Research Paper 1: An Analytical Study of the Impact of Capital Structure on Profitability of Top IT Companies in India Tapal Dulababu of Oxford College of Business Management conducted a study on the impact of capital structure on the profitability of the IT sector from 2011 to 2015. The objective was to determine whether the capital structure and the profitability of a company are interrelated. The research was conducted on the basis of a sample space of five IT companies.The data has been collected via secondary sources and was later substantiated from the annual report of the respective companies. The statistical tools applied to interpret the data were Karl Pearson’s Coefficient of correlation and ANOVA single factor.
After analyzing, we can conclude that the correlation between the Debt-Equity Ratio and other profitability factors from the sample space is zero as even with zero debt various changes have been observed in the profitability factors, which implies that any change in profitability factors is not because of DER. Research Paper 2: Impacts of Capital Structure on Performance of Banks in a Developing Economy This research examines the impact of the capital structure on 22 banks, the financial statements of which were audited for the period 2005-2014. Ordinary least square method was used to analyze the data and bank performance was taken as the dependent variable. The data has been segregated and analyzed on the basis of ROA, ROE and EPS (dependent variables);Capital structure variables like Short-Term Debt to Total Assets, Long-Term Debt to Total Assets and Total Debt to Total Assetwere considered to be independent. After the analysis, it was discovered that the debt component in the capital structure affects the bank’s performance negatively. Similarly, liquidity negatively impacts the bank’s performance. However, the growth opportunities in the banking sector lead to better performance of banks and gives them a superior market status as it reduces their agency cost and therefore, improves performance.
Research Paper 3: Capital Structure in a tax-free economy The paper discusses the impact of a tax-free economy on the capital structure of a firm by taking the non-financial listed companies from the Abu Dhabi Stock Exchange. This paper would enhance the readers’ understanding of how different capital structures of firms and their theories are affected in a tax-free environment. The researchers concluded that factors like growth opportunities and profitability of a firm were the main factors affecting the liquidity of the firm. Although this does not affect the larger firms which are market leaders, it affects the firms at the bottom of the pyramid.
The assumptions that were taken in the beginning were consistent with the findings in the report. Thus, we can conclude that a tax-free economy has a positive affect on leverage which in turn affects the capital structure. Research Paper 4: Determinants of Capital Structure of select Edible Oil Firms in India The research paper analyzes the determinants of capital structure of edible oil firms in India. The research is based on 10 listed edible oil companies selected on the basis of non-profitability. The data has been collected from the annual reports of the companies for the period 2009-2013. The statistical tools which have been used to interpret and analyse the data were hypothesis, correlation and regression analysis.
The objective was to determine the factors that affect the capital structure of edible oil firms and how its leverage is related to these factors. After the analysis we conclude that in India, large firms use more of debt than equity and that the tangible and growing firms are debt driven in order to take advantage of the various investment opportunities. A company having large amount of reserves can afford to have a higher debt component in its capital structure as its strong finances are an indicator of liquidity. After the capital structure for a company has been formed, it more or less remains the same and has no notable changes. However, companies in the same sector may have discrete strategies related to the capital structure. Research Paper 5: Determinants of Capital Structure of Small Firms: Empirical Evidence from Pharmaceutical Industry in Indore The research paper shows the capital structure determinants in the pharmaceutical manufacturing sector. Its objective was to find out whether the established capital structure theories were relevant in the pharmaceutical manufacturing firms.
A sample space of 29 firms was taken for the purpose of this analysis. The data that was collected was secondary in nature and was taken from the financial statements of manufacturing firms in Indore.It was analyzed using Panel Data Regression Model. The analysis discovered that firms which earn higher profits seem to initially finance their business activities using the internal sources and later resort to external debt which makes their relationship negative, in agreement with the pecking order theory. Similarly, a firm which has high liquidity ratios also has a negative relationship with external debt. However, a firm having more tangible assets is said to have a larger amount of debt in its capital structure as the value of intangible assets is subject to more fluctuations over tangible assets.
Besides, a tangible asset is easier to liquidate over intangible assets, thus reducing the investor’s risk. After analyzing various other independent variables, we can conclude that factors such as profitability, firm size and liquidity have a negative relationship with the capital structure where as variables like asset tangibility have a positive relationship.