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

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  • Sorana Vatavu
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    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.

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    Article provided by Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante in its journal The Review of Finance and Banking.

    Volume (Year): 08 (2016)
    Issue (Month): 1 (June)
    Pages: 021-036

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    Handle: RePEc:rfb:journl:v:08:y:2016:i:1:p:021-036
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    1. Francesco Nucci & Alberto F. Pozzolo & Fabiano Schivardi, 2005. "Is Firm's Productivity Related to its Financial Structure? Evidence from Microeconomic Data," Rivista di Politica Economica, SIPI Spa, vol. 95(1), pages 269-290, January-F.
    2. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    3. Huang, Guihai & Song, Frank M., 2006. "The determinants of capital structure: Evidence from China," China Economic Review, Elsevier, vol. 17(1), pages 14-36.
    4. Laurent Weill, 2008. "Leverage and Corporate Performance: Does Institutional Environment Matter?," Small Business Economics, Springer, vol. 30(3), pages 251-265, March.
    5. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    6. Michael L. Lemmon & Michael R. Roberts & Jaime F. Zender, 2008. "Back to the Beginning: Persistence and the Cross-Section of Corporate Capital Structure," Journal of Finance, American Finance Association, vol. 63(4), pages 1575-1608, 08.
    7. Margaritis, Dimitris & Psillaki, Maria, 2010. "Capital structure, equity ownership and firm performance," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 621-632, March.
    8. Fadzlan Sufian & Royfaizal Razali Chong, 2008. "Determinants of Bank Profitability in a Developing Economy: Empirical Evidence from the Philipinnes," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 4(2), pages 91-112.
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