The relationship between capital structure and the financial performance of the firm

Loading...
Thumbnail Image

Authors

Journal Title

Journal ISSN

Volume Title

Publisher

University of Pretoria

Abstract

Corporate finance literature suggests that the capital structure decision has played a pivotal role over the years in driving the establishment and growth of firms. There is also a body of evidence that financial markets take a keen interest in firm performance, especially for those listed on the stock exchange. There is no empirical evidence that there is a causal relationship between capital structure and the firm’s performance despite the importance of the two concepts in corporate finance.This study uses the debt/equity ratio as a proxy for capital structure and a selected few financial ratios to represent attributes of firm performance (e.g. profitability and shareholder value) in investigating the relationship between the two in the South African context.The results based on stock exchange data as input are inconclusive but they lay a foundation for potential future research. Interesting insights are drawn from using some limitations identified in the literature to try and explain why the results are the way that they are.

Description

Dissertation (MBA)--University of Pretoria, 2010.

Keywords

UCTD, Financial performance, Capital structure

Sustainable Development Goals

Citation

Gangeni, C 2006, The relationship between capital structure and the financial performance of the firm, MBA dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://hdl.handle.net/2263/23626 >