Determinants of capital structure and firm performance : evidence from Asia | |
| Author | Zafar, Qurat ul Ain |
| Call Number | AIT Diss. no.SM-19-08 |
| Subject(s) | Capital--Asia Financial management--Asia |
| Note | A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Management |
| Publisher | Asian Institute of Technology |
| Abstract | One of the dynamic factors for the growth and progression of company's performance lie in the proficiency of a company to adopt the value maximizing financing policies focusing on earning from the investment opportunities. The Financial management decision can be broken down in to three major decisions, which include: (i) the investment decision, (ii) the financing decision and (iii) the dividend policy decision. Where the financing decision refers to capital structure decisions as most vital ones. Because of the economic and operational significance of capital structure decisions on firm level and macro level, it is valuable to contribute in developing the literature focusing the relative importance of firm-specific and country-specific determinants. The combination of debt and equity is referred as company's leverage also known as firm's financial framework to finance the firms' operations. The purpose of all financing decisions is the maximization of shareholders' wealth. Therefore, financing decision have profound impact on firms' performance. The criterion of successful financing decision is the maximation of performance which eventually translates into firm value (Mwangi et aI., 2014). Our study identifies the relevant firm- and country-specific determinants of leverage choice for firms in 16 Asian countries during 2009-2015. In addition to pooled regression analysis, we classify the 16 Asian countries into three income economies based on Gross National Income (GNI) by World Bank because this approach provides more comprehensive analysis to study the determinants' effects. Equations estimating the financing determinants identify the test variables non-debt tax shield, liquidity, tax and GOP growth rate in case of pooled and income economies, beside the core variables tangibility, growth, size, and profitability retain their significance for leverage choice in both cases during 2009-20 IS. Furthermore, the findings show that financing choices of firms in Asian regional markets is complemented with financial system development stages, proxies as the equity market, bond market and banking industry. Further we evaluate the impact of leverage and firm-specific determinants on firms' performance. From the panel data estimates of Asian economies for firm performance measured as Tobin's Q, we find mixed results for pooled model and income economy based segregated models. Leverage shows negative impact on the firm performance across pooled set and income economy based segregated models from 2009-2015. While size, growth opportunities, non-debt tax shield and business risk are significantly and positively affecting the firm performance across Asian countries. Following the discussion on the impact of macro-variables includes stock market orientation, bank size and bond market on Economic growth through firms' performance on pooled basis as well as on income economy basis. For regressing the macro-factors, we observe that it impacts the GOP growth rate (GRT), through firms' performance (Tobin's Q) playing the role of mediating variable. Firms' performance meditates the impact of financial development system on economic growth which has an established relation with each other in supply leading hypothesis. In context of Asian economies, we find stock and bank markets mainly influence the firms' performance with better allocation of investment resources and by strengthening saving rates to perform better measured as Tobin's Q. The firms' performance contributes collectively in enhancing the economic growth. Asian economies are found to be following finance-led growth hypothesis, supports our preposition of positive impact of financial system development on economic growth through firms' performance. Hence, capital structure decisions immensely affect the firms' performance. |
| Year | 2019 |
| Type | Dissertation |
| School | School of Management (SOM) |
| Department | Other Field of Studies (No Department) |
| Academic Program/FoS | Doctor of Philosophy in Management (Publication code = SM) |
| Chairperson(s) | Winai Wongsurawat;Badir, Yousre F. M. (Co-Chairperson) |
| Examination Committee(s) | Vimolwan Yukongdi;Villas Nittivattananon |
| Scholarship Donor(s) | BUITEMS Quetta, Pakistan;Asian Institute of Technology Fellowship |
| Degree | Thesis (Ph.D.) - Asian Institute of Technology, 2019 |