The effect of capital structure on performance: empirical evidence from manufacturing companies in Ethiopia

Figures & data

Table 1. Summary presentation of selected variables.

Variables		Notation	Measurements	Source
Dependent	Net operating profitability	NOP	Earnings before interest and tax Total assets	Goyal, 2013
	Return on assets	ROA	Net income Total assets	Kharabsheh et al., 2017
Independent	Debt ratio	TOD	Total liability Total assets	Ayalew, 2021
	Long term debt ratio	LTD	Long term debt Total assets	Kharabsheh et al., 2017
Control	Current ratio	CR	Current assets Current liability	Akhtar et al., 2019
	Fixed asset turnover ratio	FATR	Sales Total fixed assets	Puspita et al., 2021
	Firm size	FS	Logarithm of total sales	Vinasithamb, 2015

Table 2. Descriptive statistics of variables.

Panel	Variable	Mean	Std. dev	Min	Max	Obs
A	TOD	0.461	0.252	0.000	1.000	425
	LTD	0.124	0.170	−0.160	0.890	425
B	CR	3.287	3.675	0.030	35.070	425
	FATR	6.962	6.752	0.010	37.640	425
	FS	7.899	0.450	6.470	9.230	425
C	NOP	0.152	0.200	−1.820	1.010	425
	ROA	0.099	0.119	−0.670	0.480	425

Table 3. Pearson’s correlation matrix.

	NOP	ROA	TOD	LTD	CR	FATR	FS
NOP	1.0000
ROA	0.9115***	1.000
TOD	−0.0731	−0.1436***	1.000
LTD	−0.1696***	−0.2475***	0.4245***	1.000
CR	−0.0096	0.0022	−0.5108***	0.0202	1.000
FATR	0.3737***	0.4183***	0.0426	−0.1632***	0.067	1.000
FS	0.1598***	0.1595***	0.0242	0.0899*	−0.1759***	0.0628	1.000

* and *** denote significant level at 10 and 1%, respectively.

Table 4. Harris–Tsavalis panel unit root test result.

Rho	NOP	ROA	TOD	LTD	CR	FATR	FS
Statistic	−0.187	−0.0082	0.221	0.1369	0.1215	0.0053	0.2768
z	−12.9973	−9.6149	−5.2809	−6.8689	−7.1603	−9.3583	−4.2226
p-Value	0.000	0.000	0.000	0.000	0.000	0.000	0.000

Table 5. Result of diagnostic tests for model 1 to model 6.

No	Specification and diagnostic tests	Models
		1	2	3	4
1	Hausman: chi^2(4)	3.560	6.110	6.440	6.640
	Prob > chi^2	0.469	0.191	0.168	0.156
2	Multicollinearity: average VIF	1.220	1.040	1.220	1.040
3	Heteroscedasticity: chibar^2(01)	78.250	76.870	178.560	175.920
	Prob > chibar^2	0.000	0.000	0.000	0.000
	Likelihood-ratio test: LR hi^2(84)	463.480	455.100	321.630	311.220
	Prob > chi^2	0.000	0.000	0.000	0,000
4	Serial correlation: F(1, 84)	2.534	2.366	12.411	11.738
	Prob > F	0.115	0.128	0.001	0,000
5	Cross-sectional: PCD statistics	−0.854	−0.905	−0.847	−0.949
	Independence p-value	0.393	0.365	0.397	0.343
	Off-diagonals	0.442	0.446	0.449	0.455

Table 6. Empirical results for model 1 to model 6.

	Random effect model				Two step system GMM model
Variables Independent dependent	NOP		ROA		NOP		ROA
	Model 1	Model 2	Model 3	Model 4	Model 5	Model 6	Model 7	Model 8
Lag of					0.070	0.079	0.183	0.192
Dependent					0.077	0.076	0.127	0.118
TOD	−0.071*		−0.066**		−0.124**		−0.100***
	0.042		0.027		0.049		0.032
LTD		−0.064*		−0.077**		−0.147***		−0.119***
		0.052		0.037		0.054		0.037
CR	−0.003	0.001	−0.002	0.000	−0.011**	−0.003	−0.007**	−0.001
	0.002	0.002	0.002	0.001	0.003	0.002	0.002	0.001
FATR	0.010***	0.009***	0.006***	0.006***	0.013***	0.012***	0.008***	0.007***
	0.002	0.002	0.001	0.001	0.003	0.002	0.001	0.002
FS	0.068***	0.074***	0.043***	0.048***	0.071**	0.079***	0.040**	0.047***
	0.022	0.022	0.016	0.016	0.029	0.028	0.016	0.015
Constant	−0.413**	−0.485***	−0.252*	−0.316**	−0.412**	−0.536**	−0.222**	−0.321***
	0.186	0.175	0.132	0.125	−1.740	0.223	0.125	0.120
Rho	0.319	0.318	0.477	0.476
Theta	0.453	0.452	0.576	0.575
R-square	0.247	0.252	0.273	0.272
Wald chi^2	32.480	31.220	38.420	37.510	49.620	48.470	77.790	75.100
p-Value	0.000	0.000	0.000	0.000	0.000	0.000	0.000	0.000
No of firms	85	85	85	85	85	85	85	85
Observation	420	420	420	420	340	340	340	340
AR(1)					−2.210	−2.350	−3.420	−3.610
p-Value					0.027	0.019	0.001	0.001
AR(2)					0.030	−0.170	0.280	0.060
p-Value					0.978	0.863	0.781	0.956
Sargan test					3.290	3.000	4.210	3.530
p-Value					0.194	0.223	0.122	0.171
Hansen test					2.420	2.310	1.530	1.430
p-Value					0.300	0.315	0.464	0.490

Standard errors are in parentheses; p-values denote.

*** p < 0.01, **p < 0.05, *p < 0.1.

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Data availability statement

Data available in [Mendely Data] at [https://data.mendeley.com/datasets/vctx8x86m2/draft?a=d0779d38-fa78-42a5-b724-fe9d3211ec24]. The excel set can also be resent via email.