Capital structure, product market competition and firm performance: Evidence from South Africa

By S. Fosu. 2013

227 citations recorded by the source corpus.

This paper investigates the relationship between capital structure and firm performance, paying particular attention to the degree of industry competition. The paper applies a novel measure of competition, the Boone indicator, to the leverage-performance relationship. Using panel data consisting of 257 South African firms over the period 1998–2009, this paper examines the effect of capital structure on firm performance and investigates the extent to which the relationship depends on the level of product market competition. The results suggest that financial leverage has a positive and significant effect on firm performance. It is also found that product market competition enhances the performance effect of leverage. The results are robust to alternative measures of competition and leverage.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/54dca52e70b220b10243a0fc7be4ca2829792781

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

1. Riaqa Mubeen
2. Jaffar Abbas
3. Dongping Han
4. Iftikhar Hussain
5. A. Danso
6. William Coffie
7. Wasim Ahmad
8. S. Fosu

In Economics and Econometrics

1. Riaqa Mubeen
2. Jaffar Abbas
3. Iftikhar Hussain
4. A. Danso
5. William Coffie
6. Wasim Ahmad
7. Dongping Han
8. S. Fosu

Citations in the corpus

• Information asymmetry, leverage and firm value: Do crisis and growth matter? (2016, methodology): “This measure is consistent with the extant literature (e.g., Danso and Adomako, 2014; Fosu, 2013; Opler and Titman, 1994).”
• The Effects of Market Competition, Capital Structure, and CEO Duality on Firm Performance: A Mediation Analysis by Incorporating the GMM Model Technique (2020, methodology): “Previous studies have used different measurement techniques to measure market competition, such as [86], including the application of the Herfindahl–Hirschman index (HHI) and the Boone indicator to measure market competition.”