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The Impact of Managerial Ability and Accounting Conservatism on Capital Structure Dynamics
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Journal Article
The Impact of Managerial Ability and Accounting Conservatism on Capital Structure Dynamics
2025
Overview
This research investigates the dynamic interplay between managerial ability, accounting conservatism, and the speed at which firms adjust their capital structure for firms listed in the Egyptian Stoch Exchange (EGX) for the period 2018 to 2022. The research employs a comprehensive dataset spanning multiple industries and time periods to analyze the impact of managerial ability and accounting conservatism on the speed of capital structure adjustment. The research utilizes a panel data approach and employs various econometric techniques to analyze the data from a sample of publicly listed companies. The research investigates the determinants of capital structure adjustment (SOA) and the roles of managerial ability and accounting conservatism in optimizing corporate financial decisions. The findings indicate that firms adjust their capital structure in response to macroeconomic conditions and firm-specific factors, with leverage from the previous year, company size, growth rate, and non-debt tax shields positively influencing SOA, while profitability and inflation exert negative effects. The estimated baseline SOA is 37.8%. Notably, firms with higher managerial ability exhibit a faster adjustment, increasing SOA to 60.3% (22.5% increase). Similarly, accounting conservatism significantly enhances SOA, raising it to 70.5% (32.7% increase) when measured using Tobin's Q (TQ) and 67.6% (29.8% increase) when measured using the market-to-book ratio (MTB). The combined influence of managerial ability and accounting conservatism further amplifies SOA to 93.1% (55.3% increase) using TQ and 77.4% (39.6% increase) using MTB, underscoring their complementary role in optimizing capital structure adjustments. These findings highlight the importance of integrating firm-specific capabilities and conservative financial policies to enhance corporate financial stability and strategic decision-making.
Publisher
جامعة المنوفية - كلية التجارة
Subject
