The DOI matches its Crossref record; 8 of the 8 references it cites were found in a registry or an index.
Capital Structure and Firm Efficiency
Abstract
Abstract: This paper investigates the relationship between firm efficiency and leverage. We consider both the effect of leverage on firm performance as well as the reverse causality relationship. In particular, we address the following questions: Does higher leverage lead to better firm performance? Does efficiency exert a significant effect on leverage over and above that of traditional financial measures of capital structure? Is the effect of efficiency on leverage similar across different capital structures? What is the signalling role of efficiency to creditors or investors? Using a sample of 12,240 New Zealand firms we find evidence supporting the theoretical predictions of the Jensen and Meckling (1976) agency cost model. Efficiency measured as the distance from the industry's ‘best practice’ production frontier is positively related to leverage over the entire range of observed data. The frontier is constructed using the non‐parametric Data Envelopment Analysis (DEA) method. Using quantile regression analysis we show that the reverse causality effect of efficiency on leverage is positive at low to mid‐leverage levels and negative at high leverage ratios. Firm size also has a non‐monotonic effect on leverage: negative at low debt ratios and positive at mid to high debt ratios. The effect of tangibles and profitability on leverage is positive while intangibles and other assets are negatively related to leverage.
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Citations
Cites
Sample Selection Bias as a Specification Error
Heckman, J. J. (1979) · Econometrica · doi:10.2307/1912352 · Cited by 28,779
Corporate financing and investment decisions when firms have information that investors do not have
Myers, S. C., & Majluf, N. S. (1984) · Journal of Financial Economics · doi:10.1016/0304-405x(84)90023-0 · Cited by 18,957
MYERS, S. C. (1984) · The Journal of Finance · doi:10.1111/j.1540-6261.1984.tb03646.x · Cited by 7,526
Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have
Myers, S., & Majluf, N. (1984) · doi:10.3386/w1396 · Cited by 6,745
What Do We Know about Capital Structure? Some Evidence from International Data
RAJAN, R. G., & ZINGALES, L. (1995) · The Journal of Finance · doi:10.1111/j.1540-6261.1995.tb05184.x · Cited by 6,538
The Determinants of Capital Structure Choice
TITMAN, S., & WESSELS, R. (1988) · The Journal of Finance · doi:10.1111/j.1540-6261.1988.tb02585.x · Cited by 6,112
The Determination of Financial Structure: The Incentive‐Signalling Approach,
Ross, S. A. (1977) · The Bell Journal of Economics · doi:10.2307/3003485 · Cited by 4,168
The determinants of corporate leverage and dividend policies
Barclay, M. J., Smith, C. W., & Watts, R. L. (1995) · Journal of applied corporate finance · doi:10.1111/j.1745-6622.1995.tb00259.x · Cited by 555
Cited by
Ayaz, M., Mohamed Zabri, S., & Ahmad, K. (2021) · Managerial Finance · doi:10.1108/mf-11-2019-0586 · Cited by 52
J.O., D., J.U., I., & J.A., A. (2023) · African Journal of Accounting and Financial Research · doi:10.52589/ajafr-kmsefq8m
Metadata
- Authors
- Margaritis, D., & Psillaki, M.
- Venue
- Journal of Business Finance & Accounting
- Publisher
- Wiley
- Published
- 2007-08-31
- Volume
- 34
- Issue
- 9-10
- Pages
- 1447-1469
- ISSN
- 0306-686X (ISSN-L)
- 1468-5957
- OpenAlex
- W2117635915
- Cited by
- 320
- References
- 8
- FWCI
- 19.95
- Type
- journal article
- Language
- en
- Open access
- closed
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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