This website uses cookies to ensure you have the best experience. Learn more

Critical Review On ‘Revisiting The Capital Structure Puzzle: Uk Evidence’

1814 words - 8 pages

Critical Review on ‘Revisiting the Capital Structure puzzle: UK Evidence’

Assignment for PGBS0140 Accounting & Finance for Managers

Plymouth Business School
Module No.:PGBS0140
Module: Accounting & Finance for Managers
Group Members and Student No.:

Word count: 1492

Critical Review on ‘Revisiting the Capital Structure puzzle: UK Evidence’

Al-Najjar, B. and Hussainey, K. (2011). Revisiting the capital structure puzzle: UK evidence. The Journal of Risk Finance, 12 (4), 329- 338.
This essay will summarise and critically review the report of Al-Najjar and Hussainey (2011) in which the effects of potential drivers of corporate capital structure are differing for three ...view middle of the document...

Debt to equity ratio = total debt / (total equity capital + reserves)
They analyse the influences of corporate characteristics and corporate governance components on three definitions of capital structure. The test results showed that the potential drivers have different effects on different definitions of capital structure. This article indicates that the puzzle in the definition of capital structure makes the comparison between the capital structure studies difficult and even incorrect.
Analysis and Evaluation
Above all, there are several strengths in this research. Authors presented a comprehensive and concentrated abstract in which the research’s objectives, findings, methods, and value are illustrated clearly. However, there are many problems in the main body of this article: arguments are lack of support evidence; the explanations of others’ researches are too short; methodologies are lack of assumptions and theoretical explanation; the findings are not specific and not sufficient.
Introduction
The introduction provides basic theories, and explains different arguments on the potential drivers of capital structure. Authors also presented the potential drivers of capital structure, and explained the structure of this research article. However, in the part of prior literature, some of the early studies are lack of explanation as they just summarise analysts’ findings by one sentence. At least, Al-Najjar and Hussainey should explain how those results are found or what the selected sample data is.
The first one is the findings of Barclay and Smith (2005), Al-Najjar and Hussainey should write that Barclay and Smith have revisited the benefits of debt in controlling overinvestment, information costs, and analysed the determinants of corporate leverage policy. It is necessary to explain the process of prior research before using the finding that different capital-structure theories result in different and even opposite outcomes of firm-specific factors.
Secondly, the authors just listed several citations without any explanation on the viewpoint – corporate governance system influences the capital-structure. They should demonstrate the main ideas of each report to support this argument. Wen and others (2002) found that the board composition and CEO tenure have a significant relation with the financial leverage. Julan and Dai (2005) indicated that the corporate leverage is statistically significant with the ultimate corporate ownership structure, control rights, and the separation of cash flow rights. La Rocca (2007) and Driffield (2007) found that the corporate governance has influence on firm value and capital structure.
These researchers investigated the effects of components of corporate governance on capital structure specifically. But Al-Najjar and Hussainey did not provide sufficient explanations.
Theoretical background and hypotheses
In the second part of article, Al-Najjar and Hussainey clearly illustrated 9 hypotheses with...

Other Papers Like Critical Review on ‘Revisiting the Capital Structure Puzzle: Uk Evidence’

Critical Essay. the Poor Economic Climate in the Uk and the Affect's on the Marketing Mix of a Start-Up Retail Venture in the High Street

1955 words - 8 pages Assignment 1 Critical Essay Introduction: This essay will attempt to critically explain how the poor economic climate in the UK might affect the marketing mix of a start-up retail venture in the high street. This essay will walk through the processes of starting a retail business venture in the high street and discuss how the economy and the marketing mix directly effects each step. To do this it will be vital to explore the current

On the Waterfront Review

701 words - 3 pages On the Waterfront Review Budd Schulberg's script is based on his own original which in turn was "suggested" by the Malcolm Johnson articles. It's a rousing scenario that Schulberg fashioned, with strong accent on murder and somewhat remindful of the picturized gangsterism of the 1920's. Under Elia Kazan's direction, Marlon Brando delivers one of his strongest performances here as Terry Maloy, the flawed hero of this riveting drama. Maloy

Review the Process of Implementing Cloud Computing of Smes in Uk - an Exploratory Study

2805 words - 12 pages Review the process of implementing cloud computing of SMEs in UK - an Exploratory Study 1. Introduction Information technology (IT) plays an important role in increasing innovation and competitiveness and performance for small and medium-sized enterprise (SMEs). Cloud computing or on-demand computing is IT infrastructures that empower SMEs with various capabilities to store, share and access information, data and resources in third-party

Critical Review of the ‘Competitiv Advantage of a Nation’

1983 words - 8 pages €¢ firm strategy, structure and rivalry Each of these determinants helps to achieve the success of a company or industry in the national context. But to achieve the success the company cannot depend or understand one or two of those determinants while ignoring rest of them. Each of determinants has a role to play in the success. . Factor Conditions are connected with inputs used as factors of production like land, labour, capital, natural

Smoking In The UK - A Brief Study On The UK Government's Current Plans To Get Smokers To Quit

667 words - 3 pages How times have changed. Smoking used to be something all the cool kids did, with peer pressure claiming another crop of nicotine addicts behind the bike sheds every year, but increasingly it is becoming only something the rich kids are able to do. After the introduction of large EU health warnings onto cigarette packets across Europe in January this year failed to have the right effect, the French Government has decided to raise the tax on

Critical Review of Nickel and Dimed: on (Not) Getting by in America

1513 words - 7 pages Critical Review of Nickel and Dimed: On (Not) Getting By In America Nickel and Dimed is Barbara Ehrenreich’s novel about her experiences as a low-wage worker. She spent a couple of weeks in three different US cities on three separate occasions. Ehrenreich sought to shed light on the crisis of the working poor. Starting with a little money and a car, she supplanted herself to another city and found jobs and housing from scratch. In

The Effect Of Cost Structure On Predatory Pricing

687 words - 3 pages COST ACCOUNTING FALL 2012 PROJECT The Effect of Cost Structure on Predatory Pricing To win a predatory pricing case, law enforcement officials traditionally have had to prove that a company sold products or services for less than their average variable cost. Companies with relatively high fixed costs and low variable costs are less likely to be accused of predatory pricing than companies with high variable and low fixed costs. A court case in

Discuss the Impact on the Likely Success of Uk Membership of the Eurozone (40 Marks)

657 words - 3 pages Signing up to the Eurozone, would be one of the biggest risks that Britain could take, it could be very successful but it also runs the risk of being terrible for the UK economy. Around Britain there is very little enthusiasm towards joining the Eurozone, and this is due to the impacts it will have. The likelihood of it having negative impacts on the UK is quite high, first of all there will be no devaluation. When in the Euro, you can’t

The Case For A Possible Brexit And Its Impact On The Uk Economy

1599 words - 7 pages in the same time frame. Furthermore, the current account might not be a good measure to analyse the importance of the EU as a trading partner because the deficit on the current account may be offset or counterbalanced by surpluses made in the capital and financial account. The UK has been able to cover its deficits made in the current account over the years through attracting sufficient foreign direct investment and other means of financial

Discuss Some of the Ways Differences and Inequalities Are Made on Streets in the Uk

796 words - 4 pages Discuss some of the ways differences and inequalities are made on streets in the UK Differences and inequalities are made on the streets in the UK by society. The street is a place which reflects society and the fact that there are differences and inequalities which are inevitable. Mutley Plain is an example of a street in the city of Plymouth whereby differences and inequalities do exist. On the historic main route in and out of the city

Evaluate the Likely Result of a Change in Currency Prices on the Uk Economy

627 words - 3 pages (b) Evaluate the likely result of a change in currency prices on the UK economy Price Level A change in the price of currency will have many impacts upon the economy such as upon Balance of Payments, a change in real GDP, employment and inflation. rGDP AD2 AD1 AS Assuming demand is relatively elastic, an appreciation of the currency results in a lower AD, shown by AD1 decreasing to AD2, as lower export demand and greater spending on imports

Related Essays

Microsoft A Review Of Capital Structure And Internal External Analysis

970 words - 4 pages Microsoft Corporation (NASDAQ: MSFT) --A Review of Capital Structure and Internal/External Analysis Introduction Bill Gates and Paul Allen had founded Microsoft in 1975 to develop and sell computer languages and microcomputers in Redmond, Washington State. The company had pioneered in operating system business and had been able to invent new technology and acquiring subsidiaries in order to produce a large range of personal computer

Business Financing And The Capital Structure

1089 words - 5 pages all of the risk. If your company fails, you do not have to pay the money back. You will also have more cash available because there are no loan payments.” (Parker, 2012) Both equity and debt financing has its strengths and weaknesses and it is up to my client which one will work best in the long run. To get more information on capital funding and sound advice, aside from me (the financial adviser), I would recommend to my client to take

American Home Products (Ahp): Business Case On Capital Structure

1778 words - 8 pages stocks and remaining amounts were financed by debt; thus, its common shares outstanding would decreased by 19.8 million shares on 30% dept ratio and 36.6 million shares on 70% debt ratio. It means that equity will goes down, so its return on equity will rise. AHP should consider about financial risk to change the capital structure. American Home Products Corporation can save taxes to pay by increasing debt. Figure 4 illustrates that its taxes

The Valuation Effects Of Long Term Changes In Capital Structure

5473 words - 22 pages utilize the proper capital structure. Empirical evidence: Abdullah et al (2012) the respective research shows that the how capital structure effects the performance of the listed firms in Malaysia. Basically in this research they used return of asset and return on equity for finding the firm performance. they shows the capital structure as a long term debt and independent variables that are used size , growth and efficiency .The data was