Debt Capital and Dividend Policy as Complementary Indicators of Firm Valuation

Okechukwu Enyeribe Njoku () and Younghwan Lee ()
Additional contact information
Okechukwu Enyeribe Njoku: Department of Business Administration, Kumoh National Institute of Technology, Gumi 39177, Republic of Korea
Younghwan Lee: Department of Business Administration, Kumoh National Institute of Technology, Gumi 39177, Republic of Korea

IJFS, 2025, vol. 13, issue 1, 1-26

Abstract: This study investigates the interdependencies between debt capital and dividend policy as complementary factors influencing firm value among corporations listed on the Korea Composite Stock Price Index (KOSPI). Using Tobin’s Q as a firm value metric and employing robust econometric techniques (OLS, 2-SLS, and GMM), the analysis reveals that while debt and dividend policies independently reduce firm value, their interaction produces a synergistic effect that increases value. The findings further indicate the dual role of Chaebol ownership structures, which, despite their association with lower firm value, mitigate the negative effects of financial policies. Additionally, firm size is found to negatively impact value, whereas free cash flow has a significant positive effect. By disentangling the complex dynamics of capital structure, dividend strategies, and ownership configurations, this study offers actionable insights for managers, investors, and policymakers. It emphasizes the importance of balanced financial practices and governance reforms tailored to concentrated ownership environments.

Keywords: capital structure; dividend policy; firm value; ownership structure (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7072/13/1/18/pdf (application/pdf)
https://www.mdpi.com/2227-7072/13/1/18/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jijfss:v:13:y:2025:i:1:p:18-:d:1582327

Access Statistics for this article

IJFS is currently edited by Ms. Hannah Lu

More articles in IJFS from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().