Effect of Capital Structure on Firm Profitability (An Empirical Evidence from London, UK)

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Assad Naim Nasimi
Assad Naim Nasimi
1 The University of Lahore

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This paper intends to explore the effect of capital structure on firm profitability. For the purpose of empirically investigating the effect of capital structure, a sample of 30 firms have been selected from FTSE-100 index of the London Stock Exchange. The data period for the study was 2005 to 2014. The study used multiple regression analysis method to explore the impact of capital structure on firm performance. The results revealed that Interest Coverage has positive significant impact on ROA, ROE and ROIC where DE has positive significant impact on ROE but negative significant impact on ROA and ROIC. The study concluded that an optimal level of capital structure, effective utilization and allocation of resources shall be employed to achieve the targeted level of efficiency in business.

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

Assad Naim Nasimi. 2016. \u201cEffect of Capital Structure on Firm Profitability (An Empirical Evidence from London, UK)\u201d. Global Journal of Management and Business Research - C: Finance GJMBR-C Volume 16 (GJMBR Volume 16 Issue C4): .

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Issue Cover
GJMBR Volume 16 Issue C4
Pg. 19- 29
Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

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GJMBR-C Classification: JEL Code: D21
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v1.2

Issue date

April 28, 2016

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English

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This paper intends to explore the effect of capital structure on firm profitability. For the purpose of empirically investigating the effect of capital structure, a sample of 30 firms have been selected from FTSE-100 index of the London Stock Exchange. The data period for the study was 2005 to 2014. The study used multiple regression analysis method to explore the impact of capital structure on firm performance. The results revealed that Interest Coverage has positive significant impact on ROA, ROE and ROIC where DE has positive significant impact on ROE but negative significant impact on ROA and ROIC. The study concluded that an optimal level of capital structure, effective utilization and allocation of resources shall be employed to achieve the targeted level of efficiency in business.

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Effect of Capital Structure on Firm Profitability (An Empirical Evidence from London, UK)

Assad Naim Nasimi
Assad Naim Nasimi The University of Lahore

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