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Capital Structure and Survival Dynamic of Business Organisation: The Dividend Approach

Received: 1 October 2013     Published: 20 March 2014
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Abstract

The capital structure of firms count in the determination of the financial risk of the firm a firm night be making good net profit before tax but might have less to distribute to the shareholders after the payment I of tax when compared with a similar firm in the same industries due to poor capital structure arrangement thus payment of low return to share holders most times is due to poor capital structure rather than to poor business return. In this study the return is the dividend paid to the shareholders. Secondary data was used for the study, collected from the financial report of the firm. The simple multiple linear regressions was applied for the study and the asymptotic probability and the t-statistic were adopted for the study the result of the study revealed that capital structure of the firm do not satisfied the optimal capital structure status of the Modigliani and Milan the firm for the period covered is mostly financed by equity and have a near zero debt finance a low relationship also exist between equity-debt finance of the firm and dividend of the firm. It was recommended that the firm should introduce debt finance to the capital structure of the firm to enjoy the tax advantage of debt finance.

Published in Journal of Finance and Accounting (Volume 2, Issue 2)
DOI 10.11648/j.jfa.20140202.11
Page(s) 20-23
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2014. Published by Science Publishing Group

Keywords

Dividend, Capital structure, Debt, Equity

References
[1] Cohen Ruben D. (2004) An Implication of the Modigliani-Miller Capital Structuring
[2] Theorems on the Relation between Equity and Debt http://rdcohen.50megs.com/MMabstract.htm
[3] Cohen Ruben D. (2004)An Analytical Process for Generating the WACC Curve and Locating the Optimal Capital Structure Wilmott Magazine, nov/dec 2004, pp. 86-95
[4] Cohen Ruben D. (2003) The Optimal Capital Structure of Depository Institutions http://rdcohen.50megs.com/depinst.pdf
[5] Kehinde (2011) Strategic financial management. Rakson educational publisher Lagos Nigeria.
[6] Leary Mark T. and Roberts Michael R. (2012) Do Firms Rebalance Their Capital Structures?
[7] Mac an Bhaird, C. and Lucey, B. (2010). Determinants of Capital Structure in Irish SMEs. Small Business Economics, 35, 3, pp357-375.
[8] Mac an Bhaird, C. and Lucey, B. (2011). An empirical investigation of the financial growth life cycle. Journal Of Small Business And Enterprise Development, 18, 4, pp715-731.
[9] Murphy Frederic H., Ofer Aharon R. and Satterthwaite Mark A(2009). Capital Structure and the Value of the Firm. Journal of Financial and Quantitative Analysis 10(4) 541-541 DOI: http://dx.doi.org/10.2307/2330596 (About DOI), Published online: 19 October 2009
[10] Nwachukwu Onyinye(2012) Nigeria firms less productive Businessday News Friday24- Sunday26 august
[11] Myers, Stewart C.; and Majluf, Nicholas S. (1984). Corporate financing and investment decisions when firms have information that investors do not have, Journal of Financial Economics 13 (2): 187–221. doi:10.1016/0304-405X(84)90023-0
[12] Modiliani and Millian ()
[13] MSG(2012) Capital Structure - Meaning and Factors Determining Capital Structure www.managementstudyguide.com
[14] Strebulaev Ilya A.(2007) Do test of capital structure theory mean what they say. The Journal of Finance 62(4) pp7774-1787
[15] Wikipedia, (2012) Capital structure www.wikipedia,com
[16] Zellner, A., 1962, 'An Efficient Method of Estimating Seemingly Unrelated Regressions and Tests for Aggregation Bias', Journal of the American Statistical Association 57, 348-368.
Cite This Article
  • APA Style

    Kehinde, James Sunday. (2014). Capital Structure and Survival Dynamic of Business Organisation: The Dividend Approach. Journal of Finance and Accounting, 2(2), 20-23. https://doi.org/10.11648/j.jfa.20140202.11

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    ACS Style

    Kehinde; James Sunday. Capital Structure and Survival Dynamic of Business Organisation: The Dividend Approach. J. Finance Account. 2014, 2(2), 20-23. doi: 10.11648/j.jfa.20140202.11

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    AMA Style

    Kehinde, James Sunday. Capital Structure and Survival Dynamic of Business Organisation: The Dividend Approach. J Finance Account. 2014;2(2):20-23. doi: 10.11648/j.jfa.20140202.11

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  • @article{10.11648/j.jfa.20140202.11,
      author = {Kehinde and James Sunday},
      title = {Capital Structure and Survival Dynamic of Business Organisation: The Dividend Approach},
      journal = {Journal of Finance and Accounting},
      volume = {2},
      number = {2},
      pages = {20-23},
      doi = {10.11648/j.jfa.20140202.11},
      url = {https://doi.org/10.11648/j.jfa.20140202.11},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20140202.11},
      abstract = {The capital structure of firms count in the determination of the financial risk of the firm a firm night be making good net profit before tax but might have less to distribute to the shareholders after the payment I of tax when compared with a similar firm in the same industries due to poor capital structure arrangement thus payment of low return to share holders most times is due to poor capital structure rather than to poor business return. In this study the return is the dividend paid to the shareholders.  Secondary data was used for the study, collected from the financial report of the firm. The simple multiple linear regressions was applied for the study and the asymptotic probability and the t-statistic were adopted for the study the result of the study revealed that   capital structure of the firm do not satisfied the optimal capital structure status of the Modigliani and Milan the firm for the period covered is mostly financed by equity and have a near zero debt finance a low relationship also exist between equity-debt finance of the firm and dividend of the firm. It was recommended that the firm should introduce debt finance to the capital structure of the firm to enjoy the tax advantage of debt finance.},
     year = {2014}
    }
    

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    AU  - Kehinde
    AU  - James Sunday
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    T2  - Journal of Finance and Accounting
    JF  - Journal of Finance and Accounting
    JO  - Journal of Finance and Accounting
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    UR  - https://doi.org/10.11648/j.jfa.20140202.11
    AB  - The capital structure of firms count in the determination of the financial risk of the firm a firm night be making good net profit before tax but might have less to distribute to the shareholders after the payment I of tax when compared with a similar firm in the same industries due to poor capital structure arrangement thus payment of low return to share holders most times is due to poor capital structure rather than to poor business return. In this study the return is the dividend paid to the shareholders.  Secondary data was used for the study, collected from the financial report of the firm. The simple multiple linear regressions was applied for the study and the asymptotic probability and the t-statistic were adopted for the study the result of the study revealed that   capital structure of the firm do not satisfied the optimal capital structure status of the Modigliani and Milan the firm for the period covered is mostly financed by equity and have a near zero debt finance a low relationship also exist between equity-debt finance of the firm and dividend of the firm. It was recommended that the firm should introduce debt finance to the capital structure of the firm to enjoy the tax advantage of debt finance.
    VL  - 2
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