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

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posted on 2023-06-10, 03:30 authored by Samuel FosuSamuel Fosu
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.

History

Publication status

  • Published

File Version

  • Accepted version

Journal

Quarterly Review of Economics and Finance

ISSN

1062-9769

Publisher

Elsevier

Issue

2

Volume

53

Page range

140-151

Department affiliated with

  • Accounting and Finance Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2022-05-11

First Open Access (FOA) Date

2022-05-11

First Compliant Deposit (FCD) Date

2022-05-11

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