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Capital Structure and Financial Performance

Lukaszewicz, Magdalena LU and Helén, Anna (2015) FEKN90 20151
Department of Business Administration
Abstract
The purpose of the research is to conclude whether there is conjunction
between a company's capital structure and its stock return. The data is collected monthly under ten years and processed into a tracking portfolio, which makes the study qualitative. A Welch’s t-test is performed in
order to show the statistical relationship between capital structure and stock returns. The theoretical framework relies on traditional theories on capital structure: the Modigliani-Miller Theorem, the Traditional Trade-Off Theory
and the Pecking-Order Hypothesis. Also, different more recent publications are brought up into the theoretical framework. Collection of observations from three sectors within S&P 500 between January 2004 and December 2013, based... (More)
The purpose of the research is to conclude whether there is conjunction
between a company's capital structure and its stock return. The data is collected monthly under ten years and processed into a tracking portfolio, which makes the study qualitative. A Welch’s t-test is performed in
order to show the statistical relationship between capital structure and stock returns. The theoretical framework relies on traditional theories on capital structure: the Modigliani-Miller Theorem, the Traditional Trade-Off Theory
and the Pecking-Order Hypothesis. Also, different more recent publications are brought up into the theoretical framework. Collection of observations from three sectors within S&P 500 between January 2004 and December 2013, based on 15,120 data points. Significant differences in financial performance related to capital structure are found. Low leveraged companies in the consumer discretionary sector tend to perform better than high leveraged firms. Differences in stock return between companies in consumer staples are only found after the crisis, where high leveraged firms perform better. (Less)
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author
Lukaszewicz, Magdalena LU and Helén, Anna
supervisor
organization
course
FEKN90 20151
year
type
H1 - Master's Degree (One Year)
subject
keywords
Capital structure, debt-to-equity ratio, leverage, financial performance, company value, stock return, industrial companies, consumer discretionary, consumer staples, S&P500, financial crisis
language
English
id
7370076
date added to LUP
2015-06-22 15:44:25
date last changed
2015-06-22 15:44:25
@misc{7370076,
  abstract     = {The purpose of the research is to conclude whether there is conjunction
between a company's capital structure and its stock return. The data is collected monthly under ten years and processed into a tracking portfolio, which makes the study qualitative. A Welch’s t-test is performed in
order to show the statistical relationship between capital structure and stock returns. The theoretical framework relies on traditional theories on capital structure: the Modigliani-Miller Theorem, the Traditional Trade-Off Theory
and the Pecking-Order Hypothesis. Also, different more recent publications are brought up into the theoretical framework. Collection of observations from three sectors within S&P 500 between January 2004 and December 2013, based on 15,120 data points. Significant differences in financial performance related to capital structure are found. Low leveraged companies in the consumer discretionary sector tend to perform better than high leveraged firms. Differences in stock return between companies in consumer staples are only found after the crisis, where high leveraged firms perform better.},
  author       = {Lukaszewicz, Magdalena and Helén, Anna},
  keyword      = {Capital structure,debt-to-equity ratio,leverage,financial performance,company value,stock return,industrial companies,consumer discretionary,consumer staples,S&P500,financial crisis},
  language     = {eng},
  note         = {Student Paper},
  title        = {Capital Structure and Financial Performance},
  year         = {2015},
}