capital investment and profitability

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Capital structure, capital investment and profitability among malaysian listed firms

Capital structure, capital investment and profitability among malaysian listed firms

11 2007) whereby the Malaysian government plays a vital role in public and private capital investments in Malaysia. Internally, the capital investment activity has fostered the growth of sectors. Moreover, the reduction in corporate tax effective on 2009 and the economic transformation programme have increased the capital investment activity of Malaysian firms. To encourage the development of capital intensive projects, the regulations were made granting a 60% annual investment allowance on qualifying capital expenditure incurred in conjunction with a qualifying project for certain encouraged sectors such as projects in respect of enhanced oil recovery, high carbon dioxide gas, infrastructure asset, agricultural, mining and quarrying, manufacturing, construction as well as service sectors. Besides, certain selected industries received 100% tax allowances for pioneer status capital investment. The sectors that showed a significant increase in capital investment since 2010 in Malaysia included transport and communication sector, real estate and business sector, construction and manufacturing sectors (Economic Report, 2013). In addition, the unique behaviour of capital structure at sector-level is not identical within and between countries (Ramakrishnan, 2012). However, only a few studies have been conducted focusing on the effects of capital investment on profitability across sectors in Malaysia. Hence, further study is certainly needed to examine the moderating effects of capital structure across sectors. Therefore, the fourth issue of this study is extended to investigate the moderating effects of capital structure on the relationship between capital investment and profitability across sectors in Malaysia.
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Investment appraisal techniques and constraints on capital investment

Investment appraisal techniques and constraints on capital investment

In this study non-probability purposive sampling was used. The target companies were selected from ten leading sectors (banking, telecommunication, oil & gas, cement, insurance, sugar, oil & ghee, automobiles, textile and fertilizer) of the economy, which were listed at Karachi Stock Exchange (KSE). The selection criteria of companies were profitability and application of investment of capital. The respondents of this study were the financial analysts and Chief Financial Officers (CFOs) of the target companies. 63 questionnaires were distributed but 49 filled questionnaires were received and only 37 proper filled were used for analysis. There were two parts of the questionnaire first part is related to general information of the respondents, and company, i.e. company name as well as respondent name, company year in business, expenditure and revenue for the year of 2008-2009. And the second part contained the information of investment appraisal techniques (9 items), and major constraints on capital investment (3 items). Five point Likert scale was used to collect the data, where 1 was the highest level of agreement and 5 was the least level of agreement and the scale was adapted from the research paper McCaffery et al. (1997). SPSS was used to analyze the data.
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The impact of capital investment on working capital management

The impact of capital investment on working capital management

According to Brealey et al. (2011), corporate finance involves two great decisions, which is the financial and investment decision. Those great decisions strongly interrelated with WCM, which has a strong impact on profitability and liquidity of the company (Hill et al., 2010). Thus, WCM is treated as an important component in corporate finance. Appuhami (2008) mentioned that WCM is an important portion as it deals with current asset and current liability, whereby the return of investment (ROI) generated from investments may be adverse if the level of the current assets is excessive. In addition, if an appropriate level of current assets is not maintained within the company, it can lead to disruption of the company‟s day- to-day operation as corporation faced rapid changes due to globalization.
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CONSTRUCTION INDUSTRY FEDERATION NATIONAL CONFERENCE ‘BUILDING FOR THE FUTURE OF THE CONSTRUCTION SECTOR’ Friday, 28th September 2012 : Address by Mr  Brendan McDonagh, Chief Executive of NAMA

CONSTRUCTION INDUSTRY FEDERATION NATIONAL CONFERENCE ‘BUILDING FOR THE FUTURE OF THE CONSTRUCTION SECTOR’ Friday, 28th September 2012 : Address by Mr Brendan McDonagh, Chief Executive of NAMA

NAMA will contribute loan finance over the next four years to projects which are designed to meet medium-term supply shortages, be it in the commercial or residential sectors. We have previously indicated that the potential scale of this funding is, given the right commercial opportunities, at least €2 billion, representing a very substantial injection of capital into the construction industry and the economy. A feature of this investment is its ability to be recycled from completed to new developments. A further feature is that 100% of the finance will go towards construction. There won’t be any site costs or other ancillary purchases that normally have to be factored into development costings.
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Review of the Banking Sector Profit Persistence

Review of the Banking Sector Profit Persistence

2005-2013. The Arellano and Bond (1991) and Blundell and Bond (1998) estimation techniques were used for the study. The study found that profitability was negatively affected by government ownership, lending to sensitive sectors, and non-performing assets. Fund-based income, and tier-two capital adequacy ratio had a positive impact on profitability. Pervan et al. (2015) examined the persistence of profit in the Republic of Croatia. The persistence of profit in was estimated using the Markov Chain stochastic process. The study established that that profit persistence was less likely to occur in banks with higher profit. Djalilov and Piesse (2016) investigated the determinants and persistence of profitability in the early transition countries of Central and Eastern Europe for the period 2000-2013. The study employed the generalised method of moment’s (GMM) technique. The study established that profitability persisted in the transitionary countries and the banking sector was more competitive. The study also found that credit risk had a positive impact on profitability of early transition countries whilst having positive effect in late transition countries. It was further revealed that in late transition countries government spending and monetary freedom had positive impact on profitability. In early transition countries, well capitalised banks were more profitable implying robustness of these banks. Sinha and Sharma (2014) investigated the determinants of bank profitability in India using the dynamic model framework. The study also sought to establish the persistence of bank profitability using the GMM as suggested in Arellano and Bond. The study established that product markets of Indian Banks are moderately competitive, and less opaque due to asymmetry in information. The study found that despite the competition in the banking sector, profits in the banking sector moderately persisted over time. The study also revealed that profitability was positively determined by capital to assets ratio, operating efficiency and diversification, and economic growth. Inflation negatively affected profitability in the Indian banking sector.
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China Africa’s Emerging Economic Links: A review under the Core Periphery perspective

China Africa’s Emerging Economic Links: A review under the Core Periphery perspective

Africa‘s inability to attract private capital is derived from the fact that it has not been "structurally able to assimilate these large flows" (Aron, 1996). Nigeria is the largest recipient of FDI, but this is not diversified and mainly restricted to the extractive sector of the economy, as is the case in Ghana. Unlike the situation in SE Asia, the deterioration in the terms of trade coupled with high inflation ensured the real exchange rates appreciated rapidly, forcing significant macroeconomic instability. With the deterioration in national economic management all over SSA, aggravated balance of payments problems and fiscal deficits, the continent saw considerable capital flight instead. Collier and Gunning (1997) calculatethat African wealth owners have chosen to locate 37 % of their portfolio outside Africa. This share is compared to 29 % for the Middle East, 17 % for Latin America, 4 % for South Asia, and 3 % for East Asia.
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WORKING CAPITAL MANAGEMENT IMPACT ON SMES PROFITABILITY

WORKING CAPITAL MANAGEMENT IMPACT ON SMES PROFITABILITY

Raheman and Nasr(2007)reflected working capital is essential for manufacturing organization rather than trading and Distribution Company. Therefore Manufacturing organizations have to maintain working capital over half of its total asset to operate smoothly. According to Nobanee, Abdullatif, & Al Hajjar(2011)working capital directly affect to profitability and liquidity position of firms. Inaccurate working capital management procedures may also lead to bankruptcy, even though their profitability may constantly be positive.(Samiloglu & Demirgunes, 2008), Managing working capital is basically essential for maintaining the liquidity in day-to-day operations to ensure smooth running and meeting its obligations. (Eljelly, 2004) Managing working capital is not easy taskmanagers have to consider about efficiency as well as profitable. If there are any mismatch between current asset and current liability which could be affect to the company growth and profitability of the business. Basically most of organization masure working capital management using cash conversion cycle. Shin and Soenen (1998) emphasized short cash conversion cycle was most important to create value for their shareholders by reducing the cycle lag. Most of researchers concluded aggressive working capital policies enhance a firm’s profitability .(Jose et al. 1996, Shin and Soenen ,1998 Deloof 2003 and Wang 2002) Hence the study examined working capital management on SMEs profitability.
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Capital structure determinants in Europe : the effect of profitability and the moderating role of firm size

Capital structure determinants in Europe : the effect of profitability and the moderating role of firm size

Several theories were developed in an attempt to explain the capital structure choice. The most influential of them are the pecking order theory (POT) and the static trade-off theory (TOT; de Jong, Verbeek & Verwijmeren, 2011). POT builds on the idea of asymmetric information between managers and outside investors (Chirinko & Singha, 2000). This implies the existence of certain preferences between means of financing, wherein firms opt to finance projects internally, while debt and equity (as a last resort) are the least preferred means (de Jong et al., 2011). Conversely, TOT posits that companies determine their capital structure based on the benefits and costs of debt, and increase their leverage ratio to the point where the marginal costs and benefits of debt are equal (Fama & French, 2002). Despite extensive research on the two theories (de Jong et al., 2011), the results are still mixed (Dang, 2013) and partially support them both (Gonzalez & Gonzalez, 2012). Additionally, several academics highlighted the need for a model that com- bines elements of POT and TOT (Byoun, 2008; Fama & French, 2005). A step towards reconciling the contradictory predictions of the two theories is to consider potential interac- tion effects between capital structure determinants, which would allow for the applicability of one theory to vary across the values of a given determinant, such as size. However, re- searchers have generally not included, in their testing of POT and TOT, any interaction effects between the determinants of leverage (Gonzalez & Gonzalez, 2012; Vithessonthi & Tongurai, 2015).
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A Study on the Effect of Agribank Credit Facilities on Agricultural Exports of Southern Khorasan Province

A Study on the Effect of Agribank Credit Facilities on Agricultural Exports of Southern Khorasan Province

1. One unit increase in credit facilities increases investment in agricultural sector by, on average, 0.36 units. Also, one unit increase in the stock of capital for agricultural sector enhances GDP of agricultural sector by 0.26 units and accordingly the first hypothesis, i.e. the positive relationship between Agribank credit facilities and investment in agricultural sector, is confirmed. This is similar to what reported by Hasanov and Huseynov (2013), Tekin (2012), Rajabi Jahroudi (2006), Taji and Omidikia (2013). The most effective policy to realize this objective is to increase bank credits in order to bolster investment and the stock of capital for agricultural sector as a supply side policy. So, it is suitable to allocate the investment and Agribank credit facilities to agricultural infrastructure including roads on the path of exportation aimed at enhancing the return and productivity of production factors and coping with the relevant problems, so that the facilities can be appropriately used in the development of agricultural production and exports. 2. One unit increase in agricultural sector GDP improves
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IMPACT OF CAPITAL STRUCTURE ON THE PROFITABILITY OF SELECTED QUOTED BANKS IN NIGERIA

IMPACT OF CAPITAL STRUCTURE ON THE PROFITABILITY OF SELECTED QUOTED BANKS IN NIGERIA

Licensed under Creative Common Page 547 shields, growth opportunities, firm size and decreases with volatility, advertising expenditures, research and development costs, bankruptcy probability, profitability and uniqueness of the product. In the case of SMEs however, Joshua (2008) stated some heterodox qualities of capital structure to include: industry, location of the firm, entrepreneur's educational background and gender, form of business, and export status of the firm to explain their capital structure and who revealed that there is a positive relation between firm performance and capital structure. Salteh, et al (2012) investigated the impact of capital structure on firm performance, using five performance measures (including return on equity, return on assets, earning per share, market value of equity to the book value of equity and Tobin's Q) as dependent variable and four capital structure measures (including short-term debt, long- term debt and total debt to total assets, and total debt to total equity) as independent variable. They selected 28 Iranian companies listed in Tehran Stock Exchange (TSE) as a sample. The study covered 2005 to 2009. The results indicate that firm performance, which is measured by (ROE,MBVR & Tobin's Q) is significantly and positively associated with capital structure, while there is a negative relation between capital structure and (ROA, EPS). They concluded that firm performance is positively or even negatively related to capital structure. Skopljak (2012), using data of Australian 15 Deposit- taking Institutions (ADIs) over the period 2005 – 2007, study the effects of capital structure on performance in the financial sector in Australia, discovered a robust relationship between capital structure and firm’s performance. He discovered that at relatively low levels of leverage an increase in debt
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Capital Structure and Profitability: Panel Data Analysis

Capital Structure and Profitability: Panel Data Analysis

structure is the path breaking contribution of Modigliani and miller (1958) under the perfect capital market assumption. Modigliani and miller (1958) assumed that under condition of no bankruptcy cost and frictionless capital markets without taxes firm's value is independent of its capital structure. Another school of thought holds the view that financing choice reflects an attempt by corporate managers to balance tax shield of greater debt against potential large cost of financial distress arising from under investment. However if too much debt can destroy firm's value by causing financial distress and under investment then too little debts can also leads to overinvestment and negatively affect returns particularly in large and mature firms ( Barclays and Smith, 2005).The choice of capital structure and its resultant optimal risk exposure is very paramount in economic performance of every company. This is because the choice (Debt or Equity) should ultimately result in the growth in the value of investment made the various categories of investors particularly equity investors (Watson and Head, 2007),
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CAPITAL FLIGHT AND INVESTMENT IN NIGERIA

CAPITAL FLIGHT AND INVESTMENT IN NIGERIA

Capital flight is the outflow of capital in form of massive transfer of money from one country to another. Capital flight could be legal or illegal. Legal capital flight is recorded on the books of the entity or individual making the transfer and earnings from interest, dividends and realized capital gains normally return to the country of origin. While illegal capital flight also known as illicit financial flows, is intended to disappear from all records in the country of origin. Over the years, the issue of capital flight from developing countries, including Nigeria has received appreciable attention not only from academic from researchers also from policy makers in both developing and developed countries. The attention of these writers have expressed concern over the magnitude causes and the consequences.
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Fragile Balance of Payment in Indonesia in the Midst of Recent Global Economic Uncertainties

Fragile Balance of Payment in Indonesia in the Midst of Recent Global Economic Uncertainties

Amid global financial turbulent, the economy of Indonesia posted an annual average growth of above 6 per cent between 2008 and 2012, except in 2009. This was arguably among the most stable growth performance among the regional economies of East and Southeast Asia. The strength of domestic demand has indeed been a primary driver of the remarkably stable growth performance. In contrast to the major Southeast Asian (ASEAN) economies, exports of Indonesia amounted to only less than 25 per cent of its GDP, compared to Malaysia more than 80 per cent and Thailand more than 60 per cent in recent years. Private consumption contributed between 44 to 49 per cent of the quarterly year-on- year GDP growth in 2012 (Figure 1). Indonesia has also seen investment to pick up in recent years, and the country’s resilient growth in 2008-2012 can also be attributed to high commodity prices and capital inflow surges.
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Balance of Payments quarterly Statistics  1995 4

Balance of Payments quarterly Statistics 1995 4

Net Capital, excluding reserves Direct investment Portfolio investment Other long-term capital Official sector Deposit banks Other sectors Other short-term capital Official sector Deposi[r]

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Education - an investment in human capital

Education - an investment in human capital

Using practical research methods: comprehensive quests regarding the demand for labor force and the evolution of occupations on the Romanian labor force market in the2010-2012 perspective; available demographic statistics, methods used in the prognostic analysis of the labor market in the most important EU countries, studies made by the National Institute of Statistics with the pilot inquiry named “The growth of the interest for the higher education”, the sample represented by the adult population(aged between 25 and 64 years), analyzing the degree of participation at any learning activities, the quantitative and the qualitative results obtained after the adoption of the methods, lead to the idea that the education must be seen as a process which needs to show its efficiency and effectiveness in time, a process that invests in human capital in a planned manner, for it to show its productivity in time.
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Does working capital management affect profitability of retail small and medium enterprises? Evidence from hardware stores in Mavoko Municipality, Kenya

Does working capital management affect profitability of retail small and medium enterprises? Evidence from hardware stores in Mavoko Municipality, Kenya

Transaction cost economics theory argues that Transaction cost is a cost incurred in making any economic exchange, or in other words the cost of participating in a market (Cheung, Steven N. S. 1987). This leads to rise in holding and carrying costs. These costs have impact on profitability of any firm. Liquidity theory was suggested by Emery (1984) by proposing that firms with financing challenges give advances less credit and has a stringent credit policy. A firm should ensure that the credit period and discount period for prompt payment is well defined. SMEs should come up with strict credit policy which does not make it hard to make sales or collect receivables. The Baumol–Tobin theory is an economic theory of the transactions demand for money as developed independently by William Baumol (1952) and James Tobin (1956). The theory is based on the assumptions that: income for a given period is certain; expenditure of this income is evenly distributed over known period and that the rate of interest is fixed and known. It relies on the trade-off between the liquidity provided by holding money and the interest forgone by holding one’s assets in the form of non-interest bearing money. Adair and Nofsinger (2009) this trade-off is related to the opportunity costs of holding cash which increase along with the cash level and the trading costs which are incurred with every transaction. This opportunity costs thus decrease when the cash reserves increases. Cash conversion cycle theory was developed by Gitman (1974) as part of operating cycle. Shin and Soenen (1998) argued that it is important for firms to shorten the CCC, as managers can create value for their shareholders by reducing the cycle to a reasonable minimum. A higher CCC can hurt a company‘s profitability by increasing the time that cash is tied to non-interest bearing accounts such as account receivables. On the other hand, longer CCC might be an indication that company‘s sales are rising and that the company can compete by having lax credit policies or high inventories which could also lead to high profitability.
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Working Capital Management a Measurement Tool for Profitability: A Study on Pharmaceutical Industry in Bangladesh

Working Capital Management a Measurement Tool for Profitability: A Study on Pharmaceutical Industry in Bangladesh

Working capital management is important part in firm financial management decision. When working capital is not managed and allocated properly, it refers management in- efficiency and reduces the benefits of short term investments. On the other hand, if working capital is too low, the company may miss a lot of profitable investment opportunities or suffer short term liquidity crisis, leading to degradation of company credit, as it cannot respond effectively to temporary capital requirements. The present study investigates the relationship between the working capital management and profitability of 10 Bangladeshi Pharmaceutical companies for the period 2010–14. The impact of working capital management has been analyzed using multiple regression models between WCM and profitability. The current study indicates a negative relationship between profitability and the cash conversion cycle, which was used as a measure of working capital management efficiency. Therefore it seems that operational profitability dictates how managers or owners will act in terms of managing the working capital of the firm. It has been observed that lower profitability is associated with an increase in the number days of accounts payables. The above could lead to the conclusion that less profitable firms wait longer to pay their bills taking advantage of credit period granted by their suppliers. The positive relationship between accounts receivables and firms’ profitability suggests that more profitable firms will pursue an increase of their accounts receivables in an attempt to increase their profitability. Unlike wise the negative relationship between number of days in inventory and corporate profitability suggests that in the case of a sudden drop in sales accompanied with a mismanagement of inventory will lead to tying up excess capital at the expense of profitable operations. Due to the significant statistical results, having rejected null hypothesis (H01, H02, H03, H04) and accepted the alternative hypothesis (H11, H12, H13, H14). Therefore managers can create profits for their companies by handling correctly the cash conversion cycle and keeping each different component (accounts receivables, accounts payables, inventory) to an optimum level. Besides, the study prompts the researchers to investigate the relationship between working capital management and the firm’s profitability with a broader set of companies operating in Bangladesh.
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Capital Structure and the Profitability-Liquidity Trade-off

Capital Structure and the Profitability-Liquidity Trade-off

to suffer from a variety of financial ailments, which could result in high taxes, high proportions of accounts payable, large cash- flow deficits and eventual default risk and possible bankruptcy. On the other hand, given the tax deductibility advantage of debt, increasing debt is profitable but at the risk of liquidity crisisand the increased risk and cost of bankruptcy. Liquidity however is favored with the reduction of debt but profitability is hampered. This is the so-called classic profit-liquidity trade-off in capital structure decision (Baskin, 1989; Anderson and Carverhill, 2010). Extant literature has focused on the determinants of capital structure (Lipson and Mortal, 2009; Anderson and Carverhill, 2010; Udomsirikul et al. 2010; Akinyomi and Olagunju, 2013; Anthony and Odunayo, 2015; Sharma and Paul, 2015; Ghasemi and Ab- Razak, 2016), and the impact of capital structure on profitability/ performance and possibly liquidity as a control variable (Rajan and Zingales, 1995; Uremadu, 2012; Ebimobowei et al. 2013; Olaniyi et al. 2015; Akhtar et al. 2016; Dahiru et al. 2016; Foyeke et al. 2016; Vy and Nguyet, 2017). Meanwhile, the trade-off between debt and equity component of capital structure does significantly impact on the trade-off between profitability and the risk of bankruptcy associated with liquidity (Rajan and Zingales, 1995; Anderson and Carverhill 2010; Burksaitiene and Draugele, 2018). The literature does appear silent about these trade-offs in terms of supporting or contradicting evidences. This apparent gaps in the literature has motivated this study. Moreover, the peculiar problem with businesses across the globe and particularly emerging markets like Nigeria where manufacturing firms often times have liquidity issues given that a large proportion of their liquid asset exists as inventory and receivables, makes a potential interesting sector to investigate. Hence, this study investigates the dynamic link between capital structure and profitability-liquidity trade-off in the Nigerian manufacturing sector. Evidence from this study will be useful for finance managers to better understand capital structure management.
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Institutions and Structural Unemployment: Do Capital Market Imperfections Matter? CES Germany & Europe Working Papers, No  00 8, December 2000

Institutions and Structural Unemployment: Do Capital Market Imperfections Matter? CES Germany & Europe Working Papers, No 00 8, December 2000

Impact of venture capital investment on the unemployment rate with cyclical control Impact of venture capital investment on employment with cyclical control Table 4: FGLS estimates of a [r]

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AN EFFICACY OF IMPACT OF TURNOVER RATIOS ON PROFITABILITY WITH SPECIAL REFERENCE TO INDIAN PHARMACEUTICAL INDUSTRY

AN EFFICACY OF IMPACT OF TURNOVER RATIOS ON PROFITABILITY WITH SPECIAL REFERENCE TO INDIAN PHARMACEUTICAL INDUSTRY

The two important aims of finance are short-term solvency and profitability. To ensure solvency, the enterprises should be very liquid. If the enterprises maintain a relative large invest of long-term funds in currents assets, they will not face the risk of cash shortage or stocks-outs. However, there is a cost associated with maintaining a sound liquidity position. A considerable amount of the firm’s funds will be tied up in current assets and to the extent the investment is idle, the firm’s profitability will suffer 3 . To have higher profitability, the firms may sacrifice solvency and maintain a relatively low level of current assets. When the firms do
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