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The Effect of Financial Structure, Financial Leverage and Profitability on Value of Shares of Industrial Companies Applied Study on a Sample of Saudi Industrial Companies

Delhi Business Review, 2014-12, Vol.15 (2), p.9-25

Copyright Society for Human Transformation & Research Jul-Dec 2014 ;ISSN: 0972-222X ;EISSN: 2277-7725 ;DOI: 10.51768/dbr.v15i2.152201412

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  • Title:
    The Effect of Financial Structure, Financial Leverage and Profitability on Value of Shares of Industrial Companies Applied Study on a Sample of Saudi Industrial Companies
  • Author: Abdallah, Barakat ; Hussein, Samhan
  • Subjects: Advantages ; Capital costs ; Capital structure ; Commercial credit ; Corporate profits ; Cost control ; Equity ; Financial analysis ; Financial leverage ; Financial statements ; Hypotheses ; Interest rates ; Investment policy ; Investments ; Loans ; Profitability ; Securities markets ; Stock exchanges ; Stockholders ; Working capital
  • Is Part Of: Delhi Business Review, 2014-12, Vol.15 (2), p.9-25
  • Description: THE purpose of this study is to investigate the effect of financial structure, financial leverage, and profitability on industrial company's value as a long term strategic analysis that helps the analyst in predicting future company's value on the light of the mentioned variables in addition to external environment. A sample was selected from Saudi industrial companies listed in Saudi Stock Market amounting Forty-six companies. The study used the brochures issued by Saudi capital market for four years during the period of 2009-2012. The results confirm that there is statistically significant direct relationship between two independent variables: return on equity and capital structure and the dependent variable represented by stock market price. However, there is weak and inverse relationship between financial leverage and stock value, and this relationship is not significant, so there is no statistically significant relationship between financial leverage and company's value. This research examined the effect of financial structure, financial leverage, and profitability on industrial company's value. However, this study did not explore the other factors that affect company's value. This is considered as study limitation. The results indicate that companies 'management have to pay attention to financing aspects represented by differentiation between different financing sources, and in particular investment debt funds in turn exceeds capital cost, which leads to increase and improve profitability, which have a positive impact in increasing the company value. This study will enable management of companie to have a better understanding of the impact of profitability and, which will lead to increased and improved company's values in order to increase shareholders' wealth.
  • Publisher: Rohini: Society for Human Transformation & Research
  • Language: English
  • Identifier: ISSN: 0972-222X
    EISSN: 2277-7725
    DOI: 10.51768/dbr.v15i2.152201412
  • Source: ProQuest Central
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