Corporate Finance Project

ARTICLE 1
Title of research Article :

The Effect of Capital Structure on Profitability: An Empirical Panel Data Study
Authors name:
Narinder Pal Singh Mahima Bagga
Journal Name and year:
Jindal Journal of Business Research, 2019
Theoretical Framework:
Decisions related to an optimal capital structure have troubled theoreticians for many years. The
early work made quite a few assumptions in an effort to simplify the problem and assumed that
both the cost of debt and equity were separate from the capital structure, and that the appropriate
figure for consideration was the net income of the firm. Using these suppositions, the average
cost of capital reduced by using leverage, and the value of the firm (the value of the debt and
equity combined) improved, whereas the value of the equity remained the same.
Highlight dependent Variables
Two performance indicators, ROA and ROE, has been chosen as dependent variables. They refer
to how much profit firms earn based on their asset investments, and how effectively managers
use investors’ funds.
Independent variables
The independent variables are the ratios of total liabilities to total assets (TLTA) and the ratio of
total equity to total assets (TETA). If these ratios changes will not affect other one because they
are independent.
Control variable:
The determinants of capital structure are used as control variables as performance indicators. It
includes asset tangibility (TANG), defined as the ratio of fixed assets to total assets; tax (TAX),
described by the ratio of tax to earnings before interest and tax; business risk (BR), the ratio of
percentage change in EBIT and percentage change in net sales; liquidity (LIQ), the ratio of
current assets to current liabilities, and the annual inflation rate (IR).
Mediating variable
Managerial ownership moderates the link between capital structure and firm value therefore it
serves as a moderating variable.
ARTICLE 2
Title of research Article:
The Effect of Capital Structure on Financial Performance of Vietnamese
Listing Pharmaceutical Enterprises
Authors name:
Hung The DINH1, Cuong Duc PHAM2
Journal of Asian Finance, Economics and Business Vol 7 No 9 (2020)
The concept of capital structure has many different views. According to Stephen, Westerfield,
and Jordan (2003) the firm’s capital structure is the combination of the use of debt and equity in
a certain proportion to finance production and business activities of the enterprise. In other
words, the enterprise capital structure is a correlation between longterm debt and equity. Thus, it
is common that the structure of the correlation ratio is proportional between the debt and equity
of a business.

Two performance indicators, ROA and ROE, has been chosen as dependent variables. They refer
to how much profit firms earn based on their asset investments, and how effectively managers
use investors’ funds.
The independent variables are the ratios of total liabilities to total assets (TLTA) and the ratio of
total equity to total assets (TETA)
Forecast variables
These are the F- variables used in this article E/C, LR, LAR, DR, SIZE, FAR, GROWTH.
ARTICLE 3
Title of research Article :
Factoring as a determinant of capital structure for large firms: Theoretical and empirical
analysis
Authors name:
Rumeysa Bilgin
Borsa Istanbul , (2019)
The null hypotheses H0 is tested against the alternative.
H0. : There is no relationship between a firm's leverage ratio and its factoring financing
H1. : There is a positive relationship between a firm's leverage ratio and its factoring financing.
The leverage ratio is used as dependent variable in this article.
Total assets of the firm and total sales of the firm are independent variables, as they both are
dependent on the each other, if there is change in them the they will cause a change which can
also cause a problem.
Mediating variable
Capital structure is the modertaing variable in this case as the research topic states.
ARTICLE 4
Title of Research Article :
Determinants of Capital Structure of African Firms: A Categorical Analysis
Authors name:
European Journal of Business and Management, 2018
Starting from the seminal work , several researchers have introduced theories that tried to
describe the way firm managers decide on the capital structure of the firms. But, accordingly
Barclay the challenge over the years has been to devise conclusive tests that offer a base for
choosing the correct theory. For instance, partial adjustment regressions confirmed the static
trade-off theory even on data simulated according to the pecking order theory. Such
contradiction rises because of the methodological weaknesses of partial adjustment models used
in several capital structure researches and because the theories in some cases presents
contradictory expectations on how managers choose their capital structure theoretical
Framework. It includes pecking order theory and trade off theories, contracting cost theory and
institutional determinants of capital structure.
Highlight Dependent Variable
Companys financial position is directly linked with coporate governance, financial leverage ,
liquidity and companys size.
Independent Variables
Ratio of total liabilities to total assets is an independent variable and ratio of total current
liabilites to shareholder equity is also independent variable
Mediating Variable
Financing decision is a mediating variable between capital structure and firms perfromance.
ARTICLE 5
Title of research article:
Implications of capital structure on the Profitability of Quoted Agricultural Firms in Nigeria
Authors name:
S. A. Effiong and W.S. Inyang
International Journal of Economic Development Research and Investment, 51Volume9, Number

1, April 2018
In their research, they establish the value of a firm would be determined by the capability of its
assets to create value and that no relationship exists between the firm’s capital structure and the
value of the firm, making debt financing and equity perfect substitutes. However, Modigliani and
Miller(1958) base their work on a perfect capital market assumption with no taxes, no
transaction costs and perfect and credible exposure of information, developed a theory known as
the Theory of Capital Structure Irrelevance. Summarily, no worldwide accepted theory exists to
explain debt-equity choice. Diverse opinions have been suggested as regards choice of financing.
Studies carried out by other researchers were on economies with a relatively stable monetary
value. In Nigeria, the value of money is relatively unstable; this work seeks to look into the
effect of each method of capital finance on profitability of listed agricultural companies in
Nigeria.
Panel Data method was applied using regression analysis to examine the level of
relationship that exists between the dependent and the independent variables. Return on
sales which is equal to net profit after tax divided by total assets and multiplying it with 100 is
the dependent variable in this article.
Independent Variables
The independent variable is total debt to market value of assets which is equal to sum of debt in
current liabilities and long term debt divided by the market value of assets
Control Variables
Representing two variables of the construct, the beneath equation is expressed withthe addition
of a control variable. The introduction of the control variable is to ensurea better certainty and
enquiry of the correlation existing amid profitability and financialstructure.
The equation therefore is represented as ;PAT = f (Equity; Long Term Debt; Short Term Debt)
+ SIZE

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ARTICLE 1

Title of research Article :

Highlight dependent Variables

Determinants of Capital Structure of African Firms: A Categorical Analysis

Journal Name and year:

European Journal of Business and Management, 2018

Highlight Dependent Variable

Title of research article:

Implications of capital structure on the Profitability of Quoted Agricultural Firms in Nigeria

S. A. Effiong and W.S. Inyang

Journal Name and year:

International Journal of Economic Development Research and Investment, 51Volume9, Number

Highlight dependent Variables

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