Impact of Capital Structure on Business Performance: A case of Emirates Airline
Keywords:
Capital Structure, Business Performance, Return on Asset, Return on Equity, Net Profit Margin, Debt to Asset, Debt to Equity.
Abstract
This study investigated the impact of capital structure on business performance of emirates airline. To that end, a time series analysis conducted over the period 1990 to 2015. Econometric models were developed and tested. In this regard three econometric models were developed. The dependent variable were Return on Assets, Return on Equity and Net Profit Margin while the Independent variable were Debt to Assets and Debt to Equity. Time series data assumption stationary was checked through Augmented Dickey Fuller test. To examine the impact of capital structure on business performance multiple regression and correlation analysis were applied. Results showed that there is no significant impact of debt to asset (DTA) on business performance, while debt to equity (DTE) has significant impact on the business performance of Emirates Airline.
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References
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Acras, M, J & Bachiller, P., (2008) Performance and Capital Structure of Privatized Firms in Europe, Journal of Global Economics Review, Volume 37, 2008 - Issue 1
Aivazian, V., L. Booth, and S. Cleary., (2003), "Do emerging market firms follow different dividend policies from US firms?" Journal of Financial Research 26, no. 3: 371–87
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Arbabiyan, Ali-Akbar & Safari, M., (2009), The effects of capital structure and profitability in the listed firms in Tehran Stock Exchange, Journal of Management Perspective, 33: 159-175.
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Ari,W, Herrera, J, J, D, 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
Asgharian, H., (2003) “Are highly leveraged firms more sensitive to an economic downturn?”, The European Journal of Finance, 9(3), pp. 219-241
Berger, A & Bonaccorsi di Patti, E (2006), Capital structure and firm performance: a new approach to testing agency theory and an application to the banking industry, Journal of Banking and Finance, 32: 1065-1102
Bhaduri, S., (2002), "Determinants of corporate borrowing: Some evidence from the Indian corporate structure", Journal of Economics and Finance 26: 200–15 Brailsforda, T, J, Olivera, B, R, and Pua, S, L, H,. (2002) "On the relation between ownership structure and capital structure", Accounting and Finance 42, 1– 26
Capon, N.; Farly, J.U.; and Hoenig, S.M., (1990), “A meta-analysis of financial performance.” Management Science 16, pp. 1143-1159.
Chen S-S, Chung T-Y, Ho KW, Lee, C, F., (2007), Intra-industry effects of delayed new product introductions. Rev Pac Basin Financ Mark Policies 10:415–443
Damodaran, (2001). “Corporate Finance.” Theory and Practice (2nd edition). New York: Wiely
Ebaid., E. I. (2009). The impact of capital structure choice on firm performance: empirical evidence from Egypt, . Journal of risk Finance, Vol. 7, pag, 477-487.
Fama , E, F, & French, K, R., (2002), "The Equity Premium," Journal of Finance, American Finance Association, vol. 57(2), pp, 637-659,04.
Ghosh_S. (2007). Leverage, Managerial Monitoring and Firm Valuation: A Simultaneous Equation Approach, . Research in Economics ,61: , 84–98.
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Grossman, S, J and Hart, O, D., (1982) “Corporate financial structure and managerial incentives”, The Economics of Information and Uncertainty, McCall, J.J. (ed.), NBER, pp.107-140.
Gul, F,A,. (1999), "Government share ownership, investment opportunity set and corporate policy choices in China", Pacific-Basin Finance Journal 7, no. 2: 157–72.
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King_M. and Santor_E. (2008) .Family Values: Ownership Structure, Performance and Capital Structure of Canadian Firms,. Journal of Banking and Finance,32:, 2423-2432.
Koch, P.D., and C. Shenoy (1999), "The information content of dividend and capital structure policies", Financial Management 28: 16–36
Majumdar, S.K and Chhibber, P (1999): “Capital structure and performance: evidence from a transition economy on an aspect of corporate governance.” Public Choice, 98, pp 287- 305.
Margaritis, D and Psillaki, M., (2007), “Capital structure and firm efficiency”, Journal of Business Finance & Accounting, 34(9-10), pp.1447–1469.
Modigliani, F., & Miller, M. (1958). The cost of capital, corporation finance and the theory of investment. American Economic Review, 48, 261-97.
Muhammad, H., Shah, B. & Islam, Z. (2014). The Impact of Capital Structure on Firm Profitability: Evidence from Pakistan. Journal of Industrial Distribution and Business, 5 – 2 (2014) 13 – 20, ISSN: 2233-4165/ Online ISSN: 2233-5383.
Myers, S. 1977. Determinants of corporate borrowing. Journal of Financial Economic 5: 147–75
Nirajini, A, Priya_K, B. (2013). Impact of Capital Structure on Financial Performance of the Listed Trading Companies in Sri Lanka,. International Journal of Scientific and Research Publications, Volume 3.
Onaolapo, Adekunle A, Kajola, Sunday O. (2010), “Capital Structure and Firm Performance: Evidence from Nigeria” European Journal of Economics, Finance and Administrative Sciences, Issue 25
Peterson, P, P., & Fabozzi, F, J,. (1999). Analysis of Financial Statements. New York: Wiley. p. 92. ISBN 1-883249-59-7.
Pouraghajan, A., Malekian, E., Emamgholipour, M., Lotfollahpour, V., and Bagheri, M, M. (2012). The Relationship between Capital Structure and Firm Performance Evaluation Measures: Evidence from the Tehran Stock Exchange. International Journal of Business and Comm vol no 1 .9, 166_181.
Raheman, A., Zulfiqar, B., and Mustafa. (2007). "Capital structure and profitability: Case of Islamabad Stock Exchange". "International Review of Business Research Papers Vol. 3 No.5, 347-361".
Rajan, R. G., & Zingales, L. (1995), "What do we know about capital structure? Some evidence from international data", Journal of finance, 50(5): 1421-1460
Rao, N, V, Al-Yahyee, K and Syed, L.(2007). Capital Structure and Financial Performance: Evidence from Oman, Indian Journal of Economics and Business,:1-23.
Razak, N.H.A., Ahmad, R. & Aliahmed, H.J. (2008), Government ownership and performance: An analysis of listed companies in Malaysia, Corporate Ownership and Control, 6(2): 434-442.
Riahi, B, A., (1999), Capital Structure: Determination, Evaluation and Accounting: Westport, Quorum Books Publisher.
Saeedi, A. and Mahmoodi, I. (2011), "Capital structure and firm performance: evidence from Iranian Companies'', International Research Journal and Economics, Vol. 70, 20-26.
Salim, M, Yadav, R., (2012), "Capital Structure and Firm Performance: Evidence from Malaysian Listed Companies", Procedia - Social and Behavioral Sciences, 65 pp. 156 – 166
Talberg, M., Winge, C., Frydenberg, S. and Westgaard, S. (2008), “Capital structure across industries”, International Journal of the Economics of Business, Vol. 15 No. 2, pp. 181-200.
Tang, C., Jang, S., (2007). Revisit to the determinants of capital structure: a comparison between lodging firms and software firms. International Journal of Hospitality Management 26 (1), 175–187
Timothy J. Brailsford, Barry R., Olivera, Sandra L. H. Pua (2002) " On the relation between ownership structure and capital structure", Accounting and Finance 42, 1– 26
Titman, S., and R. Wessels. (1988). The determinants of capital structure choice. Journal of Finance 43, no. 1: 1–19.
Tong, G and Green, C, J., (2005) “Pecking order or trade-off hypothesis? Evidence on the capital structure of Chinese companies”, Applied Economics, 37, pp. 2179–2189.
Tsangaao, C., Kuei-Chiu, L., Yao-Men, Y. and Chia-Ha. (2009). ' Does capital structure affect operating performances of credit cooperatives in Taiwan: application of panel threshold method,. International Research Journal of Finance and Economics, Vol. 32,18-21.
Upneja, A. and Dalbor, M. C. (2001), “An Examination of Capital Structure in the Restaurant Industry”, International Journal of Contemporary Hospitality Management, Vol. 13 No.2, pp. 54-59.
Zeitun, R. and Tian, G. (2007), “Capital structure and corporate performance: evidence from Jordan”, Australasian Accounting Business and Finance Journal, Vol. 1, pp. 40-53
Acras, M, J & Bachiller, P., (2008) Performance and Capital Structure of Privatized Firms in Europe, Journal of Global Economics Review, Volume 37, 2008 - Issue 1
Aivazian, V., L. Booth, and S. Cleary., (2003), "Do emerging market firms follow different dividend policies from US firms?" Journal of Financial Research 26, no. 3: 371–87
Antonios, A, Guney_Y, and Paudyal, K., (2008). "The Determinants of Capital Structure: Capital Market-Oriented versus Bank-Oriented Institutions,". Journal of financial and quantitative analysis Vol. 43, No. 1,, 59–92.
Arbabiyan, A. A. S. (2009). Investigating impact of capital structure on beneficiary of firms listed at Tehran stock exchange, Journal of Manager Perspective. , No.33, pp.159-175.
Arbabiyan, Ali-Akbar & Safari, M., (2009), The effects of capital structure and profitability in the listed firms in Tehran Stock Exchange, Journal of Management Perspective, 33: 159-175.
Arbabiyan, Ali-Akbar & Safari, Mehdi, (2009), "The effects of capital structure and profitability in the listed firms in Tehran Stock Exchange", Journal of Management Perspective, 33: 159-175.
Ari,W, Herrera, J, J, D, 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
Asgharian, H., (2003) “Are highly leveraged firms more sensitive to an economic downturn?”, The European Journal of Finance, 9(3), pp. 219-241
Berger, A & Bonaccorsi di Patti, E (2006), Capital structure and firm performance: a new approach to testing agency theory and an application to the banking industry, Journal of Banking and Finance, 32: 1065-1102
Bhaduri, S., (2002), "Determinants of corporate borrowing: Some evidence from the Indian corporate structure", Journal of Economics and Finance 26: 200–15 Brailsforda, T, J, Olivera, B, R, and Pua, S, L, H,. (2002) "On the relation between ownership structure and capital structure", Accounting and Finance 42, 1– 26
Capon, N.; Farly, J.U.; and Hoenig, S.M., (1990), “A meta-analysis of financial performance.” Management Science 16, pp. 1143-1159.
Chen S-S, Chung T-Y, Ho KW, Lee, C, F., (2007), Intra-industry effects of delayed new product introductions. Rev Pac Basin Financ Mark Policies 10:415–443
Damodaran, (2001). “Corporate Finance.” Theory and Practice (2nd edition). New York: Wiely
Ebaid., E. I. (2009). The impact of capital structure choice on firm performance: empirical evidence from Egypt, . Journal of risk Finance, Vol. 7, pag, 477-487.
Fama , E, F, & French, K, R., (2002), "The Equity Premium," Journal of Finance, American Finance Association, vol. 57(2), pp, 637-659,04.
Ghosh_S. (2007). Leverage, Managerial Monitoring and Firm Valuation: A Simultaneous Equation Approach, . Research in Economics ,61: , 84–98.
Gleason, K. C., Mathur, L. K., & Mathur, I. (2000), “The Interrelationship between Culture, Capital Structure, and Performance: Evidence from European Retailers”, Journal of Business Research, Vol. 50 No. 2, pp. 185 191.
Grossman, S, J and Hart, O, D., (1982) “Corporate financial structure and managerial incentives”, The Economics of Information and Uncertainty, McCall, J.J. (ed.), NBER, pp.107-140.
Gul, F,A,. (1999), "Government share ownership, investment opportunity set and corporate policy choices in China", Pacific-Basin Finance Journal 7, no. 2: 157–72.
https://en.wikipedia.org/wiki/History_of_Emirates_(airline) retrieved on 11-6-2019
Ho, H. (2003), "Dividend policies in Australia and Japan", International Advances in Economic Research 9, no. 2: 91–100
Holder, M.E., F.W. Langrehr, and J.L. Hexter. (1998), "Dividend policy determinants: An investigation of the influences of stakeholder theory", Financial Management 27, no. 3: 73–82
Hovakimian, A., Hovakimian, G., & Tehranian, H. (2004), Determinants of target capital structure: The case of dual debt and equity issues, Journal of financial economics, 71(3),517-540.
Huang, S. and Song, F. (2006). The determinants of capital structure: evidence from China,. China Economic Review, Vol. 17 No. 1, , (14-36.). Jong de A, Kahir, R, and Nguyen, T., (2007) "Capital Structure Around the World: The Roles of Firm- and Country-Specific Determinants", Journal of Banking & Finance 32(9):1954-1969
King_M. and Santor_E. (2008) .Family Values: Ownership Structure, Performance and Capital Structure of Canadian Firms,. Journal of Banking and Finance,32:, 2423-2432.
Koch, P.D., and C. Shenoy (1999), "The information content of dividend and capital structure policies", Financial Management 28: 16–36
Majumdar, S.K and Chhibber, P (1999): “Capital structure and performance: evidence from a transition economy on an aspect of corporate governance.” Public Choice, 98, pp 287- 305.
Margaritis, D and Psillaki, M., (2007), “Capital structure and firm efficiency”, Journal of Business Finance & Accounting, 34(9-10), pp.1447–1469.
Modigliani, F., & Miller, M. (1958). The cost of capital, corporation finance and the theory of investment. American Economic Review, 48, 261-97.
Muhammad, H., Shah, B. & Islam, Z. (2014). The Impact of Capital Structure on Firm Profitability: Evidence from Pakistan. Journal of Industrial Distribution and Business, 5 – 2 (2014) 13 – 20, ISSN: 2233-4165/ Online ISSN: 2233-5383.
Myers, S. 1977. Determinants of corporate borrowing. Journal of Financial Economic 5: 147–75
Nirajini, A, Priya_K, B. (2013). Impact of Capital Structure on Financial Performance of the Listed Trading Companies in Sri Lanka,. International Journal of Scientific and Research Publications, Volume 3.
Onaolapo, Adekunle A, Kajola, Sunday O. (2010), “Capital Structure and Firm Performance: Evidence from Nigeria” European Journal of Economics, Finance and Administrative Sciences, Issue 25
Peterson, P, P., & Fabozzi, F, J,. (1999). Analysis of Financial Statements. New York: Wiley. p. 92. ISBN 1-883249-59-7.
Pouraghajan, A., Malekian, E., Emamgholipour, M., Lotfollahpour, V., and Bagheri, M, M. (2012). The Relationship between Capital Structure and Firm Performance Evaluation Measures: Evidence from the Tehran Stock Exchange. International Journal of Business and Comm vol no 1 .9, 166_181.
Raheman, A., Zulfiqar, B., and Mustafa. (2007). "Capital structure and profitability: Case of Islamabad Stock Exchange". "International Review of Business Research Papers Vol. 3 No.5, 347-361".
Rajan, R. G., & Zingales, L. (1995), "What do we know about capital structure? Some evidence from international data", Journal of finance, 50(5): 1421-1460
Rao, N, V, Al-Yahyee, K and Syed, L.(2007). Capital Structure and Financial Performance: Evidence from Oman, Indian Journal of Economics and Business,:1-23.
Razak, N.H.A., Ahmad, R. & Aliahmed, H.J. (2008), Government ownership and performance: An analysis of listed companies in Malaysia, Corporate Ownership and Control, 6(2): 434-442.
Riahi, B, A., (1999), Capital Structure: Determination, Evaluation and Accounting: Westport, Quorum Books Publisher.
Saeedi, A. and Mahmoodi, I. (2011), "Capital structure and firm performance: evidence from Iranian Companies'', International Research Journal and Economics, Vol. 70, 20-26.
Salim, M, Yadav, R., (2012), "Capital Structure and Firm Performance: Evidence from Malaysian Listed Companies", Procedia - Social and Behavioral Sciences, 65 pp. 156 – 166
Talberg, M., Winge, C., Frydenberg, S. and Westgaard, S. (2008), “Capital structure across industries”, International Journal of the Economics of Business, Vol. 15 No. 2, pp. 181-200.
Tang, C., Jang, S., (2007). Revisit to the determinants of capital structure: a comparison between lodging firms and software firms. International Journal of Hospitality Management 26 (1), 175–187
Timothy J. Brailsford, Barry R., Olivera, Sandra L. H. Pua (2002) " On the relation between ownership structure and capital structure", Accounting and Finance 42, 1– 26
Titman, S., and R. Wessels. (1988). The determinants of capital structure choice. Journal of Finance 43, no. 1: 1–19.
Tong, G and Green, C, J., (2005) “Pecking order or trade-off hypothesis? Evidence on the capital structure of Chinese companies”, Applied Economics, 37, pp. 2179–2189.
Tsangaao, C., Kuei-Chiu, L., Yao-Men, Y. and Chia-Ha. (2009). ' Does capital structure affect operating performances of credit cooperatives in Taiwan: application of panel threshold method,. International Research Journal of Finance and Economics, Vol. 32,18-21.
Upneja, A. and Dalbor, M. C. (2001), “An Examination of Capital Structure in the Restaurant Industry”, International Journal of Contemporary Hospitality Management, Vol. 13 No.2, pp. 54-59.
Zeitun, R. and Tian, G. (2007), “Capital structure and corporate performance: evidence from Jordan”, Australasian Accounting Business and Finance Journal, Vol. 1, pp. 40-53
Published
2019-08-31
How to Cite
Qaiser, (Ph.D) A., & Dr. Sultan, A. (2019). Impact of Capital Structure on Business Performance: A case of Emirates Airline. Amazonia Investiga, 8(21), 62-72. Retrieved from https://www.amazoniainvestiga.info/index.php/amazonia/article/view/48
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