффициент оборачиваемости активов, отношение операционных расходов к EBITDA, рентабельность активов. The question of the influence of state ownership in Russian companies on their capital structure remains open for further discussion and the conclusion has not been drawn yet. The results of the work carried out for the Russian market indicate a significant role of state participation in Russian companies [4], as well as the fact that Russian companies with state participation have significantly higher values of debt in the capital structure than private ones [33]. In this publication, to assess the role of state participation in the capital structure of Russian companies, an empirical analysis of 139 public companies for 2014-2018 was carried out. (sample presented by state and private companies) listed on the Moscow Stock Exchange. n this study, it was revealed that domestic public state-owned companies, other things being equal, have a higher value of debt in the capital structure than private ones. In addition, companies with state participation also have higher values of the ratio of long-term liabilities in comparison with private ones. This confirms the hypothesis that the activities of state-owned companies are associated with greater financial risks than private ones, especially in the long term. In this situation, it is reasonable to introduce a policy aimed at increasing the financial stability of state-owned companies, namely, to carry out activities to expand production processes at the expense of their own funds and retained earnings, and not at the expense of borrowed funds. We also obtained a positive significant influence on the capital structure of companies with state participation of such factors as the size of the company, profitability of sales, return on equity, negative influence of such determinants as the value of net assets, the asset turnover ratio, the ratio of operating expenses to EBITDA, return on assets.

scholarly journals Optimization of capital structure as a tool for managing the value of dairy enterprises

2021 ◽  
pp. 111-124
Author(s):  
O.M. Varchenko ◽  
I. Artіmonova ◽  
N. Kholodenko
Keyword(s):  
Capital Structure ◽  
Financial Management ◽  
Average Cost ◽  
Financial Stability ◽  
Cost Of Capital ◽  
Weighted Average ◽  
Market Value ◽  
Business Entities ◽  
Retained Earnings ◽  
The Capital Structure

The article is devoted to the study of methodological and practical approaches to optimizing the capital structure as a tool for managing the value of dairy enterprises. It is established that the most common and suitable for research in the context of optimizing the capital structure are two theories: compromise and the theory of the hierarchy of funding sources. It is argued that compromise models are not designed to accurately determine the optimal capital structure of the enterprise, but allow that the owners from the standpoint of risk is most advantageous to rank sources of funding as follows: retained earnings; debt sources; equity instruments, shares. It is proved that only in the complex use of approaches of foreign theories of capital structure optimization and developments of domestic scientists taking into account the environment of business entities it is possible to develop effective tools for maximizing the market value of the enterprise, minimizing the average market value of capital and risk of financial stability. The calculation of the integrated indicator of financial stability is offered, which allows to determine the level of the financial stability reserve, which allows to take into account the industry specifics and to carry out current monitoring of financial stability at the enterprise. It is substantiated that one of the methods of quantitative assessment of capital structure and substantiation of its optimal structure is the method of capital expenditures. It is argued that the estimated weighted average cost of capital varies in a fairly narrow range, is one of the key factors in the value of business, and achieving a minimum level of such a barrier rate increases the company's ability to make effective investments. It is established that determining the optimal financial structure of capital is one of the most difficult problems of financial management of dairy enterprises. It was found that the management of the formation and use of capital of dairy enterprises is focused on meeting the needs of sources of financing of their economic activities, and to achieve a balanced structure of sources of financing of capital by economic entities is possible only on the basis of optimization criteria. It is proved that the calculation of the weighted average cost of capital based on the capital assets model (CAPM) should be used provided reliable information on intra-industry indicators, in a developed stock market and the turnover of shares in the securities market. Key words: capital structure. cost of capital, cost management, dairy enterprises.

Cross-impact of leverage and firm performance: developed vs frontier bank-based economies

2019 ◽  
Vol 45 (8) ◽  
pp. 982-1000 ◽  
Author(s):  
Sibanjan Mishra ◽  
Ranjan Dasgupta
Keyword(s):  
Firm Performance ◽  
Capital Structure ◽  
Empirical Studies ◽  
Order Theory ◽  
Simultaneous Equation ◽  
Equation Modeling ◽  
Firm Level ◽  
Content Type ◽  
The Cross ◽  
And Performance

Purpose The purpose of this paper is to investigate the cross-impact of leverage and performance for firms operating in the developed and frontier bank-based economies. Design/methodology/approach This study uses annual panel data for a sample of 400 firms over a period of 27 years from 1990 to 2016. The sample sample firms consist of developed, Germany, France and Japan, and frontier including Argentina and Sri Lanka bank-based economies firms. The authors employ a simultaneous equation modeling consisting of two equations estimated using the two-stage least squares procedure to examine the cross-relationships between leverage and performance after controlling for other firm-level variables like size, growth and liquidity. Findings The empirical results are presented in two sets. First, in the case of firms in the developed bank-based sample, the authors find a negative debt-to-performance relationship and a negative performance-to-debt relationship. This inconsistent negative debt–performance relationship implies that firms operating in these economies use debt beyond a threshold limit, which, in turn, increases agency issues between the managers and debt-holders, thereby influencing firm performance adversely. Second, for frontier economies firms, the authors find a positive debt-to-performance relationship in line with the “trade-off theory.” Furthermore, the authors find a negative performance-to-debt relationship for both sub-samples in line with the “pecking-order theory.” Originality/value The study is distinct from earlier empirical studies and contributes largely to the existing literature. First, it emphasizes whether financial leverage influences firm performance in bank-based economies as firms operating in such systems are exposed directly to the strict regulatory environment. Second, it investigates whether any reverse relationship emanating from firm performance to capital structure holds for firms of these countries. This issue, to the best of author knowledge, is unanswered in previous research, more specifically for developed and frontier bank-based economies. Moreover, the results are relevant, as firm managers, analysts and policymakers must consider the importance of such cross-debt-performance relationships, while determining the optimal capital structure, in the bank-based economies.

scholarly journals DETERMINAN STRUKTUR MODAL DAN NILAI PERUSAHAAN PERTAMBANGAN PASCA UU NOMOR 4 TAHUN 2009

2017 ◽  
Vol 19 (1) ◽  
pp. 23
Author(s):  
Sumani Sumani
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Empirical Studies ◽  
Institutional Ownership ◽  
Negative Influence ◽  
Managerial Ownership ◽  
Company Size ◽  
Mining Companies ◽  
Size Growth ◽  
The Capital Structure

The aim of research is to know the effect of profitability, company size, growth, business risks, managerial ownership and institutional ownership on the capital structure as well as the influence of capital structure to value mining companies after the implementation of Law No. 4 of 2009 on Mineral and coal's Mining. The research carried out to test the hypothesis based on theoretical and empirical studies. The study population is a mining company listed on the Indonesia Stock Exchange, with a population of 36 company members. The sampling method was using purposive sampling techniques and acquired 11 companies in the study period of six years, from 2009 to 2014. Multiple and simple regression analysis techniques were used according to the research objectives to be achieved. Regression models of this study were not violation classic assumption which includes multicollinearity, autocorrelation and heteroscedasticity. Hypothesis testing results showed the variables of profitability, business risk, managerial ownership and institutional ownership have negative effect on the mining company's capital structure.  However, company size, growth and asset structure not significant on the capital structure. On the other side, Capital structure significantly negative influence to the value of mining companies after the implementation of Law No. 4 of 2009.

scholarly journals Determinantes do endividamento de empresas brasileiras listadas na B3 com e sem risco de insolvência

2021 ◽  
Vol 14 (1) ◽  
pp. 79-99
Author(s):  
Vinícius Freitas Lott ◽  
Daniel Rennó Tenenwurcel ◽  
Marcos Antônio de Camargos
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Multiple Regression Model ◽  
Bankruptcy Prediction ◽  
Over The Counter ◽  
Controversial Topic ◽  
Finance Theory ◽  
Retained Earnings ◽  
The Capital Structure

Purpose – The objective of this paper is to identify and analyze if there are differences in the determinants of the capital structure of companies listed in B3 (Brazil, Stock exchange, Over-The-Counter), with and without risk bankruptcy.Design/methodology/approach – We used the bankruptcy prediction index (Z2) of Altman, Baidya and Dias (1979) to separate companies with and without risk of bankruptcy, in addition to the multiple regression model estimated by OLS, in a sample consisting of 233 companies. The data used are secondary, of annual periodicity, obtained from financial statements taken from the Quantum Axis database, covering the period from 2011 to 2016.Findings – We concluded that there is a difference in the determinants of indebtedness between companies with and without risk of bankruptcy. Companies with risk of bankruptcy present a positive relationship between long-term and total indebtedness, and profitability and risk. Healthy companies, long-term and total debt presented negative relation with profitability, and positive with risk and size.Research limitations/implications – The limitation of this study is that it applies only to the companies investigated, so it is not possible to make generalizations.Originality/value – As a whole, the evidence found corroborates the pecking order hypothesis, according to which the first source of funds to finance investments is retained earnings, in the assessment of the capital structure of healthy companies than in relation to companies at risk of bankruptcy. Thus, the research's contribution is in the empirical field, providing new evidence for a very controversial topic in finance theory.

scholarly journals FINANCIAL LEVERAGE AND FINANCIAL PERFORMANCE OF OIL AND GAS COMPANIES IN NIGERIA

2020 ◽  
Vol 1 (1) ◽  
pp. 28-44
Author(s):  
A. Abubakar
Keyword(s):  
Capital Structure ◽  
Financial Performance ◽  
Random Effects ◽  
Oil And Gas ◽  
Stock Exchange ◽  
Annual Reports ◽  
Debt Ratio ◽  
Financial Leverage ◽  
Retained Earnings ◽  
The Capital Structure

This study was carried out to determine the effect of financial leverage on the financial performance, using secondary data obtained from the annual reports of 7 quoted Oil and Gas firms in Nigeria, and the Nigerian stock exchange (NSE) daily official lists over the period 2005- 2016. Descriptive statistics such as mean, median, minimum, maximum, standard deviation, coefficient of variation, skewness and kurtosis were used in data presentation, while random effects panel estimator is applied in determining the effect of financial leverage variables as short-term debt ratio (STDR), long-term debt ratio (LTDR) and total-debt equity ratio (TDER) on the financial performance measured by the return on equity (ROE). The regression results from the random effects model (REM), the best panel estimator in this study as revealed by the F-test and the Hausman test for best model selection, indicate that STDR and LTDR have no significant effect on the financial performance, and TDER has a negative significant effect on the financial performance denoted by ROE. The study concludes that higher financial leverage in the capital structure of quoted Oil & Gas firms in Nigeria deteriorates shareholders wealth measured by ROE. The study recommends that firms in the Oil & Gas sector should substitute at least 90 per cent of debt in the capital structure with equity, through bonus issue, right issue and higher proportion of retained earnings in the capital structure. Abubakar, A. | Department of Business Management, Federal University Dutsin-Ma, Katsina State, Nigeria

Sign in / Sign up

Export Citation Format

Share Document