IDEAS home Printed from https://ideas.repec.org/a/eco/journ2/2023-04-35.html
   My bibliography  Save this article

Exploring Capital Structure Determinants for OECD Energy Firms

Author

Listed:
  • Gholamreza Zandi

    (Universiti Kuala Lumpur Business School, Malaysia,)

  • Raja Rehan

    (Department of Business Administration, ILMA University, Karachi, Pakistan,)

  • Qazi Muhammad Adnan Hye

    (Academic Research and Development Wing, Dubai, United Arab Emirates.)

  • Sandy Low Bee Choo

    (Universiti Kuala Lumpur Business School, Malaysia,)

Abstract

Energy is considered as a critical factor for supporting Economic Co-operation and Development (OECD) countries economic growth. However, little is known about OECD-based energy firms capital structure determinants. Hence, this investigation is an effort to explore the capital structure determinants for OECD countries energy firms. In this context, 18 key OECD countries 43 energy firms are selected. The balanced panel data sample set of 14 years from 2007 to 2020 is constructed to perform empirical analysis. The eight selected determinants, which are tangibility, current ratio, non-debt tax shield, return on equity, annual gross domestic product, inflation, and energy consumption are examined in association with capital structure that is measured by debt-to-asset ratio. By engaging a Panel Data Static Model and Dynamic Model via Generalized Method of Moments (GMM), the outcomes expose that tangibility, profitability, gross domestic product, energy consumption, and lagged dependent variable are the key capital structure determinants for energy firms of OECD countries. Notably, the significant role of a lagged dependent variable specifies the existence of a dynamic capital structure and speed of adjustment for these firms. Also, the significant role of tangibility directly indicates the relevance of the Dynamic Trade-Off theory. The findings pave new ways for policymakers to develop similar policies that will enhance collaboration in OECD countries to knob forth seeing energy-connected issues. Likewise, the identification of key determinants will also be helpful for these firms to construct best mix of debt and equity that ultimately enhance their financial performance and market value.

Suggested Citation

  • Gholamreza Zandi & Raja Rehan & Qazi Muhammad Adnan Hye & Sandy Low Bee Choo, 2023. "Exploring Capital Structure Determinants for OECD Energy Firms," International Journal of Energy Economics and Policy, Econjournals, vol. 13(4), pages 338-347, July.
    • Handle: RePEc:eco:journ2:2023-04-35
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijeep/article/download/14559/7402
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/ijeep/article/view/14559
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Rolly Guedie & Ali Salim Ahmed Ngnemadon & Hervé Kaffo Fotio & Luc Nembot, 2022. "Disaggregated Analysis of the Effects of Energy Consumption on Greenhouse Gas Emissions in Africa," Energy Economics Letters, Asian Economic and Social Society, vol. 9(2), pages 75-90.
    2. Erlane K. Ghani & Raja Rehan & Sultan Salahuddin & Qazi Muhammad Adnan Hye, 2023. "Discovering Capital Structure Determinants for SAARC Energy Firms," International Journal of Energy Economics and Policy, Econjournals, vol. 13(1), pages 135-143, January.
    3. Ozcan, Burcu & Tzeremes, Panayiotis G. & Tzeremes, Nickolaos G., 2020. "Energy consumption, economic growth and environmental degradation in OECD countries," Economic Modelling, Elsevier, vol. 84(C), pages 203-213.
    4. Orsetta Causa & Emilia Soldani & Nhung Luu, 2023. "A cost-of-living squeeze? Distributional implications of rising inflation," Public Sector Economics, Institute of Public Finance, vol. 47(4), pages 431-460.
    5. Yuru Guan & Jin Yan & Yuli Shan & Yannan Zhou & Ye Hang & Ruoqi Li & Yu Liu & Binyuan Liu & Qingyun Nie & Benedikt Bruckner & Kuishuang Feng & Klaus Hubacek, 2023. "Burden of the global energy price crisis on households," Nature Energy, Nature, vol. 8(3), pages 304-316, March.
    6. Abbas, Jawad & Wang, Lisu & Ben Belgacem, Samira & Pawar, Puja Sunil & Najam, Hina & Abbas, Jaffar, 2023. "Investment in renewable energy and electricity output: Role of green finance, environmental tax, and geopolitical risk: Empirical evidence from China," Energy, Elsevier, vol. 269(C).
    7. Alireza Bahrami & Markus Olsson & Karl Svensson, 2022. "Carbon Dioxide Emissions from Various Structural Frame Materials of Single-Family Houses in Nordic Countries," International Journal of Innovative Research and Scientific Studies, Innovative Research Publishing, vol. 5(2), pages 112-120.
    8. Biswajit Ghose, 2017. "Impact of Business Group Affiliation on Capital Structure Adjustment Speed: Evidence from Indian Manufacturing Sector," Emerging Economy Studies, International Management Institute, vol. 3(1), pages 54-67, May.
    9. Saddam Hussain & Chunjiao Yu & Liu Wan, 2021. "Energy – Growth Nexus- A Case of South Asian Countries," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 8(2), pages 58-66.
    10. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    11. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    12. GholamReza Zandi & Raja Rehan & Qazi Muhammad Adnan Hye & Sadaf Mubeen & Shujaat Abbas, 2022. "Do Corruption, Inflation and Unemployment Influence the Income Inequality of Developing Asian Countries?," International Journal of Applied Economics, Finance and Accounting, Online Academic Press, vol. 14(2), pages 118-128.
    13. Vu Minh Hieu & Tran Duc Tai & Doan Dang Phi Hung, 2021. "Examining the Impact of Sustainable Energy on the Economy: Panel Evidence from ASEAN," International Journal of Management and Sustainability, Conscientia Beam, vol. 10(1), pages 22-32.
    14. Vu Minh Hieu & Tran Duc Tai & Doan Dang Phi Hung, 2021. "Examining the Impact of Sustainable Energy on the Economy: Panel Evidence from ASEAN," International Journal of Management and Sustainability, Conscientia Beam, vol. 10(1), pages 22-32.
    15. Hammayo Abubakar & Kamal Tasiu Abdullahi, 2022. "Carbon Dioxide Emissions and Economic Growth Nexus in Nigeria: The Role of Financial Development," American Journal of Social Sciences and Humanities, Online Science Publishing, vol. 7(2), pages 69-84.
    16. Barbara Grabinska & Marcin Kedzior & Dorota Kedzior & Konrad Grabinski, 2021. "The Impact of Corporate Governance on the Capital Structure of Companies from the Energy Industry. The Case of Poland," Energies, MDPI, vol. 14(21), pages 1-25, November.
    17. Monika Wieczorek-Kosmala & Joanna Błach & Iwona Gorzeń-Mitka, 2021. "Does Capital Structure Drive Profitability in the Energy Sector?," Energies, MDPI, vol. 14(16), pages 1-15, August.
    18. Myers, Stewart C, 1984. "The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-592, July.
    19. Ting-Kun Liu, 2022. "Concentration, Foreign Participation and Bank Performance: An Empirical Study of Asian Emerging Markets," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 12(1), pages 29-46.
    20. Ilir MITEZA, 2012. "Fiscal Deficits, Current Deficits and Investment: A Panel Causality Framework of 20 OECD countries," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 12(1).
    21. Siti Aminah Harun & Muhammad Ashraf Fauzi & Nur Muneerah Kasim & Walton Wider, 2022. "Determinants of Energy Efficient Appliances among Malaysian Households: Roles of Theory of Planned Behavior, Social Interaction and Appliance Quality," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 12(3), pages 212-226.
    22. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
    23. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    24. Johora Tahsin, 2022. "The Effects of ICT on Environment Quality: The Role of Green Technological Innovation in Asian Developing Countries," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 10(2), pages 92-107.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Raja Rehan & Muhammad Asghar Khan & Guo Hong Fu & Auwal Adam Sa’ad & Auroob Irshad, 2024. "The Determinants of Shariah Banks’ Capital Structure," International Journal of Economics and Financial Issues, Econjournals, vol. 14(5), pages 193-202, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Erlane K. Ghani & Qazi Muhammad Adnan Hye & Raja Rehan & Sultan Salahuddin, 2023. "Examining Capital Structure Determinants for ASEAN Energy Firms," International Journal of Energy Economics and Policy, Econjournals, vol. 13(3), pages 129-140, May.
    2. Biswajit Ghose & Kailash Chandra Kabra, 2020. "Does Growth Affect Firms’ Leverage Adjustment Speed? A Study of Indian Firms," Business Perspectives and Research, , vol. 8(2), pages 139-155, July.
    3. Mohamed Soufeljil & Asma Sghaier & Zouhayer Mighri & Hanène Kheireddine, 2017. "The financial structure of the Tunisian listed businesses: an application on panel data," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 7(1), pages 1-25, December.
    4. Drobetz, Wolfgang & Pensa, Pascal & Wanzenried, Gabrielle, 2007. "Firm Characteristics, Economic Conditions and Capital Structure Adjustment," Working papers 2007/16, Faculty of Business and Economics - University of Basel.
    5. Biswajit Ghose & Kailash Chandra Kabra, 2019. "Capital Structure Dynamics and Financing Imbalance: Evidence from an Emerging Economy," Emerging Economy Studies, International Management Institute, vol. 5(2), pages 103-124, November.
    6. Wolfgang Drobetz & Gabrielle Wanzenried, 2006. "What determines the speed of adjustment to the target capital structure?," Applied Financial Economics, Taylor & Francis Journals, vol. 16(13), pages 941-958.
    7. Biswajit Ghose & Kailash Chandra Kabra, 2018. "Dynamic Capital Structure Adjustments and Business Group Affiliations: Indian Evidence," Business Perspectives and Research, , vol. 6(1), pages 27-41, January.
    8. Giorgio Canarella & Stephen M. Miller, 2019. "Determinants of Optimal Capital Structure and Speed of Adjustment: Evidence from the U.S. ICT Sector," Working papers 2019-06, University of Connecticut, Department of Economics.
    9. Strike Mbulawa & Nathan F. Okurut & Mogale Ntsosa & Narain Sinha, 2020. "Optimal Capital Structure and Speed of Adjustment under Hyperinflation and Dollarization," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 12(2), pages 158-177, May.
    10. Dobetz, Wolfgang & Grüninger, Matthias C., 2006. "Corporate cash holdings: Evidence from a different institutional setting," Working papers 2006/06, Faculty of Business and Economics - University of Basel.
    11. Altaf, Nufazil & Shah, Farooq, 2017. "Slack heterogeneity and firm performance: Investigating the relationship in Indian context," Research in International Business and Finance, Elsevier, vol. 42(C), pages 390-403.
    12. Khémiri, Wafa & Noubbigh, Hédi, 2018. "Determinants of capital structure: Evidence from sub-Saharan African firms," The Quarterly Review of Economics and Finance, Elsevier, vol. 70(C), pages 150-159.
    13. Biswajit Ghose & Kailash Chandra Kabra, 2019. "Firm Profitability and Adjustment of Capital Structure: Indian Evidence," Vision, , vol. 23(3), pages 297-308, September.
    14. Elena Alexandra Nenu & Georgeta Vintilă & Ştefan Cristian Gherghina, 2018. "The Impact of Capital Structure on Risk and Firm Performance: Empirical Evidence for the Bucharest Stock Exchange Listed Companies," IJFS, MDPI, vol. 6(2), pages 1-29, April.
    15. Arestis, Philip & Gonzalez-Martinez, Ana Rosa, 2016. "Revisiting the accelerator principle in a world of uncertainty: Some empirical evidence," Economic Modelling, Elsevier, vol. 56(C), pages 35-42.
    16. Young Mok Choi & Kunsu Park, 2019. "Foreign Ownership, Agency Costs, and Long-Term Firm Growth: Evidence from Korea," Sustainability, MDPI, vol. 11(6), pages 1-17, March.
    17. Surenderrao Komera & P. J. Jijo Lukose, 2016. "Heterogeneity and Asymmetry in Speed of Leverage Adjustment: The Indian Experience," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 19(03), pages 1-26, September.
    18. Bolaji Tunde Matemilola & Rubi Ahmad, 2015. "Debt financing and importance of fixed assets and goodwill assets as collateral: dynamic panel evidence," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 16(2), pages 407-421, April.
    19. Dang, Viet Anh & Kim, Minjoo & Shin, Yongcheol, 2014. "Asymmetric adjustment toward optimal capital structure: Evidence from a crisis," International Review of Financial Analysis, Elsevier, vol. 33(C), pages 226-242.
    20. Chau H. A. Le, 2016. "Macro-financial linkages and bank behaviour: evidence from the second-round effects of the global financial crisis on East Asia," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 6(3), pages 365-387, December.

    More about this item

    Keywords

    Capital Structure; Panel Data Models; GMM; Trade-Off Theory; OECD;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • P18 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Energy; Environment

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ2:2023-04-35. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.