The Impact of Equity Ratio on Firms Financial Performance: Evidence from Emerging Market of Saudi Arabia - Research Proposal Example

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The author states that the leverages or debt/equity ratio highlight the profits for a firm with positive earning while exposing the loses for a firm with negative records in earning. Thus the research evolves a framework for analyzing the financial performance in Saudi Arabia. …
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The Impact of Equity Ratio on Firms Financial Performance: Evidence from Emerging Market of Saudi Arabia
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Download file to see previous pages The initiates taken by both the government and the private sector players have promoted the investment opportunity in Saudi Arabia by creating effective partnerships with the Saudi Businessmen in effort to bring newer industries or modern technology to the country. Added emphasis is being given on attracting the infrastructure promotion and power generation but the investments made in these sectors are yet to exhibit the financial attractiveness in it. The existing capital investment from foreign institutions specifies three conditions (U.S. Department of Commerce, n.d. ),
Saudi Arabia is a rapidly growing region among Arab countries and hence the empirical evidence gained from the choice each firm make on their capital structure (Leverage ratio) could be used to gauge their financial performance in the emerging scenario. This aspect has been considered on the reason that detailed and more exhaustive studies are needed to make valid conclusions on the best capital structure for any company (Rajan & Zingales, 1995, Harris, and Raviv, 1991). Further, a few researchers have also raised an opinion of the influence of organizational characteristics on the corporate leverage level, thus making this research more valid (Fan et al., 2004; Hall et al., 2004; De Jong et al., 2007). Thus, in order to understand the better performance of business organizations in the emerging market the criteria, it is proposed to adopt the debt/equity ratio as the most appropriate parameter. Further, Saudi Arabia has a highly conservative financial market where the interest from debts is considered as illegal. Thus this creates a situation of very low leverage. Thus as companies have decided to undergo the process of financial planning the present approach would be turned from the debt to be linked more to equity approach. Thus this study could open newer vistas of academic research in the area of financial planning for the companies and proposing better investment options.  ...Download file to see next pagesRead More
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