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Cited by 99Corporate Finance and GovernanceFinancial Analysis and Corporate GovernanceWorking Capital and Financial Performance

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The Impact of Financial Leverage on the Financial Performance of the Firms Listed on the Tokyo Stock Exchange

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Arhinful, Richard, Radmehr, Mehrshad·2023·Sage Open
DOI 10.1177/21582440231204099
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Abstract

Japan is widely regarded as one of the world’s most developed nations. The country’s electronics industry, in particular, is consistently ranked among the global leaders in innovatiion. Industries such as automotive, construction, electronics, metal, and telecommunications, companies have traditionally leaned more heavily on debt financing for both their day-to-day operations and investment endeavors, rather than relying on equity financing. In Japan, debt financing is favored as cost-effective source of capital compared to equity financing. The study selected 257 automotive, construction, electronic, metal, and telecommunications companies between 2000 and 2021. To find the effect of financial leverage on financial performance, the study used the random effect and the GMM to estimate the effect of the firms’ leverage on financial performance. The study found that interest coverage has a positive and statistically significant effect on ROA, ROE, and Tobin’s Q. The study discovered that cash coverage has a positive and statistically significant effect on ROE. The study found that debt service obligations have a negative and statistically significant effect on financial performance.

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Metadata

Authors
Arhinful, R., & Radmehr, M.
Affiliations
Cyprus International University (CY)
Corresponding author
Arhinful, Richard
ORCID
Venue
Sage Open
Publisher
SAGE Publications
Published
2023-10
Volume
13
Issue
4
ISSN
2158-2440 (ISSN-L)
DOI
10.1177/21582440231204099
OpenAlex
W4388707333
Cited by
99
References
2
Citations by year
2026: 40 · 2025: 37 · 2024: 21 · 2023: 1
FWCI
57.67
Type
journal article
Language
en
Open access
Licence
Locations
  • SAGE Open (publishedVersion, cc-by)
  • RePEc: Research Papers in Economics (submittedVersion)
  • DOAJ (DOAJ: Directory of Open Access Journals) (submittedVersion, cc-by-sa)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Finance › Corporate Finance and Governance
  • Social Sciences › Business, Management and Accounting › Accounting › Financial Analysis and Corporate Governance
  • Social Sciences › Business, Management and Accounting › Accounting › Working Capital and Financial Performance
Keywords
leverage, financial performance, debt financing, interest coverage ratio, debt service obligations, return on assets, return on equity, Tobin's Q, Japanese listed companies, electronics industry, automotive industry, telecommunications industry, construction industry, metal industry

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