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Contents
Objective
Literature Review
Methodology
Results
Conclusion
Criticism
Topic Objective:
Capital Structure and Firm Value
Relationship of (Debt & Equity) vs. FV
Country: Nigeria
Corporate: Banking
# Banks: 15
Period: 2007 to 2012
Literature Review:
Theoretical studies : Capital Structure and Firm Value
Theory
Literature Review:
Empirical studies : Capital Structure and Firm Value
Study
Chowdhury and
Chowdhury (2010) Bangladesh economy from
the year 1997 to 2003
Methodology:
Type
of Study: Empirical
Results:
Mode
Dependent Variable: FIRM_VALUE
l:
Debt >
Equity2 SE Debt <<
Debt
2 SE Equity >>
Equity
p Debt =
0.03
p Equity =
t 0.00
Debt
>> 2
t Equity
<<
2 >
Debt
Equity
R2 value near 1
Our Model Is
Good
Express 98% of
FV
Results:
Validatin
Dependent Variable: RESID^2
g:
Method: Least Squares
Date: 11/23/13 Time: 15:56
Sample: 1 127
Included observations: 104
No Pattern for
Residuals
All t-values
<2
All ps >>
0.05
R2 value is low
Error has no
Linear
Conclusion:
1. The findings shows that capital structure decision have
implication on the values of the firm.
2. The Debt play significant role in maximizing (FV),
while Equity have minimum contribution towards
magnifying the value of the banking firm.
3. Finding is in line with the Trade-off theory.
Therefore study recommend that management of banks as
well as regulatory institutions adopts policies that tends
towards the use of debt instruments so as to maximize the
value of the firm, thus the shareholder wealth.
Criticism:
1. The model had only two factors (debt and Equity), there
might be other factors that effect (FV), either in a
positive or negative way.
2. There were no consideration of the risk associated with
adopting policy towards debt.
3. There were no mention of developing non-linear model
that describe the (FV) against leverage in the case of
bankruptcy.
Q&A:
Thank You!
Questions?