Impact of Capital Structure on Profitability: Panel Data Evidence of the Telecom Industry in the United States
Debt finance, when considered a source of finance, always leads to financial risk; however, it is also considered a source of increased profitability in the normal business scenario. It has always been challenging to find the correct debt equity combination. In the discussed sample of the telecom in...
| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
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MDPI AG
2022-08-01
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| Series: | Risks |
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| Online Access: | https://www.mdpi.com/2227-9091/10/8/157 |
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| author | Houshang Habibniya Suzan Dsouza Mustafa Raza Rabbani Nishad Nawaz Rezart Demiraj |
| author_facet | Houshang Habibniya Suzan Dsouza Mustafa Raza Rabbani Nishad Nawaz Rezart Demiraj |
| author_sort | Houshang Habibniya |
| collection | DOAJ |
| description | Debt finance, when considered a source of finance, always leads to financial risk; however, it is also considered a source of increased profitability in the normal business scenario. It has always been challenging to find the correct debt equity combination. In the discussed sample of the telecom industry in the USA, an abnormally high total liability-to-total assets ratio was observed. Thus, it is inclined to investigate the capital structure (CapSt) effect on firms’ profitability. By taking annual data of the telecom industry from 2012 to 2020 in the USA, unbalanced cross-sectional data (panel data) comprising 421 firm-year observations for 72 firms were studied using pooled panel regression, univariate analysis, correlation, and descriptive statistics models. We decided to test the impact of CapSt (Total Liabilities to Total Assets (TLsTAs) and Total Equity to Total Assets (TETAs)) on the profitability (Return on Assets (ROA) and Return on Equity (ROE)) of firms in the telecommunication industry in the USA. The results reveal that the ratio of TLsTAs has a significant impact on ROA, and TETAs has a significant impact on ROA. However, TLsTAs and TETAs have no impact on ROE. |
| first_indexed | 2024-03-09T12:38:58Z |
| format | Article |
| id | doaj.art-853ef6071bc44662937828a5a91defb9 |
| institution | Directory Open Access Journal |
| issn | 2227-9091 |
| language | English |
| last_indexed | 2024-03-09T12:38:58Z |
| publishDate | 2022-08-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Risks |
| spelling | doaj.art-853ef6071bc44662937828a5a91defb92023-11-30T22:21:24ZengMDPI AGRisks2227-90912022-08-0110815710.3390/risks10080157Impact of Capital Structure on Profitability: Panel Data Evidence of the Telecom Industry in the United StatesHoushang Habibniya0Suzan Dsouza1Mustafa Raza Rabbani2Nishad Nawaz3Rezart Demiraj4Accounting Department, College of Business Administration, American University of the Middle East, Egaila 54200, KuwaitAccounting Department, College of Business Administration, American University of the Middle East, Egaila 54200, KuwaitDepartment of Economics and Finance, University of Bahrain, Zallaq P.O. Box 32038, BahrainCollege of Business Administration, Kingdom University, Riffa P.O. Box 40434, BahrainAccounting Department, College of Business Administration, American University of the Middle East, Egaila 54200, KuwaitDebt finance, when considered a source of finance, always leads to financial risk; however, it is also considered a source of increased profitability in the normal business scenario. It has always been challenging to find the correct debt equity combination. In the discussed sample of the telecom industry in the USA, an abnormally high total liability-to-total assets ratio was observed. Thus, it is inclined to investigate the capital structure (CapSt) effect on firms’ profitability. By taking annual data of the telecom industry from 2012 to 2020 in the USA, unbalanced cross-sectional data (panel data) comprising 421 firm-year observations for 72 firms were studied using pooled panel regression, univariate analysis, correlation, and descriptive statistics models. We decided to test the impact of CapSt (Total Liabilities to Total Assets (TLsTAs) and Total Equity to Total Assets (TETAs)) on the profitability (Return on Assets (ROA) and Return on Equity (ROE)) of firms in the telecommunication industry in the USA. The results reveal that the ratio of TLsTAs has a significant impact on ROA, and TETAs has a significant impact on ROA. However, TLsTAs and TETAs have no impact on ROE.https://www.mdpi.com/2227-9091/10/8/157telecommunication industryprofitabilitycapital structurepanel data |
| spellingShingle | Houshang Habibniya Suzan Dsouza Mustafa Raza Rabbani Nishad Nawaz Rezart Demiraj Impact of Capital Structure on Profitability: Panel Data Evidence of the Telecom Industry in the United States Risks telecommunication industry profitability capital structure panel data |
| title | Impact of Capital Structure on Profitability: Panel Data Evidence of the Telecom Industry in the United States |
| title_full | Impact of Capital Structure on Profitability: Panel Data Evidence of the Telecom Industry in the United States |
| title_fullStr | Impact of Capital Structure on Profitability: Panel Data Evidence of the Telecom Industry in the United States |
| title_full_unstemmed | Impact of Capital Structure on Profitability: Panel Data Evidence of the Telecom Industry in the United States |
| title_short | Impact of Capital Structure on Profitability: Panel Data Evidence of the Telecom Industry in the United States |
| title_sort | impact of capital structure on profitability panel data evidence of the telecom industry in the united states |
| topic | telecommunication industry profitability capital structure panel data |
| url | https://www.mdpi.com/2227-9091/10/8/157 |
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