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

See all articles by Walaa Elkelish

Walaa Elkelish

University of Sharjah

Andrew P. Marshall

University of Strathclyde - Strathclyde Business School

Date Written: September 22, 2012

Abstract

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

Elkelish, Walaa and Marshall, Andrew P., Financial Structure and Firm Value: Empirical Evidence from the Emerging Market of the United Arab Emirates (September 22, 2012). International Journal of Business Research, Vol. VII, No. 1, 2007, ISSN 1554-5466, Available at SSRN: https://ssrn.com/abstract=741285

Walaa Elkelish (Contact Author)

University of Sharjah ( email )

United Arab Emirates

Andrew P. Marshall

University of Strathclyde - Strathclyde Business School ( email )

100 Cathedral Street
Glasgow G4 0LN
United Kingdom
44 0141 548 3894 (Phone)

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