A meta-analysis: capital structure and firm performance

Abstract:Purpose
The paper aims at providing insights on the relationship between capital structure and performance of the firm by employing meta-analytical approach to obtain a synthesized result out of controversial studies as well as the sources for such inconsistency.

Design/methodology/approach
Using secondary data, the analysis is divided into two main parts with concerns to the overall strength of the relationship, the effect size and the potential paper-specific characteristics influencing the magnitude of impacts between leverage and firm performance (moderators of the relationship). Overall, a total number of 32 journals, reviews and school presses were selected besides online libraries and publishing platforms. There were 50 papers with 340 studies chosen from 2004 to 2019, of which data range from 1998 to 2017.

Findings
Using Hedges et al. (1985,1988), descriptive and quantitative analysis have been conducted to confirm that corporate performance is negatively related to capital decisions, which inclines toward trade-off model with agency costs and pecking order theory. The estimation induces rather small effect size that implies sufficiently large sample size to be effectively investigated. In terms of moderator analysis, random-effects meta-regression models of three different techniques are used to increase the robustness in research findings, showing statistically significant elements as publication status, factor of industry and proxy of firm performance.

Originality/value
This paper is one of the first papers presenting meta-analysis in capital structure and performance for two languages, Vietnamese and English, providing a consistent result with previous worldwide papers.