Capital Structure and Firm Performance in Australian Service Sector Firms: A Panel Data Analysis

Rafiuddin Ahmed · Rafiqul Bhuyan

64 citations0/0 files storedJournal of risk and financial management

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Corporate Finance and Governance Financial Analysis and Corporate Governance Working Capital and Financial Performance

Abstract

Using cross-sectional panel data over eleven years (2009–2019), or 1001 firm-year observations, this study examines the relationship between capital structure and firm performance of service sector firms from Australian stock market. Unlike other studies, in this study directional causalities of all performance measures were used to identify the cause of firm performance. The study finds that long-term debt dominates debt choices of Australian service sector companies. Although the finding is to some extent similar to trends in debt financed operations observed in companies in developed and developing countries, the finding is unexpected because the sectoral and institutional borrowing rules and regulations in Australia are different from those in other parts of the world.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1984Corporate financing and investment decisions when firms have information that investors do not have 1958The Cost of Capital, Corporation Finance and the Theory of Investment 2002Unit root tests in panel data: asymptotic and finite-sample properties 2008The cost of capital, corporation finance and the theory of investment 1984The Capital Structure Puzzle 1963CORPORATE INCOME TAXES AND THE COST OF CAPITAL: A CORRECTION 1977The Determination of Financial Structure: The Incentive-Signalling Approach

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