EAN: 9783836695473

CAPITAL STRUCTURE AND PROFITABILITY S&P 500 ENT...

The present study aims to investigate to what extent capital structure has an impact on
profitability and closely associated factors due to a series of bankruptcies and bail-outs
within the last twelve months. The analysis refers to firms listed in the S&P 500 index on
January 2004 and evaluates their performance from 2004 to 2008. The results show strong
industry-specific characteristics for all factors observed  i.e. gearing  profitability 
liquidity  investments and dividends. In addition  findings indicate a negative effect of
higher gearing for almost all ten sectors in respect of the core variables analysed. Neither
the trade-off nor the pecking order theory can be confirmed  however  more support for the
former is found. Due to the complexity of capital structure choice  regulations have very
limited effects that require the need for independent non-governmental monitoring agencies to
improve transparency and have the authority to intervene if managers act at the expense of
public interest.

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