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Impact of Capital Structure on Stock Prices: Evidence from Oman

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  • Udayakumari Vidhyasagara Menon

Abstract

The study tests the relationship between capital structures and share prices of the listed companies of Muscat Securities Market (MSM). It considers all the 113 listed companies registered in MSM for three main sectors for a period of eight years i.e. 2008 till 2015. It analyzes the relationship between share price and capital structure by employing correlation analysis and multiple regression analysis in a panel framework. We found an inverse relationship between amount of debt and share prices. Further a positive relationship between amount of equity and share prices and debt equity ratio. The results were statistically significant at 1% level of significance. The results indicate adding debt to overall capital inversely effects the share prices. The results are in tandem to Net Income Approach which portrays capital structure to influence firm value.

Suggested Citation

  • Udayakumari Vidhyasagara Menon, 2016. "Impact of Capital Structure on Stock Prices: Evidence from Oman," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(9), pages 249-257, September.
    • Handle: RePEc:ibn:ijefaa:v:8:y:2016:i:9:p:249-257
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    References listed on IDEAS

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    Cited by:

    1. Michael Nana Owusu-Akomeah & Joseph Asare & Emmanuel Atta Kumah & Stephen Owusu Afriyie, 2022. "Holistic Analysis of the Relationship Between Capital Structure and Stock Price of Consumer Staples," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 12(2), pages 38-60.

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    More about this item

    Keywords

    capital structure; debt; equity; firm value; muscat securities market; share price;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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