The Impact of Firm Leverage on Shareholders’ Wealth in Southeast Asia
- DOI
- 10.2991/aebmr.k.210522.031How to use a DOI?
- Keywords
- Capital structure, optimal leverage, shareholder wealth, dividend yield
- Abstract
The issue of the firm capital structure continues to be an exciting phenomenon to research. Begins with the development of theories regarding optimal leverage, to the proliferation of research on firms with zero leverage, which are apparently more profitable. This study attempts to identify the impact of firm leverage on shareholders’ wealth in Southeast Asian firms between 2009 and 2018 using panel data analysis. Our results show that there is a non-linear relationship between firm leverage and shareholder wealth. Contrary to the suggestion of optimal leverage theory, this non-linear relationship indicates that leverage has a negative relationship to dividend yield up to a certain point, but the relationship turns positive at high debt levels. This implies that managers should consider any increase in the firm leverage, since additional debt does not always increase shareholder wealth. Additionally, our results show that several firm-level and country-level factors significantly correlated with shareholder wealth, such as sales growth, growth opportunity, profitability, cash holdings, asset tangibility, inflation and corporate income tax. Understanding the impact of leverage on shareholders’ wealth enhances managers’ decisions in capital structure and complements knowledge to investors who would like to increase wealth through dividends.
- Copyright
- © 2021, the Authors. Published by Atlantis Press.
- Open Access
- This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).
Cite this article
TY - CONF AU - Deavina Retkaputri AU - Zaäfri A. Husodo PY - 2021 DA - 2021/05/25 TI - The Impact of Firm Leverage on Shareholders’ Wealth in Southeast Asia BT - Proceedings of the International Conference on Business and Engineering Management (ICONBEM 2021) PB - Atlantis Press SP - 232 EP - 243 SN - 2352-5428 UR - https://doi.org/10.2991/aebmr.k.210522.031 DO - 10.2991/aebmr.k.210522.031 ID - Retkaputri2021 ER -