Proposal finance - Essay Example

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The aftermath of the financial crisis created an interesting opportunity for studying the impact of financing and capital structure decisions on project and firm value. The choice of capital structure has gained considerable attention in literature, given its impact on firms,…
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The impact of Financing and Capital Structure on Project and Firm Value The impact of Financing and Capital Structure on Project and Firm Value
Chapter One: Introduction
The aftermath of the financial crisis created an interesting opportunity for studying the impact of financing and capital structure decisions on project and firm value. The choice of capital structure has gained considerable attention in literature, given its impact on firms, investment, and policymaking (Harrison & Widjaja, 2013). Following the 2008 crisis, tangibility and market to book ratio had a strong impact on capital structures unlike the period before the crisis. The negative co-efficient signs in firms were an exact opposite of what existed before the crisis. With further analysis indicating that the pecking order theory additional explanatory power as compared to trade off- or marketing theory, interest in the impact of financing and capital structure decisions on project and firm value needs discernment now than before.
Research Objectives
General Objective
i. The purpose of the study is to investigate the impact of financing and capital structure decisions on project and firm value
Specific Objectives
The study aims to:
i. Analyze the additional explanatory power of the pecking order theory and its impact of financing and capital structure decisions on project and firm value
ii. Explore literature indicating that the pecking order theory additional explanatory power as compared to trade off- or marketing theory
iii. Understand the relationships between the additional explanatory power the pecking order theory and others such as the trade off- or marketing theory
iv. Make conclusions and recommendations that are applicable to investment portfolios
Chapter Two: Literature Review
The recent financial crisis is an opportunity to study the impact of financial shock on capital structures. The relationship between capital structure and the value of firms remains an issue attracting considerable debate (Harrison & Widjaja, 2013). Historically, debate has focused on the relevance of optimum capitals structures to an individual firm’s value. However, recent findings show that firms should center on maximizing value through capital structures or financial leverage decisions considering their impact on the value of firms. This assertion forms the background of this study, which the researcher hopes will help companies forge a way forward in their capital structure decisions.
Chapter Three: Research Methodology
The chapter discusses the research design used to study the general objective, the population, data collection method, and analyses.
Research Design
The study will employ a descriptive and qualitative research method to investigate behavior occurring in this non-contrived situation. In contrast, a comprehensive literature review will aid in gathering information and summarizing literature on eventual yields. The research will also employ a structured questionnaire to collect data from company managers. The literature is meant to unearth information gaps on the research topic while the questionnaire will investigate current expectations of the industry.
Sample Population
The sample defines the target population chosen for this study, picked through random sampling. The study will select ten capitalistic firms using a simple random sampling technique. The study will include managers as well as employees from the firms in the sample. The proposed sample size is 10 managers and 30 employees.
Sampling Procedure
Purposive sampling is the best sample criteria, because this study requires participants with knowledgeable background on the subject.
Data Collection Methods
Data collection in this study is achieved through intensive, semi-structured interviews with the sample population, either face-to-face or via the telephone.
Chapter Four: Data Processing, Analysis, and Findings
Data Processing and Analysis
Data analysis begins from the literature review and extends to the onset of the interviews. It then continues to its end. After data collection, the researcher will deduce the data before interpreting and presenting it. The key points are noted and the similarities as well as differences presented by the managers, employees noted too. The coded data will be compared to previous literatures to determine key themes that will guide the tabling of findings.
Harrison, B. & Widjaja (2013). Did the Financial Crisis impact on the Capital Structure Of Firms? Discussion Papers in Economics, No. 2013/5, 1-48. Read More
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