| Issue |
SHS Web Conf.
Volume 91, 2021
Innovative Economic Symposium 2020 – Stable Development in Unstable World (IES2020)
|
|
|---|---|---|
| Article Number | 01002 | |
| Number of page(s) | 9 | |
| Section | Stable Development in Unstable World | |
| DOI | https://doi.org/10.1051/shsconf/20219101002 | |
| Published online | 14 January 2021 | |
The Relationship between Capital Structure and Financial Performance of the Company
Financial University under the Government of the Russian Federation, Moscow, Russia
* Corresponding author: trevishka@gmail.com
The article examines and analyzes the relationship of key performance indicators (ROA, ROIC, change in market capitalization and price-to-book ratio) and the capital structure of the company based on the pharmaceutical industry in the UK for the 2009-2019 period. The study seeks to provide a practical evidence on the impact of external financing on company’s financial performance and test applicability of the pecking order theory for the chosen companies. The research conducted uses panel data regression and Wald test to determine and analyze the effect of capital structure on the financial indicators of the company performance. The study used a sample of 185 UK companies from the pharmaceutical industry. The result of the research showed that equity has negative effect on price-to-book ratio and ROA and positive effect on change in market capitalization, while long-term debt has a positive relationship with price- to-book ratio and change in market capitalization. In addition, short-term debt has a negative effect on change in market capitalization, ROA and ROIC. The study also provides only partly coincidence of the results with the pecking order theory.
Key words: Capital Structure / Financial Performance / Market Capitalization / Return On Assets / Return On Invested Capital
© The Authors, published by EDP Sciences, 2021
This is an Open Access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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