Frequency

Percent

Valid Percent

Cumulative Percent

Valid Agree
Strongly agree
Not sure
Disagree
Strongly disagree
Total

19
16
7
4
4
50

28.4
23.9
10.4
6.0
6.0
74.6

38.0
32.0
14.0
8.0
8.0
100.0

38.0
70.0
84.0
92.0
100.0

Total

67

100.0

Does Optimum Capital Structure Exist

Proper Debt To Equity Combinations For Optimum Performance

Frequency

Percent

Valid Percent

Cumulative Percent

Valid 50/50
60/40
70/30
Total

10
31
9
50

14.9
46.3
13.4
74.6

20.0
62.0
18.0
100.0

20.0
82.0
100.0

Total

67

100.0

Efficient capital structure reduces cost of capital

FREQUENCY

PERCENT

VALID PERCENT

Strongly agree
Agree
Disagree
Strongly disagree
Total

20
15
9
6
50

29.9
22.4
13.4
9.0
74.6

40.0
30.0
18.0
12.0
100.0

TOTAL

67

100.0

CUMULATIVE
PERCENT
40.0
70.0
88.0
100.0

Inefficient Capital Structure Lead To Bankruptcy

FREQUENCY

PERCENT

VALID

CUMULATIVE
PERCENT
50.0
82.0

Strongly agree
Agree

25
16

37.3
23.9

PERCENT
50.0
32.0

Disagree

6.0

8.0

90.0

Strongly disagree
Total
TOTAL

5
50
67

7.5
74.6
100.0

10.0
100.0

100.0

Inefficient Capital Structure Businesses Are Takeover Targets

FREQUENCY

PERCENT

VALID

CUMULATIVE

Strongly agree
Agree
Disagree
Strongly

16
18
6
10

23.9
26.9
9.0
14.9

PERCENT
32.0
36.0
12.0
20.0

PERCENT
32.0
68.0
80.0
100.0

disagree
Total
TOTAL

50
67

74.6
100.0

100.0

Capital Used To Finance Assets

FREQUENC

PERCENT

VALID PERCENT

CUMULATIVE

Y
Debt
8
Equity
25
Mix of debt and 12

11.9
37.3
17.9

15.7
49.0
23.5

PERCENT
15.7
64.7
88.2

equity
Retained

9.0

11.8

100.0

earnings
TOTAL

51

76.1

100.0

Correlation between Capital Structure, Cost of Capital and Financial Performance.

CAPITAL

COST

STRUCTURE
1.00

CAPITAL

Capital structure
Cost of capital

0.585**

1.000

Loan covenants

0.528**

0.642

Financial performance

-0.285**

-0.307

OF FINANCIAL
PERFORMANCE

1.000

** Correlation is significant at the 0.01 level (2-tailed).

Descriptive statistics

N
LEV
5
SIZE
5
TANG
5
PROF
5
Valid N (list wise) 5

Minimum
.28
19.30
.28
.04

Maximum
.52
20.19
.47
.17

Mean
.3600
19.8774
.3435
.1073

Std. Deviation
.09695
.38964
.07356
.04763

Capital structure and financial performance statistics

Gearing

N
Statistic
5

Minimum
Statistic
27.69

Maximum
Statistic
51.55

Mean
Statistic
35.8270

Std. Deviation
Statistic
9.50302

Net

Profit

Margin
Return

On

Equity
Valid

(listwise)

1.13

3.13

2.3656

.79616

10.77

23.90

16.9749

5.39660

Correlations

CORRELATIONS

GEARING NET PROFIT

Pearson Correlation
1
Gearing
Sig. (2-tailed)
N
5
Pearson Correlation
-0.631
Net Profit Margin Sig. (2-tailed)
0.254
N
5
Pearson Correlation
-0.330
Return On Equity Sig. (2-tailed)
0.588
N
5
*. Correlation is significant at the 0.05 level (2-tailed).

RETURN ON

MARGIN
-0.631
0.254
5
1

EQUITY
-0.330
0.588
5
0.931*
0.022
5
1

5
0.931*
0.022
5

Regression model for capital structure and Net Profit Margin

Model
1

R Square

Adjusted

Square
.631
.398
.198
a. Predictors :( constant) gearing.
a

RStd. Error of the Durbin-Watson

Estimate
.71318

1.383

b. Dependent variable: net profit margin

Coefficients

Model

Unstandardized Coefficients Standardized

B

Std. Error

(Constant)

4.260

1.382

Gearing

-.053

.038

Sig.

3.083

.054

-1.409

.254

Coefficients
Beta
-.631

c. Dependent Variable: Net Profit Margin

Regression Model for Gearing and Return On Equity

Model

R Square

Adjusted R Square Std. Error of the Durbin-Watson

Estimate

.330a
.109
-.188
a. Predictors: (Constant), Gearing

5.88252

1.476

b. Dependent Variable: Return On Equity

Correlation Coefficient Matrix for the Highly Geared Companies

ROI

ROI

GEARING

INFLATION

GDP

-0.1531

0.2647

0.1045

0.2163

-0.1257

0.2599

LEVAREGE
INFLATION
GDP

Correlation Coefficient Matrix for the Lowly Geared Companies

ROI

ROI

GEARING

INFLATION

GDP

-0.265

0.4081

0.04

0.2647

0.0867

0.404

LEVAREGE
INFLATION
GDP

Panel Regression Result for Highly Geared Firms

VARIABLES

POOLED
COEFFICIENT
CONSTANT
2.42981***
LEVERAGE
-0.1582**
INFLATION
0.6275***
GDP
0.3289***
ROI(-1)
-0.1618***
R-SQUARED
0.4979 0.6194
ADJUSTED R
0.3797 0.4671
P-VALUE (F)
0.0149 0.0127
DURBIN-WATSON
1.5906
Key: *
represents
10%
**

represents

5%

***

represents

1%

P-VALUE
0.0000***
0.0185**
0.0000***
0.0000***
0.0000***

FIXED EFFECT
COEFFICIENT
2.6918***
-0.1758***
0.6393***
0.4425***
0.2929***
0.6194
0.4671
0.0127
1.8771

P-VALUE
0.0000
0.0000
0.0000
0.0000
0.0006

Panel Regression Result for Lowly Geared Firms

VARIABLE
CONST
LEVERAGE
INFLATION
GDP GR
ROI(-1)
R
ADJUSTED R

POOLED
COEFFICIENT
-0.3929
-0.1556
0.4241
0.1135
0.5679
0.4436
0.3424

P-VALUE
0.15344
0.20336
0.23622
0.72175
0.01562**

FIXED EFFECT
COEFFICIENT
0.8947
-0.1585
0.5542
0.1181
0.0240
0.6678
0.5681

P-VALUE
0.00841***
0.01001**
0.12572
0.59463
0.92368

P VALUE (F)
DURBIN
WATSON

0.0092
1.9718

0.0005
2.1327