M.Com. (Business Management) / The capital structure of a company depends on the degree of debt used. Companies use debt to trade of tax shields and financial distress costs. At the margin where these equate, the optimal capital structure is reached. This optimal capital structure has been determined for each size of market capitalisation on the Johannesburg Securities Exchange. The capital structure theories of the static trade-off theory, pecking order and signalling model theory are highlighted in relation to company determinants such as size, asset structure, profitability and growth opportunities. A sample of 35 companies was used for each market capitalization for the period 2003 to 2009. The researcher uses a bar graph to display the average price to book value (P/BV) in sequential intervals for each degree of leverage in order to determine the optimal capital structure. The research shows that the optimum leverage for small market capitalisations was reached with a DIE ratio of 0.75-1 and for medium and large market capitalisations between 1.01-1.25.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:uj/uj:12548 |
| Date | 08 October 2014 |
| Creators | Snaith, N.J.G. |
| Source Sets | South African National ETD Portal |
| Detected Language | English |
| Type | Thesis |
| Rights | University of Johannesburg |
Page generated in 0.0021 seconds