Abstract
Abstract : The study seeks to investigate the relationship between company capital structure and profitability with special reference to the industrial metals and mining industry of South Africa. Out of the 22 companies listed on the Johannesburg Stock Exchange under the industrial metals and mining industry, 14 companies were selected to be analysed in this study. Secondary data in the form of published financial statements relating to the period 1994 to 2017 of the selected companies was used. The study used return on equity (ROE), net profit margin (NPM), and return on assets (ROA) as proxies for profitability (dependent variables), while short-term to total debt (STDTA) ratio, long term as a ratio of total assets (LTDTA), and the total debt as a ratio of total assets (TTDTA) were used as proxies for capital structure (independent variables). The study employed panel data regression with pooled, random effects and fixed effects regression; however, the fixed effects regression was found to be the most appropriate. The results indicate that short-term debt is statistically insignificant as an independent variable of company profitability. Long-term debt was found to be more significant as a determinant of profitability for companies listed in the industrial metals and mining industry on the JSE. The results of the study show that the profitability of companies listed in the industrial metals and mining industry on the JSE is negatively related to the use of long-term debt over the period 1994 to 2017, implying that an increase in the company’s long-term debt would adversely affect the return of shareholders.
M.Com. (Finance)