Financial Structure and Firm Value: Empirical Evidence from the Emerging Market of the United Arab Emirates
International Journal of Business Research, Vol. VII, No. 1, 2007, ISSN 1554-5466
Posted: 14 Jun 2005 Last revised: 10 Jul 2013
Date Written: September 22, 2012
This paper investigates the impact of financial structure on firm value in the United Arab Emirates emerging market. Financial statements of a stratified random sample of unlisted food firms are analyzed during period 1996-2000. Empirical results show that debt to equity ratio has no impact on firm value. Furthermore, multiple regression analysis shows that business risk is the most important determinant of debt to equity ratio. It seems that the competitive capital market approach by Modigliani and Miller (1958) is favorable in the United Arab Emirates business environment. This may be due to the absence of any tax shield benefits of using debt and the low value of perceived bankruptcy and agency costs.
Keywords: Financial structure, Firm value, United Arab Emirates
JEL Classification: G32, M40, M41
Suggested Citation: Suggested Citation