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

Samuel Fosu

The Quarterly Review of Economics and Finance, 2013, vol. 53, issue 2, 140-151

Abstract: 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.

Keywords: G32; L11; L25 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (45)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:53:y:2013:i:2:p:140-151

DOI: 10.1016/j.qref.2013.02.004

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