A COMPARISON OF THE CAPITAL STRUCTURES OF THE TOP 40 MULTINATIONAL ENTITIES AND THE TOP 40 JSE-LISTED ENTITIES
Abstract
The strategies and policies of multinational entities (MNEs) centre on the focal
goal of any company, which is to maximise profits and shareholder wealth.
Management aims for an optimum ownership structure by implementing various
strategies. One of these strategies is the debt-to-equity ratio (the capital structure).
Previous studies conducted on various countries’ locally-listed entities confirm
that the capital structure of an entity has an impact on the value of that entity. This
then raises an interesting question as to whether the capital structures of the top 40
Johannesburg Stock Exchange (JSE)-listed entities are similar to those of the top
40 global MNEs. Based on market capitalisation on 31 December 2014, this study
sought to compare the capital structures, using the debt-to-equity ratio, of the top
40 JSE-listed entities with those of the top 40 global MNEs on the Fortune 500
list. Independent t-tests were performed on the debt-to-equity ratios of the top 40
JSE-listed entities and the top 40 global MNEs as a group. Both independent ttests
and the Mann-Whitney tests were performed on the debt-to-equity ratios of
applicable entities of the group divided into three selected industries. The results
of the independent t-test indicate a statistical and practically significant difference
between the top 40 JSE-listed entities and the top 40 global MNEs’ capital
structures. The results of the Mann-Whitney tests indicate that if the financial
industry is excluded, there is no statistical or practically significant difference
between the capital structures of the top 40 JSE-listed entities and the top 40
MNEs. However, based on the effect size there is a practical visible difference.
Details
| Other ID | JA39JN75DH |
|---|---|
| Journal Section | Research Article |
| Authors | |
| Publication Date | February 1, 2017 |
| Published in Issue | Year 2017 Volume: 9 Issue: 1 |