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The impact of capital structure on firm performance : evidence from British high-tech firms

Seckanovic, E. (2021) The impact of capital structure on firm performance : evidence from British high-tech firms.

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Abstract:This study investigates the impact of capital structure on firm performance of British high-tech firms. Capital structure is measured by the following three ratios, total debt ratio, long-term debt ratio and short-term debt ratio, while firm performance is measured by ROE, ROA and Tobin’s Q. Most data is collected from the database ORBIS over the sample period of 2015 till 2018, while some other data is collected manually from annual reports of the firms. Based on a sample of 466 British high-tech firms, OLS regression analyses are conducted. Literature has indicated that capital structure can have a positive and negative impact on firm performance. Therefore, this study develops two hypotheses. The results show a negative and significant impact of all measurements of capital structure on ROE, ROA and Tobin’s Q. This indicates that increasing debt, regardless of the duration of leverage, lowers firm performance. Robustness tests are conducted in order to increase the validity and reliability of the main findings. With the use of lagged variables and a subsample, the negative impact of capital structure on firm performance is confirmed. Future research is needed to assess the generalizability of these findings.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/86230
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