University of Twente Student Theses


The impact of capital structure on firm performance : an investigation of Dutch unlisted SMEs

Schulz, Tim (2017) The impact of capital structure on firm performance : an investigation of Dutch unlisted SMEs.

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Abstract:The aim of this study is to research the effect of capital structure on firm performance based on panel data of Dutch small and medium-sized enterprises between 2008 and 2015. Moreover, two sub-panels have been created to investigate potential changes in the effect for the period of the financial crisis and for the post-crisis period. The effect was studied in the perspectives of two prominent capital structure theories, the trade-off and pecking order theory, which assume opposing signs for the relationship. Two different empirical models have been created that used return on assets (ROA) and return on capital employed (RCOE) as proxies for performance. Capital structure was measured by the total leverage and the combination of long-term and short-term obligations in proportion to total assets. The empirical results show a negative and highly statistically significant relationship between all proxies of capital structure and the ROA as a performance proxy, which is in line with the pecking order theory. The results for ROCE as a proxy for performance are mixed but statistically significant, which can be explained by the fact that ROCE is using earning before interest and tax (EBIT) as a performance indicator.
Item Type:Essay (Bachelor)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:International Business Administration BSc (50952)
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