A comparative analysis of the impact of Covid-19 and the global financial crisis on capital structure: Evidence from the Johannesburg Stock Exchange

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University of the Witwatersrand, Johannesburg
Since Modigliani and Miller (1958) introduced the modern theory of capital structure, various studies have been conducted on capital structure. This study contributes to the existing capital structure literature by investigating how the Covid-19 pandemic impacted the capital structure of Johannesburg Stock Exchange (JSE) listed non-financial firms and comparing this impact to that of the 2008 global financial crisis. Furthermore, this study seeks to determine the relationship between capital structure and fundamental firm factors (business risk, profitability, firm size, growth, and asset tangibility). To conduct this analysis, the financial data of these firms for the 2005 to 2022 period is extracted from Bloomberg and the Generalized Method of Moments (GMM) model is used to conduct the analysis of this study. The results of this study indicate that Covid-19 did not have a statistically significant impact on the capital structure of the JSE listed non-financial firms whereas, the 2008 global financial crisis had a statistically significant impact. Overall, the results of this study are consistent with the empirical evidence reported by previous studies, and they provide evidence in support of both the trade-off theory and the pecking order theory
A research report submitted in partial fulfillment of the requirements for the degree of Master of Commerce (Finance) to the Faculty of Commerce, Law and Management, School of Accountancy, University of the Witwatersrand, Johannesburg, 2023
Capital structure, Global financial crisis (GFC), Covid-19 pandemic, Capital structure determinant, JSE, UCTD
University of the Witwatersrand, Johannesburg