IDEAS home Printed from https://ideas.repec.org/a/mes/emfitr/v57y2021i9p2632-2650.html
   My bibliography  Save this article

Earning Volatility, Capital Structure Decisions and Financial Distress by SEM

Author

Listed:
  • Morteza Ghasemzadeh
  • Mehdi Heydari
  • Gholamreza Mansourfar

Abstract

The article investigates the relationship between earning volatility and capital structure and in particular, aims to contribute to prior research by examining the moderating role of financial distress on the relationship between earning volatility and capital structure. Thus, we employ a MIMIC model of Structural Equations Modeling (SEM) approach to examine the associations, which enables us to measure the earning volatility and capital structure by a few best indicators. Using 902 firm-year observations listed in the Tehran Stock Exchange (TSE) from 2006 to 2017, we find that earning volatility has a significant and negative impact on capital structure. In addition, the results indicate that financial distress significantly affects the relationship between earning volatility and capital structure. In short, when financial distress acts as a moderating variable, the relationship between earning volatility and capital structure is weaker than the time when there is no such variable.

Suggested Citation

  • Morteza Ghasemzadeh & Mehdi Heydari & Gholamreza Mansourfar, 2021. "Earning Volatility, Capital Structure Decisions and Financial Distress by SEM," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(9), pages 2632-2650, July.
    • Handle: RePEc:mes:emfitr:v:57:y:2021:i:9:p:2632-2650
    DOI: 10.1080/1540496X.2019.1663729
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/1540496X.2019.1663729
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/1540496X.2019.1663729?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mes:emfitr:v:57:y:2021:i:9:p:2632-2650. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/MREE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.