Capital Structure and Firm’s Financial Performance; A Case of Sanlam Insurance Company (2010-2018)
DOI:
https://doi.org/10.53819/81018102t2280Abstract
This study examined the influence resulted in structure or arrangement of capital towards the financial performance of the firm. The SANLAM Ltd was taken as a case of study of eight years from 2010 to 2018 to assess the importance of the capital structure for a firm to better performance resulted in chosen finance companies in Rwanda. On other hands, the specific objectives are firstly, to assess the benefits of using the capital structure in selected finance company. Secondary, to assess the link connecting the capital structure and the performance of SANLAM Ltd. By using both quantitative and qualitative approaches, this study used aregression model to demonstrate the link between through by Return on Asset and Return on Equity. The researcher used Secondary data to attain objective stipulated in the study. The study employed both the Return on Equity and Return on Asset like dependent as estimator variables in variables under the study. The findings through regression analysis showed that debt ratio and the variable like tangible were accounted to be statistically were significant parameters impact the performance of obtained through return on asset; for loan to the ratio of the deposit, size and debt, are not significant with performance .The results obtained through regression showed that tangible is negative and statistically associated with return about asset and has a positive statistically for the return towards equity and has the probability value of 0.088 and 0.416. The implication is that debt level stimulate the return on asset and reduce the loss due to extent that high use of leverage has to impose high interest rate. Finally, this study recommends that the firm has to develop new strategies and target in order to use more equity. On the side of government of Rwanda as well as policy makers have to minimize any rigidity measures that could prohibit the use ling term financial resources.
Keywords: Capital Structure, Firm’s Financial Performance, Sanlam Insurance Company, Rwanda
References
Ahmed, N. a. (2013). The impact of capital structure on performance: An empirical study of non-financial listed firms in Pakistan International. ournal of Commerce and Management,, 23(4), 354-364.
Deakin, S. G. (2017). Legal Institutionalism: Capitalism and the Constitutive Role of Law’. Journal of Comparative Economics, 1(4), 40-61.
Ebaid. (2009). The impact of capital-structure choice on firm performance: empirical evidence from Egypt. The Journal of Risk Finance, The Journal of Risk Finance, 10(5), 477-487.
Gill, A., Nahum, B. and Neil, M. (2011). The effect of capital structure on profitability: Evidence from the United States. International Journal of Management,, 28(4), 3-15.
Harrington, C., Smith, W., & Trippeer, D. (2012). Deferred tax assets and liabilities: tax benefits, obligations and corporate debt policy. Journal of Finance and Accountancy, 11, 1.
Modigliani, F. & Miller, M. (1958). The cost of capital, corporation finance and the theory of investment. The American Economic Review, 48(3), 261-279.
Onaolapo, A. a. (2010). Capital structure and firm performance: evidence from Nigeria. European Journal of Economics, Finance and Administrative Sciences,, 25, 70-82.
Onaolapo, A. and Kajola, S. (2010). Capital structure and firm performance: evidence from Nigeria. European Journal of Economics, Finance and Administrative Sciences,, 25, 70-82.
Pandey, I. (2006). Capital Structure, Profitability and Market Structure:Evidence from Malaysia. Journal of Economics and Business, 8(2), 78-91.
Polyak, G. (2014). Finance, Money Turnover, Credit. Moscow: UNITY.
Sadeghian, N., Latifi, M., Soroush, S. and Aghabagher, Z. (2012). Debt policy and corporate performance: empirical evidence from Tehran Stock Exchange companies. International Journal of Economics and Finance, 4(11), 2017.
Shaker, A. and Hassan, M. (2015). The Effect of Capital Structure on Profitability: An Empirical Analysis of Listed Firms in Iraq. European Journal of Accounting, Auditing and Finance Research,, 3 (2), 61-78.
Shi’s, I. (2014). Empirical Research on the Relationship Between Firm Size and Firm Performance. Journal of Ocean University of China, 5.
Ting, I. a. (2011). Capital Structure of Government-Linked Companies in Malaysia,. Asian Academy of Management Journal of Accounting and Finance, 7(2), 137-156.
