The impact of debt and equity decisions on business performance: Evidence from International Airline Corporation
DOI:
https://doi.org/10.34069/AI/2023.63.03.1Palavras-chave:
Financial Performance, Debt, Equity, Return on assets, Return on equity, Airline Company.Resumo
Capital structure decision remains always interesting puzzle for practitioner as well as for researchers. Capital structure of company fluctuates from company to company, country to country, nature of business to business and firm age to age. The current study examines the impact of capital structure (financial leverage and equity decision) on airline performance. The analysis is performed on secondary data. Data is taken from the financial statements of under consideration study of Pakistan International Airline. Sample period is taken from 2004 to 2020. The financial performance is measured by ROA and ROE, while independent variables are debt to asset (DTA), debt to equity (DTE), and size (natural log of total assets). Two econometric models are developed for the analysis. Regression and correlation are used to measure the impact of debt and equity on company performance. The study demonstrated that DTA has a statistically significant negative relationship with the dependent variable, ROA. Model 1 results indicated that only DTA was the good predictor of ROA and size had no significant relationship with ROA. Model 2 results demonstrated that the size had a significant but positive relationship with ROE. Meanwhile, DTA had an insignificant association with ROE.
Downloads
Não há dados estatísticos.
Referências
Aman, Q., & Altass, S. (2019) Impact of Capital Structure on Business Performance: A case of Emirates Airlin, Amazonia Investiga, 8(21), 62-72. Retrieved from https://amazoniainvestiga.info/index.php/amazonia/article/view/48
Ardalan, K. (2018). Capital structure theory: Reconsidered. Research in International Business and Finance, 39, pp. 696–710
Asgharian, H. (2003) Are highly leveraged firms more sensitive to an economic downturn? The European Journal of Finance, 9(3), 219-241, DOI: 10.1080/13518470210132381
Bancel, F., & Mittoo, U. (2004). Cross-country Determinants of Capital Structure Choice: A Survey of European Firms,” Financial Management, 33, 103–132.
Booth, L., Aivazian, V., Demirguc-Kunt, A., & Maksimovic, V. (2001). Capital Structure in Developing Countries, Journal of Finance, 56, 87–130.
Butzbach, O., & Sarno, D. (2019). To What Extent Do Regional Effects Influence Firms’ Capital Structure? The Case of Southern Italian SMEs. International Journal of Financial Studies, 7(1), 2-20
Campbell, G., & Meeghan, R. (2018). Capital structure volatility in Europe. International Review of Financial Analysis, 55, 128-139
Damodaran, A. (2001). Corporate Finance, Theory and Practice (2nd edition). New York: Wiley.
De Jong, A., Kabir, R., & Nguyen, T. T. (2008). Capital Structure around the World: The Roles of Firm and Country Specific Determinants. Journal of Banking and Finance, 32, 1954-1969.
Fama, E., F., & French, K. R. (2002). Testing Trade-Off and Pecking Order Predictions about Dividends and Debt,” Review of Financial Studies, 15, 1-33.
Flannery, M. J., & Rangan, K. P. (2006). Partial Adjustment toward Target Capital Structures. Journal of Financial Economics, 79, 459-506.
Frank, M. Z., & Goya, V. K. (2003). Testing the pecking order theory of capital structure. Journal of Financial Economics, 67, 217–248
Frank, M., Z., & Goyal, V. K. (2007). Trade-Off and Pecking Order Theories of Debt. Handbook of Corporate Finance: Empirical Corporate Finance, 2, 1-82
Frank, M., Z., & Goyal, V. K. (2009). Capital Structure Decisions: Which Factors are Reliably Important? Financial Management, 38, 1–37.
Gaud, P., Jani, E., Hoesli, M., & Bender, A. (2005). The Capital Structure of Swiss Companies: An Empirical Analysis Using Dynamic Panel Data. European Financial Management, 11, 51–69.
Ghosh, C., Nag, R., & Sirmans, C. (2000). The pricing of seasoned equity offerings: evidence from REITs. Real Estate Economics, 28, 363-384.
Gonzalez, V., & Gonzalez, F. (2008). Influence of Bank Concentration and Institutions on Capital Structure: New International Evidence. Journal of Corporate Finance, 14, 363–375.
Hadlock C., J., & James, C. M. (2002). Do Banks Provide Financial Slack? The Journal Finance, 57(3), 1383-1419. https://doi.org/10.1111/1540-6261.00464
Jalilvand, A., & Harris, R. S. (1984). Corporate Behavior in Adjusting to Capital Structure and Dividend Targets: An Econometric Study. The Journal of Finance, 39(1), 127-145.
Jensen, M. (1986). Agency Cost of Free Cash Flow, Corporate Finance and Takeovers. American Economic Review, 76, 323-329.
Mallinguh, E, Wasike, C, & Zoltan, Z. (2020). The Business Sector, Firm Age, and Performance: The Mediating Role of Foreign Ownership and Financial Leverage, International Journal of Financial Studies, 8(4), 79-94
Margaritis, D., & Psillaki, M. (2007). Capital structure and firm efficiency. Journal of Business Finance & Accounting, 34(9-10), 1447–1469. https://doi.org/10.1111/j.1468-5957.2007.02056.x
Miguel, A., & Pindado, J. (2001). Determinants of Capital Structure: New Evidence from Spanish Panel Data. Journal of Corporate Finance, 7, 77–99.
Modigliani, F., & Miller, M. (1958). The cost of capital, corporation finance and the theory of investment. American Economic Review, 48, 261-97.
Musiienko, O., Kapustnyk, V., Arbeláez-Encarnación, T. F., Rojas-Bahamón, M. J., & Arbeláez-Campillo, D. F. (2022). The global economic crisis against the background of the war in Ukraine: Currant realities and prospects for overcoming. Amazonia Investiga, 11(59), 141-150. https://doi.org/10.34069/AI/2022.59.11.13
Myers, S., & Majluf, N. (1984). Corporate Financing and Investment Decisions when Firms Have Information that Investors do not Have. Journal of Financial Economics, 13, 187–221.
Nenu, E.A., Vintil?, G., & Gherghina, ?. C. (2018). The Impact of Capital Structure on Risk and Firm Performance: Empirical Evidence for the Bucharest Stock Exchange Listed Companies. International Journal Financial Studies, 6(2), https://doi.org/10.3390/ijfs6020041
Pakistan International Airlines (2021) Website. https://www.piac.com.pk. (Retrieved on 5th April, 2021)
Riahi-Belkaoui, A. (1999). Value Added Reporting and Research. Westport, CT, Greenwood.
Shah, S. (2016) After Syrian Air, PIA has second worst employee-to-aircraft ratio. The News International. https://www.thenews.com.pk/print/96203-After-Syrian-Air-PIA-has-second-worst-employee-to-aircraft-ratio (retrieved on 21-12-2021)
Simerly, R., L., & Li. M. (2000). Environmental dynamism, capital structure and performance: a theoretical integration and an empirical test. Strategic Management Journal, 21 (1), 31-49.
Warokka, A., Jose, J., & Abdullah, H. H. (2011). East Asian Corporate Governance: A test of the relationship between capital structure and firm performance. International Journal of Economics and Finance Studies, 3(2), 1-10.
Zeitun, R, & Tian, G. G. (2007). Capital structure and corporate performance: evidence from Jordan. Australasian Accounting Business and Finance Journal, 1(4/3), 40-61.
Ardalan, K. (2018). Capital structure theory: Reconsidered. Research in International Business and Finance, 39, pp. 696–710
Asgharian, H. (2003) Are highly leveraged firms more sensitive to an economic downturn? The European Journal of Finance, 9(3), 219-241, DOI: 10.1080/13518470210132381
Bancel, F., & Mittoo, U. (2004). Cross-country Determinants of Capital Structure Choice: A Survey of European Firms,” Financial Management, 33, 103–132.
Booth, L., Aivazian, V., Demirguc-Kunt, A., & Maksimovic, V. (2001). Capital Structure in Developing Countries, Journal of Finance, 56, 87–130.
Butzbach, O., & Sarno, D. (2019). To What Extent Do Regional Effects Influence Firms’ Capital Structure? The Case of Southern Italian SMEs. International Journal of Financial Studies, 7(1), 2-20
Campbell, G., & Meeghan, R. (2018). Capital structure volatility in Europe. International Review of Financial Analysis, 55, 128-139
Damodaran, A. (2001). Corporate Finance, Theory and Practice (2nd edition). New York: Wiley.
De Jong, A., Kabir, R., & Nguyen, T. T. (2008). Capital Structure around the World: The Roles of Firm and Country Specific Determinants. Journal of Banking and Finance, 32, 1954-1969.
Fama, E., F., & French, K. R. (2002). Testing Trade-Off and Pecking Order Predictions about Dividends and Debt,” Review of Financial Studies, 15, 1-33.
Flannery, M. J., & Rangan, K. P. (2006). Partial Adjustment toward Target Capital Structures. Journal of Financial Economics, 79, 459-506.
Frank, M. Z., & Goya, V. K. (2003). Testing the pecking order theory of capital structure. Journal of Financial Economics, 67, 217–248
Frank, M., Z., & Goyal, V. K. (2007). Trade-Off and Pecking Order Theories of Debt. Handbook of Corporate Finance: Empirical Corporate Finance, 2, 1-82
Frank, M., Z., & Goyal, V. K. (2009). Capital Structure Decisions: Which Factors are Reliably Important? Financial Management, 38, 1–37.
Gaud, P., Jani, E., Hoesli, M., & Bender, A. (2005). The Capital Structure of Swiss Companies: An Empirical Analysis Using Dynamic Panel Data. European Financial Management, 11, 51–69.
Ghosh, C., Nag, R., & Sirmans, C. (2000). The pricing of seasoned equity offerings: evidence from REITs. Real Estate Economics, 28, 363-384.
Gonzalez, V., & Gonzalez, F. (2008). Influence of Bank Concentration and Institutions on Capital Structure: New International Evidence. Journal of Corporate Finance, 14, 363–375.
Hadlock C., J., & James, C. M. (2002). Do Banks Provide Financial Slack? The Journal Finance, 57(3), 1383-1419. https://doi.org/10.1111/1540-6261.00464
Jalilvand, A., & Harris, R. S. (1984). Corporate Behavior in Adjusting to Capital Structure and Dividend Targets: An Econometric Study. The Journal of Finance, 39(1), 127-145.
Jensen, M. (1986). Agency Cost of Free Cash Flow, Corporate Finance and Takeovers. American Economic Review, 76, 323-329.
Mallinguh, E, Wasike, C, & Zoltan, Z. (2020). The Business Sector, Firm Age, and Performance: The Mediating Role of Foreign Ownership and Financial Leverage, International Journal of Financial Studies, 8(4), 79-94
Margaritis, D., & Psillaki, M. (2007). Capital structure and firm efficiency. Journal of Business Finance & Accounting, 34(9-10), 1447–1469. https://doi.org/10.1111/j.1468-5957.2007.02056.x
Miguel, A., & Pindado, J. (2001). Determinants of Capital Structure: New Evidence from Spanish Panel Data. Journal of Corporate Finance, 7, 77–99.
Modigliani, F., & Miller, M. (1958). The cost of capital, corporation finance and the theory of investment. American Economic Review, 48, 261-97.
Musiienko, O., Kapustnyk, V., Arbeláez-Encarnación, T. F., Rojas-Bahamón, M. J., & Arbeláez-Campillo, D. F. (2022). The global economic crisis against the background of the war in Ukraine: Currant realities and prospects for overcoming. Amazonia Investiga, 11(59), 141-150. https://doi.org/10.34069/AI/2022.59.11.13
Myers, S., & Majluf, N. (1984). Corporate Financing and Investment Decisions when Firms Have Information that Investors do not Have. Journal of Financial Economics, 13, 187–221.
Nenu, E.A., Vintil?, G., & Gherghina, ?. C. (2018). The Impact of Capital Structure on Risk and Firm Performance: Empirical Evidence for the Bucharest Stock Exchange Listed Companies. International Journal Financial Studies, 6(2), https://doi.org/10.3390/ijfs6020041
Pakistan International Airlines (2021) Website. https://www.piac.com.pk. (Retrieved on 5th April, 2021)
Riahi-Belkaoui, A. (1999). Value Added Reporting and Research. Westport, CT, Greenwood.
Shah, S. (2016) After Syrian Air, PIA has second worst employee-to-aircraft ratio. The News International. https://www.thenews.com.pk/print/96203-After-Syrian-Air-PIA-has-second-worst-employee-to-aircraft-ratio (retrieved on 21-12-2021)
Simerly, R., L., & Li. M. (2000). Environmental dynamism, capital structure and performance: a theoretical integration and an empirical test. Strategic Management Journal, 21 (1), 31-49.
Warokka, A., Jose, J., & Abdullah, H. H. (2011). East Asian Corporate Governance: A test of the relationship between capital structure and firm performance. International Journal of Economics and Finance Studies, 3(2), 1-10.
Zeitun, R, & Tian, G. G. (2007). Capital structure and corporate performance: evidence from Jordan. Australasian Accounting Business and Finance Journal, 1(4/3), 40-61.
Downloads
Publicado
2023-04-30
Como Citar
Aman, Q., & Altass, S. (2023). The impact of debt and equity decisions on business performance: Evidence from International Airline Corporation. Amazonia Investiga, 12(63), 10–20. https://doi.org/10.34069/AI/2023.63.03.1
Edição
Seção
Articles
.gif)
