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Non-linear Panel Data Analysis for Capital Structure and Its Impact on Profitability

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  • Sorana Vatavu

Abstract

This paper intends to establish the determinants of financial performance in 125 companies listed on the Bucharest Stock Exchange, over the 2003-2012 period. The analysis is based on descriptive analysis, linear and non-linear regression analysis. Return on assets, as performance proxy, is regressed on endogenous and exogenous variables. Results indicate that Romanian companies register higher returns when they operate with limited borrowings. Tangibility has a negative impact on return on assets, as long as investments are made from internal funds, affecting the level of earnings over short-term. The current financial crisis affects corporate performance, while inflation rates induce a loop effect in returns along with their fluctuation.

Suggested Citation

  • Sorana Vatavu, 2016. "Non-linear Panel Data Analysis for Capital Structure and Its Impact on Profitability," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 8(1), pages 021-036, June.
    • Handle: RePEc:rfb:journl:v:08:y:2016:i:1:p:021-036
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