The Effect of Capital Structure on the Firm Value of Listed Companies in Thailand

Abstract

Purpose

The objective of this research is to examine the relationships between capital structure providence and firm value based on the secondary financial data of the SET50 in Security Exchange in Thailand (SET) between 2010 to 2021.

Theoretical Framework

This conceptual framework is based on the traditional capital structure theory of Modigliani and Miller (M&M Theory) and the trade-off theory.

Design/Methodology/Approach

The study focuses on the short- and long-term impact of the capital structure providence on firm value. The short-term impact is assessed by firm liquidity, while the long-term impact is based on sustainability and growth. A regression analysis is used to test the relationship between capital structure providence and firm value.

Findings

The results support a negative relationship between capital structure providence and firm growth and sustainability, suggesting that capital structure providence has a negative long-term impact on firm value.

Research, Practical And Social Implications

This finding encourages practitioners to be prudent regarding the financing between debt and equity, as the capital structure providence can affect firm value in the long-term.

Original Value

This research studies the impact of capital structure providence on firm value based on the return on total assets. More specifically, the effect on firm value is based on short-term (firm liquidity) and long-term (firm growth and sustainability) measurements.