The Impact of Capital Structure on the Firm Risk and Performance
Lyulyu, Sofiya (2018)
Jyväskylän ammattikorkeakoulu
2018
All rights reserved
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2018120419990
https://urn.fi/URN:NBN:fi:amk-2018120419990
Tiivistelmä
The decision about the sources of financing is the prior one when incorporating the company, and even before. The perfect balance of capital structure is the issue which the corporate governments often struggle with. The goal was to examine the influence of capital structure on the performance measures of the firm and the risk in order to address the above-mentioned problem. The performance was categorized into market-based, accounting-based, non-financial, and hybrid performance measures. The capital structure was measured from two perspectives, the book value of the debt was compared to the book and market values of equity.
The secondary data were collected of 50 Finnish publicly listed companies for the period from 2012 to 2016. All the data were collected from the Helsinki stock exchange official databases and the financial statements, the reports, and disclosures of the sample companies. The analysis was performed by using of SPSS software. The analysis included descriptive, correlation, and ordinary least square (OLS) regression statistics. The descriptive statistics gave the overview of the data, the correlation analysis showed the level of association between the main variables, and, finally, the regression provided the findings related to the impact of amount of debt on the multiple dependent variables related to performance and risk. The research methods were chosen with diligence to support research hypotheses.
The empirical findings show that the capital structure has an impact on the market-based, accounting-based, and hybrid performance measures, as well as total risk. The results further highlight the attainment of optimum capital structure. Nevertheless, as the proportion of debt starts exceeding the market value of equity a negative influence on the dependent variables is observed. The findings disclose that increased debt leads to the increased total risk, interestingly, the systematic risk is not affected by the changes in the debt-to-equity ratio (a measure of capital structure).
The secondary data were collected of 50 Finnish publicly listed companies for the period from 2012 to 2016. All the data were collected from the Helsinki stock exchange official databases and the financial statements, the reports, and disclosures of the sample companies. The analysis was performed by using of SPSS software. The analysis included descriptive, correlation, and ordinary least square (OLS) regression statistics. The descriptive statistics gave the overview of the data, the correlation analysis showed the level of association between the main variables, and, finally, the regression provided the findings related to the impact of amount of debt on the multiple dependent variables related to performance and risk. The research methods were chosen with diligence to support research hypotheses.
The empirical findings show that the capital structure has an impact on the market-based, accounting-based, and hybrid performance measures, as well as total risk. The results further highlight the attainment of optimum capital structure. Nevertheless, as the proportion of debt starts exceeding the market value of equity a negative influence on the dependent variables is observed. The findings disclose that increased debt leads to the increased total risk, interestingly, the systematic risk is not affected by the changes in the debt-to-equity ratio (a measure of capital structure).