A Study on the Banking Industry in Australia and New Zealand

Abstract

The corporate finance decisions in different companies are being influenced by several factors such size of firm, market conditions, cost of capital, and many more. The size of firm is aligned with nature of business, scale of business operations, market value, total assets employed by an organisation, and other. The size of firm is significantly aligned with the efficiency of corporate financing operations. The corporate finance refers to combination of different activities and transactions that are aligned with raising the capital of business entity for the creation, development, expansion and acquisition of businesses. Therefore, this study has aimed “To evaluate the impact of organisation’s size of an organisation on the corporate finance: A study on banking industry within Australia and New Zealand.”. As per the study goals, researcher has adopted the quantitative research methodology in which the firm’s size has been measured with reference to different independent variables such as revenue, profitability, market value of equity, and total assets. However, the leverage or debt capital has considered the dependent variable. In this regard, the application of regression analysis and correlation concludes the acceptance of alternative hypothesis that states that Firm’s size has a direct impact on the financial leverage of banking firm associated with the banking sector of Australia and New Zealand. If you are seeking finance dissertation help, making you understand the relationship between firm size and corporate finance is crucial for your research.

Chapter 1: Introduction

1.1 Overview of Study Topic

The firm size plays a critical role in dealing with various long and short term corporate finance operations that may have direct influence the long term business efficiency and sustainability. The size of firm is aligned with nature of business, scale of business operations, market value, total assets employed by an organisation, and other. The size of firm is significantly aligned with the efficiency of corporate financing operations. The corporate finance refers to combination of different activities and transactions that are aligned with raising the capital of business entity for the creation, development, expansion and acquisition of businesses (Dang and Yang, 2018). It leaves the direct impact on the efficiency of the decision making process that result a variety of financial or monetary implications. It support companies in establishing an appropriate balance between capital market trends and decision making process in different companies. In the context of contemporary business environment, it supports companies in making appropriate corporate decision for ensuring the maximised shareholder’s value. The expansion of business operation in overseas market due to globalisation, has influenced the importance and role of corporate finance in every industry (Nakatani, 2019).

With consideration of size and type of organisations, the management of every company is looking to streamlines their corporate financing related operations for assessing an optimum level of wealth distribution along with the generation of appropriate return on investment. It influences managers for managing different factors in investment and financing decisions that include planning of finances, raising funds, investing operations, and monitoring. Apart from that, corporate finance decisions in different companies are being influenced by several factors such size of firm, market conditions, cost of capital, and many more (Coles, Lemmon and Meschke, 2012). These factors are having direct influence the efficiency and profitability of companies because the corporate finance decisions control the cost of capital along with solvency risk. For maximising the efficiency of business operations along with the generating the high value of returns, the concept of corporate finance assists companies in carrying out detailed comparison of different investment alternatives so as an organisation would be able to select most appropriate investment solution (Eka, 2018). In this context, companies consider different sources of finance or capital to meet the long and short business goals with consideration of cost of capital, risk factors, impact on shareholders’ returns, and others. Therefore, managers have to consider a variety of measures while taking the corporate finance related decisions such as firm size, market value, and others. In this regard, companies with equity share capital have to evaluate dividend decision in the assessment of shareholder’s returns with reference to time duration and amount of investment (Hashmi and Akhtar, 2018). In addition to that, advanced corporate finance related operations covers the development of a wide range of financial strategies and execution of different business policies to manage the corporate planning and resource management.

As a result of change in the market conditions, companies are facing several challenges in their business environment that may have direct impact on the long term business goals and sustainability of managerial operations. In this context, the approach of corporate finance has been addressed the subpart of finance and it supports companies in dealing with sources of finance, promoting the capital restructuring, supporting the accounting practices, and enhancing the effectiveness of investment decisions (Swastika, 2013). Therefore, the role of corporate finance has been enhanced to manage high quality capital investment and financing decisions because this tool pays extra attention on the maximisation of shareholder value with the help of long and short term financial planning along with execution of different business strategies. It covers all critical elements initiated with capital investment to tax consideration that influences the overall profitability and efficiency of management operation to deal with various market opportunities and threats (González and González, 2012). In addition to that, the leverage is being termed as the most important element of corporate finance so as companies use different policies to manage the investment debt capital that maximises the profit and minimises the cost of capital with the optimum utilisation of different tools of investment. Moreover, the firm size plays a most critical role in influencing the different corporate finance related operations because the vision and objectives of companies are significantly influenced by size and nature of companies along with the market trends (Lumapow and Tumiwa, 2017).

For managing the financing operations with reference to various market opportunities and threats, companies apply different tools and strategies of corporate financial operations such as capital budgeting, capital financing and, and assessment of return on capital. The approach of investment and capital budgeting covers a systematic planning in which companies consider different types of long-term capital assets to assess highest-adjusted returns. This assessment supports managers for deciding whether or not they need to consider the particular investment proposal (Amihud and Mendelson, 2012). Therefore, the management considers a variety of financing accounting tools such as evaluation of total investment of company in new assets or capital expenditure, assessment of future cash flows, cost of capital and many more so as an appropriate comparison of different investment proposals would select the top management in selection of the most profitable investment options. The selection of investment options is also carried with reference to existing size of firm, nature of business, revenue generation capabilities of existing business operations and others. Moreover, the corporate finance operations have been found very effective for performing the financial modelling to estimate the economic impact of an investment opportunity by evaluating the internal rate of return, net present value and others elements of different elements (Ibhagui and Olokoyo, 2018). These factors also influence the financing decisions of companies because the high rate of return could influence the management to select costly or high risky sources of debt finance.

In addition to that, the capital financing is being termed as the core activity of corporate finance in which management takes a variety of decisions such as the selection of the most optimally finance for the capital investments with consideration of the business’ equity, debt, or a mix of both. Long-term funding for major capital expenditures or investments is mainly obtained by selling company stocks or issuing debt securities with the help of investment banks. In this context, size of firm has been addressed as key element that determines an organisation’s capabilities to raise the funds for various long and short term business requirements (Kurshev and Strebulaev, 2015). In this context, the corporate financing operations help management for managing an appropriate balance in the two sources of funding. This is because the consideration of too much debt may increase the risk of default in repayment or solvency risk, while the increased dependence on the equity capital may dilute earnings and value for original investors. Overall, manager working in the corporate finance professionals are always focusing to optimize the company’s capital structure by lowering its Weighted Average Cost of Capital (WACC) with reference to existing business capabilities and size (Pattiruhu and PAAIS, 2020).

1.2 Purpose of Investigation

In the context of contemporary business environment, the size of a firm plays an important role in evaluating the efficiency of business operations and relationship of the management that enjoys by an organisation within and outside its operating or business environment because the operational capabilities of companies are having direct impact on the long term sustainability of company (Kim, Lin and Chen, 2016). Therefore, a large firm is having a significant influence over its various internal and external stakeholders. In addition to that, the growing influences of different kinds of conglomerates along with the multinational corporations within the global economy have enhanced the importance of size within the corporate environment. By refocusing on the importance of size towards the corporate discourse, the economic growth of an organisation is aligned with the size of existing organizations. In this context, the size of firm also encourages long and short term business finance and investment decision that are aligned with corporate finance related operations (García-Meca, López-Iturriaga and Tejerina-Gaite, 2017). In this context, several past studies have examined the implications of organizational/firm size on different kinds of outcomes that are aligned with the different fields of organizational management that include executive compensation, innovation and development in companies, application of organizational change, change in the functional complexity, hiring practices, and corporate social responsibility. However, this investigation is aimed to present a distinct approach by assessing the relationship between firm size and corporate finance (Siahaan, 2014). In the context of corporate finance, several factors are identified that are having huge implications on the efficiency of the business operations and long term business sustainability such as capital structure, financial policy and investment strategy, selection of dividend policy, assessment of the leverage position, expansion rate in the form of merger and acquisition. Therefore, the purpose of current study is aligned to deal with contemporary business challenges in financing operations so as researcher has focused to assess the relationship between the firm’s size and leverage (Doğan, 2013). The main reason behind consideration of leverage as an important element of corporate finance was that leverage or usages of debt capital in companies affects the solvency risk, cost of capital, earnings, and firm’s value. Moreover, it plays a critical role in future business decisions related to capital structure, expansion of business with debt capital, identification of new sources of finance, assessment of cost of capital, and many more. In this regard, the firm’s size is being termed as key area of concern in making the financing or fund raising decisions through debt capital.

1.3 Research Problem

In the context of contemporary business environment, various global and domestic factors have incorporated several challenges for the banking industry in Australia that may have adverse impact on the sustainability of banking firms. The evaluation of the contemporary trends in the banking sector New Zealand and Australia has determined that banks in Australia operates with high value of leverage capital as compared to other countries (Rao, Tilt and Lester, 2012). In this regard, different factors such as organisational size, business policies, expansion decisions, and others have influenced the requirements of funds among banking firms. However, the increase in the borrowing cost in New Zealand and Australia influences the cost of funds. Moreover, the reliance of the big banks on foreign sources for their wholesale funding has been reduced but it still accounts for more than half of total wholesale funding of banking firm. In addition to that, the size of banking firms is having direct influence over the capital structure because the larger companies are having more capabilities to raise capital from the different sources of finance and it also influence the leverage value of companies (Dang and Yang, 2018). However, the easy access of debt capital also influences companies having small size to assess more funds but small companies are facing some issues in mobilisation of extra debt capital to profitable investment opportunities that could influence the solvency risk. In this regard, the size of companies determines their companies to mobile debt capital in profitable investment options. Therefore, the current study has tried to assess the influence the firm’s size on the corporate financing operations. The rationale behind consideration of area of current investigation was that past studies have paid extra attention on the firm’s size, business profitability and capital structure. However, the present investigation has focused to fill the gap identified the past studies by determining the influence of firm’s size over the corporate finance with consideration of leverage position of banking firms.

1.4 Significance of Study

In the context of current investigation, researcher has tried to evaluate the impact of organisation’s size of an organisation on the corporate finance with reference to the banking industry within Australia and New Zealand. For determining the firm size, different studies have determined different measures such as total revenue, total assets, market value of equity capital, profitability and others; these variables are acted as the independent variable, whereas corporate finance refers with leverage of company that would be acted as dependent variable (Nakatani, 2019). Therefore, findings of current study will be found very useful to lending institutions and management banking firm. This is because the current investigation would examine the significant impact of different measures of firm’s size over the leverage position so as this information assists the management of banking and other investment in managing a variety decisions related to corporate finance. It supports companies in maintaining an appropriate balance between organisational capabilities and the amount of debt capital in capital structure that may influence the overall business profitability and lowering the risk to investors (Coles, Lemmon and Meschke, 2012). In addition to that, research findings would be found very useful to manager for developing appropriate strategic plan with consideration of long and short term investment projects that may leave positive impact on the firm’s size along with the revenue generation capabilities of different companies.

1.5 Research Aim and Objectives

Aim

The aim of current study is “To evaluate the impact of organisation’s size of an organisation on the corporate finance: A study on banking industry within Australia and New Zealand.”

Objectives

As per the study aim, researcher considered below mentioned objective to achieve the study goals in an efficient manner:

To evaluate different elements that determines the firm’s size.

To examine key aspects of corporate finance related operations in different companies

To investigate the role of corporate finance in capital structure decisions

To assess the impact of revenue on the financial leverage of banks operating within the banking sector of Australia and New Zealand

To evaluate the impact of total assets on the financial leverage of banking firm operating within the banking sector of Australia and New Zealand

To assess influence of market value of equity on the financial leverage of banking companies that operating within the banking sector of Australia and New Zealand

To identify the impact of profitability on the financial leverage of banking companies that operating within the banking sector of Australia and New Zealand

1.6 Research Question

For supporting the data collection process to meet the study objectives, researcher questions assist researcher in consideration of different types of variables to assess the key areas of a systematic assessment. In the context of present investigation, research questions are listed below:

1. What are different elements that are used to evaluate the firm’s size?
2. What are the most critical elements that are considered by manager in dealing with the corporate finance related operations?
3. How does corporate finance influence the capital structure decisions of different companies?
4. How does the revenue influence the financial leverage of banking companies related to the banking sector of Australia and New Zealand?
5. What is the significant relationship between total assets and the financial leverage of banking firm working in the banking sector of Australia and New Zealand?
6. What is the significant relationship between the market value of equity and financial leverage of banking companies that operating within the banking sector of Australia and New Zealand?
7. How does the profitability affect the financial leverage of banking companies associated with the banking sector Australia and New Zealand?

1.5 Overview of Research Methodology and Report Structure

Research Methodology and Research hypothesis

With reference to nature of current study, researcher examines a variety of information to generate the useful findings in relation to study goals with the help of quantitative research methodology in which researcher uses a variety of secondary data associated with the financial performance of different banking firms. In this context, researcher applies different statistical tools to evaluate the relationship among different variables (Hashmi and Akhtar, 2018). For the application of research methodology, the hypothesis development is being termed as the most critical aspect of a systematic investigation. This is because hypothesis is worked as pre-framed outcomes or assumptions that could be examined or tested for attainment of study goals in an efficient manner. In the context of present investigation, hypothesis is determined below:

H0: There is not significant impact of the firm’s size on the financial leverage of banking firms associated with the banking sector of Australia and New Zealand.

H1: There is significant impact of the firm’s size on the financial leverage of banking firm associated with the banking sector of Australia and New Zealand.

With reference nature of data and study objectives, researcher has adopted linear regression model for assessing the relationship between the independent and independent variables.

Methodology 1

DV- Leverage

IV1- Total Revenue

H02: There is not significant impact of the Total Revenue on the financial leverage of banking firm associated with the banking sector of Australia and New Zealand.

H2: There is significant impact of the Total Revenue on the financial leverage of banking firm associated with the banking sector of Australia and New Zealand

Methodology 2

DV- Leverage

IV2- Total Assets

H03: There is not significant impact of the Total Assets on the financial leverage of banking firm associated with the banking sector of Australia and New Zealand.

H3: There is significant impact of the Total Assets on the financial leverage of banking firm associated with the banking sector of Australia and New Zealand

Methodology 3

DV- Leverage

IV3- Market Value of Equity Capital

H04: There is not significant impact of the Market Value of Equity Capital on the financial leverage of banking firm associated with the banking sector of Australia and New Zealand.

H4: There is significant impact of the Market Value of Equity Capital on the financial leverage of banking firm associated with the banking sector of Australia and New Zealand

Methodology 4

DV- Leverage

IV4- Net Income

H04: There is not significant impact of the Net Income on the financial leverage of banking firm associated with the banking sector of Australia and New Zealand.

H4: There is significant impact of the Net Income on the financial leverage of banking firm associated with the banking sector of Australia and New Zealand.

Structure of Report

As per the nature of investigation, this report contains the five different sections that covers different elements i.e. introduction, literature review, research methodology, results and summary of finding, and conclusion and recommendation. The section is termed as Introduction that provides a brief overview of whole investigation because it contains the background, research problem, significance of research, aim and objective, and report structure. This part determines critical variables and elements that are considered by as key areas of investigation. The second section is termed as the Literature Review. In this part, researcher carries out a detailed assessment of different theories and approaches aligned with firm’s size, capital structure, corporate finance and others for assessing the in-depth understanding about the subject the areas of investigation (Swastika, 2013). In this context, researcher considers different secondary sources of information such as findings of past studies, articles of different scholars, online book and other sources. The next section is known as Research Methodology that determines a comparison and evaluation of different research tools and tactics to select an appropriate combination of different research approaches for the selection of the most appropriate research methodology. As per the nature of current investigation, the researcher has considered the secondary sources of information along with various other approaches aligned with quantitative research methodology (González and González, 2012). The fourth section is termed as Results and Summary of findings in which researcher presents the findings of linear regression and descriptive statistics to test the hypothesis for determining the implications of firm’s size on the leverage position of banking firms related to Australia and New Zealand. The last section of this report presents the Conclusion and Recommendation that covers findings of current investigation with reference to study objectives. In this section, researcher offers some recommendations through which companies banking companies could influence the efficiency of business operations with reference to firm size and leverage.

Chapter 2: Literature Review

2.1 Introduction

The section of literature review seems a great tool through which an investigator would be able to assess an in-depth understanding about key areas of investigation. In this context of present investigation, researcher has focused to evaluate the impact of organisation’s size of an organisation on the corporate finance with reference to banking industry within Australia and New Zealand (Lumapow and Tumiwa, 2017). In this regards, researcher considered a variety of sources of secondary data such as online journals and books to assess the findings of past studies and views of different scholars to support the statistical analysis. Moreover, this section also examines different reports and online articles to evaluate different variables of capital structure such as firm’s size, sales and leverage. With reference to study objectives, this part carries out detailed evaluation of different theories associated with firm’s size and corporate finance (Amihud and Mendelson, 2012). This section determines the relationship among different critical variables that are used to meet study objective such as total sales, total assets, leverage, profitability, and market value of company that are playing a critical in influencing the efficiency of business operations.

2.2 Firm Size and its Measures

Ibhagui and Olokoyo (2018) stated that the firm’s size determines the scale or volume of operations turned out by a single firm. The study of the size of a business is being termed as an important corporate planning and financial decision making. It may have direct impact on the long term efficiency and sustainability along with fund raising capabilities. In the context of firm’s size, Kurshev and Strebulaev (2015) determined the amount of capital invested is being termed as an important measure of firm size. However, companies face some issues in assessing the accurate data about the capitalisation that may have direct impact on the efficiency of capital financing decisions. Apart from that the capital invested has been emerged as important indicator of capital. It assists manager in selection of an appropriate capital structure with reference to distinct business requirements. Furthermore, Pattiruhu (2020) stated that the value of total assets is being termed as an important indicator of firm’s size because this value presents an organisation’s investment within the current and non-current assets that are having direct impact on the operational capabilities of companies. The value of assets assists manager in evaluating the overall value of total investment that has been made by an organisation in different business operations to handle long and short term business requirements (Lumapow and Tumiwa, 2017). Therefore, total assets value has been perceived as an important indicator that provides accurate information about the level of capital expenditure. In this regard, Amihud and Mendelson (2012) argued that total assets also determines the combination of availability of working capital and investment in fixed assets that may have significant influence over the long term financing and investment decisions.

Moreover, the investigation of Kurshev and Strebulaev (2015) addressed that total monetary value of an organisation’s sales or total revenue presents the efficiency of business operations and capital investment made by an organisation so as the value of total revenue can be presented as the firm’s size that may have direct impact on the efficiency of business operations along with the long term organisational sustainability. In the context of corporate finance operations, the value of company’s revenue is being termed as an important element that influences financing decisions in different companies (Dang, Li and Yang, 2018). Hashmi and Naz (2020) argued that the monetary value of all the products of an organisation is also assisted the management in evaluating the overall value of firm. This is because the business entity the increase in value of product during the economic boom influences the overall value of company because the market value of different products and services may have direct impact on the efficiency of business operations along with firm value. In addition to that, the volume of output is being termed as the most appropriate in assessing the overall size of an organisation (Nakatani, 2019). Therefore, the production quantity is being termed as an important indicator firm’s size. The volume of production determines the production capacity of plant that is used to determine the firm’s size.

As per the study of Siahaan (2014), it found that the size of the firm is being termed as one of the most decisive factors in achieving the maximum efficiency within different business operations. In the context of contemporary business environment, the large-scale production is being considered as the most important approach for bringing the high level of economic results because it would support companies in lowering the productions costs and increasing the overall profitability of an organisation. Therefore, there has been a tendency among companies in which they are tried to increase the size of the industrial or production units for achieving the goals of the mass production along with the bulk sales in different markets (Hashmi and Akhtar, 2018). Therefore, organisation capacity has been addressed as an important indicator of firm size. In this regard, Humphery-Jenner and Powell (2014) stated that firms of different sizes have been adopted different measure and identifying new approaches for expanding their business resources and business potential with reference to different market challenges and opportunities. However, all types of organisation are not able to operate with an equal efficiency (Drempetic, Klein and Zwergel, 2020). Therefore, different economists stated that the problem of size must be viewed from the point of costs in relation with the expected returns with consideration of total value of investment made by an organisation. The investigation of Lumapow and Tumiwa (2017) determined that there has been a generally accepted norm is identified in the context of modern economic analysis in which the expansion of the business has been perceived as key driver for lowering the overall production cost. Therefore, all firms are always focusing for expanding their scale of operations through companies would be able to spread the business expenditure over larger output. However, Ibhagui and Olokoyo (2018) argued that growth in the business operation or expansion of business capabilities must be aligned with reference to business profitability because the management should have to ensure to manage the business expansion in such manner with consideration of the adverse effect on its profitability. This is because the high level of business expansion and growth beyond a particular limit may increase the chances of the decreasing returns per unit on the investment as result of the managerial along other financial strains that is also called as the model limit (MALIK and et.al., 2021).

The research of Arnegger and Vetter (2014) determined several factors that are having a significant influence over the size of an organisation and it may have a significant influence over the financing decisions of an organisation. In this context, the Nature of Industry is being termed as the most critical element of in the business planning that may have a significant impact on size of an organisation because manufacturing industries are having a large infrastructure and size as compared to companies that are operating in the trading and service industry. This is because manufacturing industries are involved in the production of the heavy machinery, producing a variety of goods over a large scale, making higher capital investments that influence the size of an organisation so as the nature of industry plays a critical role in influencing the size of an organisation (Arnegger, Pull and Vetter, 2014). However, Harisa, Mohamad and Meutia (2019) argued that the Nature of Products has addressed the most critical element that influences the firm’s size. This is because when the product portfolio of a company seems less standardized then the size of the firm is often found the small when the product is standardized, complex, along with durable that may change the perception of people and it could also indicate the larger size of an organisation. In addition to that, the total value of capital employed has been identified as key indicator of the firm’s size because when the total value capital employed is high and the firm can use it for supporting the business expansion whereas small companies also contain the low value of investment in the form of capital employed (Kurshev and Strebulaev, 2015). In addition to that, Ali, Khurshid and Mahmood (2015) argued that the size of the market plays an important role in influencing the size of an organisation if the size of the market seems large for the particular product and service then an organisation would find extra opportunities for the business expansion and identification of new sources of finance. In similar way, the Quality of management is being termed as an important element that influences the firm’s size. In this regard, the competence along with the integrity of management has direct impact over the size of a business unit. It plays a critical role in managing the business expansion decision and handling the long term financial planning (Olawale, Ilo and Lawal, 2017). Moreover, if the management follows an appropriate competence for managing the complex tasks of modern business that are mainly managed by the large business organisations then the efficiency of the management has direct impact over the efficiency and size of the business operations.

As per the investigation of Olawale, Ilo, and Lawal (2017), the Signaling Theory found effective in evaluating different measures of firm’s size and other related variables. In this regards, the signaling theory states that there is information asymmetry or information mismatch between internal organisational structure with external users of financial statements that are termed as the stakeholders of the business entity. In this context, signaling theory determines that why companies are paying the huge attention for providing the financial statement information to external parties that include government agencies, investors and lenders (Mule, Mukras and Nzioka, 2015). This is because the disclosure of information incorporated by organisation within the financial statements assists the investors and potential lender for making an appropriate analysis of financial to manage their investment in within an organisation so as people can change their views about the company's financial performance. Coles and Li (2019) argued that the disclosure of information carried out by company managers can give signals to users of financial statements so that accurate information is very important in the process of making investment decisions or providing loans by external parties and other stakeholder. With consideration of different theoretical aspect of signaling theory, it has been perceived that the user of the financial statement would be able to assess the accurate information about the capital structure, size and profitability that would reduce the problem associated with the information asymmetry (Wei, Xu and Zeng, 2017). The investigation of Dang, Ngo and Hoang (2019), the assessment of size of an organisation can be carried out with consideration of debt-to-equity-ratio because it supports different stakeholders in assessing the quality of an organisation’s capital. In this context, the addition of more debt by companies within the company's capital structure can be considered as an appropriate signal of higher expected future cash flows. This is because the company could provide appropriate commitments lenders for meeting interest payments with reference to distinct requirements of the debt holders and managing the remaining cash flow in a more efficient manner (Tunyi, 2019). Lerner and Seru (2017) stated that investors perceive the debt issuance as a better signal as compared to the issuance of ordinary shares for raising funds because the issuance of share by an organisation could be emerged as overvalued solution for investors. In this regard, the greater the size of an organisation will give an appropriate signal that shows that financial performance is improving systematically at a reliable growth rate (Mitton, 2020). Moreover, Signaling theory also explains that the size plays a critical role in influencing the perception of stakeholders because it enhances an organisation’s capabilities for attaining different types of financing requirements.

2.3 Assessment of corporate finance and finance leverage

Erel, Jang and Weisbach (2020) asserted that the corporate finance is being termed as the subfield of finance that is dealing with different financing operations such as assessment of sources of funds, capital structuring, and application of a variety of investment decisions. It provides a great support in maximization of the shareholder’s value with consideration of the long and short-term financial planning along with the implementation of various business strategies. Corporate finance activities are being executed from a range from capital investment operations to manage the tax considerations (Lawrenz and Oberndorfer, 2018). The financing operations of an organisation are significantly influenced by several critical elements such as cost of capital, availability of finance, requirements of funds.

For attainment of distinct financing needs, companies raise financial capital by issuing the debt securities or by selling common stocks. In this context, financial leverage is being termed as the most critical to meet the financing needs of an organisation (Vithessonthi and Tongurai, 2015). The investigation of Dewally and Shao (2014) determined that financial leverage is being extent to which fixed-income securities along with the preferred stock that are used by companies in dealing with the capital structure. Financial leverage has been valued with consideration of different interest tax shield with reference to income tax law. Moreover, the usage of financial leverage is also valued with consideration of total value of the assets that are purchased with consideration of the debt capital and it would offer the higher return with reference to total cost of financing (Gabaix, Landier and Sauvagnat, 2014). The research of Shen, Firth and Poon (2016) determined that the application of financial leverage may increase the company’s profits. Moreover, the leverage decisions are aligned with the usage of debt for undertaking an investment or acquisition of new projects. The result has focused to multiply the potential returns from a variety of investment options. At the same time, leverage would be found very effective for multiplying the potential downside risk when an investment would not attain the desirable objectives (Silva, 2019). In the context of contemporary business operations, when a property or investment is termed as the "highly leveraged’ that shows the high value of debt capital in relation to equity capital of an organisation.

Błach (2020) argued that the concept of leverage is also being used by both investors and management of different companies. Investors consider the leverage for assessing a significant increase in the company’s returns that can be aligned with the investments of an organisation. They lever their investments by using various instruments, including options, futures, and margin accounts. Companies are also using the leverage to achieve the financing needs for the acquisition of a variety of assets because companies use debt financing to manage a significant investment in the business operations instead of the application of share capital to raise capital (Butt, 2016). This thing plays a critical role for increasing the shareholder value. Hatem (2014) argued that a company’s capital structure is a crucial tool that can use to maximize the value of the business. It determines an appropriate structure that can be emerged as an important combination of long-term and short-term debt along with the preferred equity. The ratio between a firm’s liabilities along with its equity values has been found very effective for determining the value of risk factor in capital financing with reference balance between the debt and equity capital. In addition to that, a company that is highly dependent on the debt capital is being considered as an aggressive capital structure that contains the more risk for stakeholders (Raza and Karim, 2016). Moreover, this risk plays a critical role in the strategic planning for managing different risk factors.

As per the research of Garicano, Lelarge and Van Reenen (2016), it determined that the financial leverage is having a significant influence over the level along with the variability of the organisation’s after tax earnings that may have direct impact on the firm's overall risk and return. The concept of the operating leverage is significantly depending on the fixed operating costs and it may have direct influence over the higher operating risk of the firm. Baltacı and Ayaydın (2014) argued that high operating leverage is good when the sales are rising but it could be termed as a risky tool when companies are addressing the downfall in the sale volume. Bhagat and Bolton (2019) stated that the total assets along with the sale turnover are commonly considered as substitutes for determining the size of organisation. With the help of debt capital, larger companies are not only enjoying a higher turnover with the help of increased profit generation capabilities and but also it is also generating the higher income to stakeholders. This is because large companies are having the better access to capital markets and it would support manager in lowering the total cost of borrowing. In addition to that, large firms are more likely to handle short term debt along with the working capital requirements to manage their working capitals in more efficient manner as compared to the small firms (Nawaiseh, Boa and El-shohnah, 2015). In addition to that, most of the large firms are also enjoying the economies of scale that would support companies in minimizing their costs and increment in the profitability of the business operations.

2.4 Evaluation of different elements that influence the capital structure and corporate financing operations

As per the research of Ehrhardt and Brigham, 2016), it has addressed a firm’s capital structure can be evaluated as the proportion of the debt-to-equity. With reference to contemporary business environment, companies consider different sources of finance that can be categorised in the form of debt and equity capital that are used to manage a variety of financial needs such as expansion of the business, managing the capital expenditures, acquisitions of assets and inventories, and managing various short term or long-term investments. Vo and Nguyen (2014) stated that tradeoffs firms have to determine the requirements and usage of debt or equity to deal with different finance operations, and managers should have to maintain an appropriate balance in the two types of capital sources for assessing the optimal capital structure. For optimizing the capital structure in an organisation, a firm can consider either more debt or equity with consideration of different elements of cost of capital (Setiadharma and Machali, 2017). In the context of capital structure planning, the new capital that’s acquired by an organisation may be used for managing the investment in new assets or organisation may also consider the funds for managing the repurchase of the debt/equity that’s currently outstanding in the form of recapitalization.

On the other hand, the research of Frijns, Dodd and Cimerova (2016) determined that the minimisation of cost of capital has been perceived as the most critical task for the corporate financing operations. In addition to that, a sound capital structure of any business enterprise has found highly effective for maximising the shareholders’ wealth by paying extra attention on the minimisation of the overall cost of capital. In this regard, companies pay huge attention on debt capital or leverage to meet distinct financing requirements. In the context of contemporary business environment, companies are focusing to adopt the long-term debt capital within the capital structure so as they would be able to achieve the cost control objectives (Frijns, Dodd and Cimerova, 2016). In the context of larger firm, companies find more operational capabilities to manage the large proportion of debt capital within the overall capital structure of an organisation. This is because the cost of debt capital is lower than the cost of equity or preference share capital so as companies could manage tax benefits that may have substantial implications on funding operation. Moreover, the research of Ibhagui and Olokoyo (2018) determined that that the capital structure assists manager in managing the solvency risk or liquidity position. This is because the liquidity management has been perceived as an important determinant of the corporate financing decisions. In this regard, Kurshev and Strebulaev (2015) argued that a sound capital structure never allows an organisation for increasing the debt capital in high value because the emergence of poor economic condition of business may influences distribution of solvency in which the solvency would be disturbed for the compulsory payment of interest to the debt-supplier. By managing the risk of solvency, the firm size has been perceived as an important variable to determine the efficiency of financing practices (Pattiruhu, 2020).

2.5 Key variables consider in corporate financing operations

In this context of different studies, there have been different variables identified which are playing a critical role in supporting the corporate financing operations. In this regards, Ibhagui and Olokoyo (2018) stated that the capital budgeting is being termed as the most critical variable of corporate financing operations. This approach is used by investor when an organisation is planning for the long-term investment for different business objectives such as replacement of old machinery, acquisition of new machines and equipment, managing the investment in new plants, development of new products, establishing research and development operations and others. In this context, the concept of capital budgeting has been found very useful to evaluate the worth of funding of cash through the capital structure of an organisation within different investment options (Lumapow and Tumiwa, 2017). Amihud and Mendelson (2012) stated that concept of capital budgeting assists managers in evaluating the cost of capital for different investment proposal, value of return, appropriateness of different sources of finance, payback period and many more. Therefore, it is considered as the most appropriate in profit estimation through investment planning and resource management. Moreover, it assists managers in determining the requirements of funds to meet of funding requirements of different investment projects (Kurshev and Strebulaev, 2015).

The investigation of Hashmi and Naz (2020) determined that the primary target of every organisation to maximise the shareholder’s value with optimum investment and profit planning. In this context, the selections of capital structure and managing the solvency risk have been termed as key elements of strategic decision making process. Siahaan (2014) stated that financial management has the major goal of increasing the shareholder value. In this regard, the corporate finance managers are focused to maintain the balance between the investments in different types of projects that would support companies for increasing the firm’s profitability as well as sustainability. In addition to that, the regular payment of dividend is also considered as an important tool that is used by companies to maximise the value of shareholders. In this context, companies have to pay huge attention on the efficiency of capital structure, sources of finance, cost of capital and returns to maintain the stable business growth at minimal cost (Nakatani, 2019). Furthermore, the investigation of Humphery-Jenner and Powell (2014) determined that companies have a variety of resources and surplus cash through which managers manage the business expansion by investing the additional resources within different investment proposals. In this context, the corporate financing operations assist managers for conducting the proper analysis of capital structure and cost of debt financing for determining the appropriate allocation of the firm’s capital resources and cash surplus that could enhance the business profitability and dividend payment capabilities (Drempetic, Klein and Zwergel, 2020).

The investigation of Lumapow and Tumiwa (2017) was focused to evaluate the relationship between the return on investment and corporate financing practices in which researcher found that every organisation should have to pay a significant attention on the returns on investment in the financial planning and selection of sources of capital. In the of corporate finance theory, an organisation has to manage a significant investment in different assets for yielding an appropriation of the value to organisation. In addition to that, the return on investment is being termed as an appropriate approach for measuring the returns earned with reference to total value of invested capital. Therefore, return on investment is being termed as key driver of corporate financing operations because it will assist manager in evaluating the profit generation capabilities of an investment proposal along with its role to enhance the overall value of business entity (Arnegger, Pull and Vetter, 2014).

In similar way, the research of Ibhagui and Olokoyo (2018) was aimed to evaluate the corporate financing operations to manage the merger and acquisition in which researcher found the leveraged buyout (LBO) as the most critical concept of capital structure planning. It plays a critical role in stimulating the lending decisions among companies in which LBO can be applied in different forms such as Management Buy-in, Management Buy-out, Secondary Buyout and tertiary buyout. Overall, these elements have been found very effective to support the financial planning and investment management practices. However, Arnegger and Vetter (2014) stated that the assessment of leveraged buyout (LBO) has been found a very difficult task for performing the merger and acquisition in the small companies. Apart from that, it seems a great tool to support the investment planning with consideration of debt capital. Moreover, it would enhance of corporate financing operations with reference to contemporary trends in the business environment.

The research of Harisa, Mohamad and Meutia (2019) perceived the growth stock as an important variable of corporate financing operations and it plays a critical role in financial and investment planning. A growth stock has been termed as those stocks that generate positive cash flow and its revenue are increasing in more rapidly as compared to industry average. In the context of financial planning and resource management, the growth stock plays a critical role in enhancing the effectiveness of corporate financing operations with reference to long and short terms strategic goals (Kurshev and Strebulaev, 2015). Furthermore, Ali, Khurshid and Mahmood (2015) stated that the growth stock seems a great to estimate the future business profitability along with average rate of returns. It may leave substantial implications over the investment flow and resource management. Apart from that, the investigation of Coles and Li (2019) determined that efficient-market hypothesis has been termed as an important aspect of corporate financing practices. This is because the efficient market hypothesis determines that the financial markets are efficient in terms of information flow. It determines three types of hypothesis such as weak, semi-strong and strong that would support the management in investment management and selection of sources of finance to meet the long and short term strategic requirements in an efficient manner (Mule, Mukras and Nzioka, 2015). In this regard, scholar further stated that the ‘weak form’ determines that that the prices on traded assets are being termed as important reflection of all types of past publicly available information about the organisation. Moreover, ‘semi-strong form’ reflects that all types of publicly available information of companies and new information may influence the instant change in the prices of stocks. The ‘Strong form’ presents the instant reflection in the prices even the occurrence of the hidden information. Therefore, the term efficient market hypothesis may leave substantial implication on the long term financial planning and resource management (Wei, Xu and Zeng, 2017).

2.6 Theoretical assessment of corporate financing operations

The investigation of Arnold (2012) determined a systematic comparison of different theories based on the linkages between capital structure and the firm’s strategy that are playing a critical role in the corporate financing operations. In this context, researcher found two classes of models which pay extra attention on the structure of capital in which different determinants of the firm’s organisation along with the industrial strategy are having a significant influence over the corporate financing decisions. In this context, the first model evaluates the relationship between capital structure of an organisation along with its growth strategy on the market for goods and services that are having a significant influence over the efficiency of the corporate financing decisions (Gong, 2020). In the context of the second model, investigator presented the usage of the relationship between capital structure along with the different characteristics of inputs as well as the outputs within the production process. However, Agrawal and Matsa (2013) argued that the grounded approach influences the debt over strategic variables and it encourages the managers for developing appropriate relationships between suppliers as well as consumers. In the context of production operation, key strategic variables include price, quantity and others. In the context of corporate financing operation, the business strategy of the firm is being established in such manner that may influence the attitude of competitors along with effectiveness of corporate financing decisions.

Moreover, Demirci, Huang and Sialm (2019) stated that the capital structure affects the appropriateness of the business strategy along with the performance of any business for attainment of the market equilibrium. With consideration of different characteristics of the production process, the capital structure or corporate financing decisions may have significant influence over the availability of a particular product or service and it also affects the bargaining process between managers and suppliers. In this regard, the investigation of Vo (2019) determined that the oligopolies are tempted companies for taking on more debt as compared to monopolies within highly competitive market trends. Scholar further identified that the debt tends to be long term in the corporate financing practices. Further assessment of different theories of corporate finance assisted researcher for assessing different tactics of the collusion that influences the reduction of debt along with the debt capacities that may be aligned with the elasticity of demand. In the context of a theoretical standpoint, Ting and Azizan (2016) evaluated the models based on organisational along with the industrial considerations that disclosed the highly interesting findings about the selection of the capital structure and corporate financing operations. These models have been found very effective in describing the links between capital structure and characteristics of corporate financing operations that are mainly influenced by the market demand and competition level in particular sector or industry. In this regards, the different theories that are linking an organisation’s capital structure and factor-product markets have incorporated or determined the new dimensions in the research and a systematic evaluation has found the increased the role of the non-financial stakeholders in designing different types of corporate finance structure (Dwenger and Steiner, 2014). These elements are playing an important in corporate financing decision in different types of industrial organisation along with their firms’ strategic management. Moreover, Saeed, Belghitar and Clark (2015) highlighted the existence of mutual influences that are identified between production factors along with the corporate financial decisions in which industrial concentration and competition policy are being termed as the most critical component of financing decisions to influence the organisational sustainability.

The research of Harjoto (2017) was focused to conduct theoretical research in the field of corporate financing operations and found that companies have recorded several conflicts of interest not only between with internal stakeholders but also between outside agents that may have a significant influence over the management decisions about the long term financial planning and investment management. Norden and van Kampen (2013) argued that only a few of the theoretical formulations have been empirically examined different theories of corporate finances. Moreover, direct testing of different theories has been found difficult task because it has found a very difficult task for establishing the relationship among different variables. For example, the assessment of changes in the area of competition that were being influenced by a firm’s financing decisions. Moreover, different studies presented different assumptions related to the time duration, scope and conesquences of macroeconomic shocks that cannot be anticipated by market participants in an appropriate manner (Chen, Sensini and Vazquez, 2021). In this regard, Hamrouni, Boussaada and Toumi (2019) analysed the sensitivity of sales or revenue increases with reference to the changes in leverage value of different industries and concluded that the financial structure may have a significant influence over the firm’s performance in the context of the product markets because the selection of financing methods affect the firms’ competitive capacity within the highly competitive market trends. Moreover, different theories based on the relationships between firms’ capital structure along with the market for corporate control have determined a significant influence of the capital structure over the takeover activity within the financial planning and expansion decisions. Kalantonis, Kallandranis and Sotiropoulos (2021) stated that the incumbent managers can manipulate a public bid in the context of corporate financing operations that may have direct impact on the probability of success while performing business takeover bid that is mainly influenced by the equity stake that hold by an organisation. To the extent that the top management of the acquiring firm and of the target firm have maintained different competences so as the value of the firm is dependent on the level of resistance by the incumbent manager in response to different attempts of takeover (Chen, Sensini and Vazquez, 2021). Therefore, corporate financing operations are being influenced by several factors.

2.7 Contemporary trends in banking sector and recent changes in banking industry of Australia and New Zealand that influence corporate finance related decision

As per the investigation of Lumapow and Tumiwa (2017), there have been several changes identified in banking market capacity along with its structure with reference to change in market conditions and government regulation. In this regard, financial and other crisis reported the huge implications on the strong growth rate among companies or banking firms that are associated with the banking sector in different advanced economies. In this regard, several capacity metrics point or performance indicators have reported huge shrink in the wealth and operational capabilities of banking sectors during the crisis Therefore, banking firms have incorporated various adjustments to manage their market position so as companies have restructured the business operations (U-Din, Tripe and Kabir, 2017). For example, reduction in business volumes or change in the capital structure rather than assessing exit from the particular market.

Murray (2017) argued that the banking sectors have reported a significant expansion and growth in countries that were being less affected by the crisis, that include mainly emerging market economies (EMEs). Therefore, concentration within the banking systems has influenced several changes in the business model that also affects the corporate financing operations. In this context, the research of Ruming and Baker (2021) determined that the shifting in the bank business models has been considered as the most important element that influences financing decisions among banking firms in all over the word. This is because banking firms related to advanced economy have a tendency in order to reorient their business away from the complex business operations and organisational procedures, towards the less capital-intensive activities that cover different aspects of commercial banking operations. This approach leaves the huge implications on the banks’ asset portfolios along with several other factors that include revenue mix along with the increased reliance on customer’s deposit (Mayes, 2015). In this context, the Large banking firms associated with the European and US markets have also become more selective and paid extra attention on their international banking practices so as the banking sector companies related to the large EMEs addressed less negative consequences of the financial crisis even these organisation have expanded internationally. Moreover, Boxall, Bainbridge and Frenkel (2018) determined that the evaluation of different trends in bank performance in different countries has recorded a significant decline within the bank’s profitability and business model. In this regard, the lower value of leverage determined by regulatory reforms was being termed as key element of the decline in the business profitability. Moreover, many advanced economy banks are facing several issues related to revenues and cost management so as these companies have already taken several measures for cutting the business expenditure including the legacy costs associated with past investment decisions, along with change in the capital structure that may have direct impact on the firm size and corporate financing operations (Murray, 2017).

Willis, Carryer and Henderson (2017) stated that the main findings associated with the post-crisis are aligned with the structural change in banking operations along with capital structure through which banking firms would be able to assess the stability in the three critical area of the banking sector i.e. Bank resilience and risk-taking; assessment of the market sentiment and future bank profitability; and evaluation of the system-wide effects. In the context of first element, banking firms in all over the world have considered different variables to increase their resilience to manage a variety future risks that include substantially building up capital along with the establishment of appropriate liquidity buffers (Airehrour, Vasudevan Nair and Madanian, 2018). Hatem (2014) argued that the increased use of stress testing and other approaches by banking firms and other financial institution since the crisis has been found a great approach for assessing the greater resilience on a forward-looking basis so as companies would be able to regulate the credit flows in good as well as bad times. In addition, banking firms within the advanced economy have transformed their capital structure by shifting towards the more stable source of finance and managing their investment towards the safer as well as the less complex assets and other investment tools (Butt, 2016). In this context, some of these adjustments are also being influenced by some cyclical factors that include the accommodative monetary policy and other economic drivers. In this regard, different statistics determined that banking firms have considerably strengthened their risk management policies as well as internal control operations to enhance the effectiveness of business model along with corporate financing decisions. However, these changes would not provide an appropriate support to evaluate the market uncertainties in near future. Apart from that, the investigation of Błach (2020) found that assessment of the market sentiment and future bank profitability play a critical role in influencing the efficiency of the banking operations and corporate strategies. Despite of an appropriate recovery identified within different types of the marketbased indicators, the sentiments of equity investors towards larger institutions in recent years were remained sceptical towards some banks with low profitability (Silva, 2019).

Shen, Firth and Poon (2016) examined different simulations analysis that were being carried out by the Working Group and addressed that some institutions should have to adopt and implement further cost-cutting along with different kinds of the structural adjustments with reference to domestic business trends and future risk factor. In this context, the element of system-wide effect is having a significant implication on the operational and financial capabilities of banking firms (Gabaix, Landier and Sauvagnat, 2014). For assessing the implications of a variety of the structural changes, the assessment system-wide stability is essential because it must be harder in the case of individual banks would find different complex interactions that may have direct impact on the leverage and assets portfolio of banking firms.

The research of Dewally and Shao (2014) determined that banking authorities have adopted a number of changes that are consistent with the objectives of public authorities aligned with the other reform process. First of all, banks have been more focused on geographical element in their international strategy and tend to intermediate more of their international claims locally. Second, direct connections between banking organisations through a variety of companies that are involved in the lending and derivatives operations have been declined (Vithessonthi and Tongurai, 2015). Third, some European banking systems that are having relatively high capacity has incorporated several changes in their operations along with the banking system that also influences the progress with consolidation. Fourth, the implications of the less business model diversity have been raised in the form of the repositioning of many banking organisation towards commercial banking and also transformed the business operations to maximise the efficiency of business operations and it played a critical role in influencing the banking firms for shifting towards more stable funding sources such as deposits. Lawrenz and Oberndorfer (2018) argued that a range of other reforms in banking firms has also enhanced systemic stability with consideration of several modifications in banking operations in which size of banking companies also influence the management in establishment of an appropriate relationship in different source of finance and capital in which the size of an organisation has also considered as critical factor that determines an organisation’s capabilities for raising the leverage (Erel, Jang and Weisbach, 2020).

The investigation of Mitton (2020) determined that the Basel III reforms have been adopted in Australia and different regulations of these reforms are being executed as per the schedule that are playing a critical role in strengthening a prudential regime that is already tighter as compared to the global minimum standards. These reforms have been found very effective for encouraging the banking firms for putting the greater emphasis on the assessment of the cost of capital along with the liquidity in different business operation. In this regard, the Tier 1 capital ratios for the banking companies have been increased by 50% since 2006 in which the most of capital is being termed as the CET1 capital. These regulatory changes have been found very effective to manage several changes in the corporate financing operations. Lerner and Seru (2017) stated that the change in capital structure or corporate financing operation in banking system would be emerged as important element in the reduction in risk-taking operations. In this context, Banks are selling some of their higher risk assets that were failed j to provide in sufficient rates of return. For lowering the financial risks, Australian banks have reduced their international banking activities that are aligned with the United Kingdom and Asia, where banks were not gained appropriate returns and banks were not able to met banks' cost of capital. Apart from that, corporate financing decisions have influenced banking firm for the expansion of their exposure towards the mortgage lending that could reduce the requirements of capital because different collateral are being used to protect the these types of loans. In addition to that, the investigation of Tunyi (2019) determined that the majority of top banking firm have also diversified their business operations towards the life insurance along with the wealth management operations. These diversifications of the business operations were played a critical role in implementing several changes in capital rules because the banking firm would require the more capital for supporting the intra-group investments. Therefore, the management of banking should have to pay extra attention on the corporate finance and leverage management related decisions (Dang, Ngo and Hoang, 2019). This is because it has been anticipated that different investments aligned with diversified business operations may be failed to deliver the anticipated benefits that are influenced by the cross-selling, and an appreciation of the non-financial risks.

The research of Wei, Xu and Zeng (2017) determined that the introduction of liquidity regulations with consideration of the Liquidity Coverage Ratio (LCR) along with the Net Stable Funding Ratio (NSFR) has influenced the requirements of a substantial rise in the banks' liquid asset holdings that is increased to 20% as compared to 15% pre-crises rate that influences the requirements of funds among banking companies so as companies have to consider several factors in selection of appropriate sources of corporate finance such as size of organisation, profitability, market share and existing capital structure. Therefore, banking firms are paying huge attention on the High Quality Liquid Assets (HQLA) like government securities along with the government bonds different financing requirements of banking firms. Coles and Li (2019) argued that different liquidity regulations have been contributed to influence the reduction in liquidity along with the maturity transformation. It may have direct impact on the corporate finance and leverage of bank. In addition to that, Mule, Mukras and Nzioka (2015) argued that the change in capital structure level substantial change in the composition of banks' liabilities. For managing the efficiency of business operation, banking companies in Australia region have significantly reduced the usage of the short-term debt, while increasing their use of domestic deposits. By applying transfer pricing across in the context of the whole business operations, banks are now seeking to ensure that all lending decisions are significantly aligned with the liquidity of deposits or maturity transformation. As per the research of Olawale, Ilo, and Lawal (2017), it has found that the regulatory changes along with optimum recognition of bank’s financial risks as well as returns have restricted the growth banking organisation in term’s profitability since 2014. In addition to that, the divestment of different types of wealth management business operations has been the reduced total profits so as companies are paying extra attention on corporate financing decisions (Olawale, Ilo and Lawal, 2017).

Therefore, banking firms are paying extra attention on the profitability of the business operations by focusing on return on assets (ROA) but financial crisis leaved negative impact on the organisational profitability (Ali, Khurshid and Mahmood, 2015). Two important contributors have been the increased holdings of (safer but lower yielding) HQLA and a more general decline in risk-taking and hence reward. The fall in profitability has been even larger when it is measured by return on equity (ROE) as a result of the increase in bank’s equity outstanding. Moreover, the decline in profitability does not equate related to the costs of financial intermediation for customers. Therefore, the spread between lending rates along with the funding costs leaves significant impact on efficiency of corporate finance (Kurshev and Strebulaev, 2015). In this regard, the higher costs to customers and lower profits profit margin in banking firms reflect the different implications of tighter prudential regulation.

2.8 Revenue and firm’s size

Tunyi (2019) stated that revenue presents the total amount of money a company brings in consideration of sales of a variety of products and services. In the context of contemporary business environment, revenue is being termed as an important indicator of an organisation’s capabilities for generation of revenue along with the efficiency of business operations. It may have a significant influence over the profit generation capabilities. The investigation of Lerner and Seru (2017) determined that revenue also has critical psychological implications over the both internal and external stakeholders for an individual’s business. Moreover, employees would be able to feel more confident with their employer and have found a sense of security and stability in their jobs. It plays a critical role in influencing the firm’s size. In addition to that, strong revenue production offers employees this feeling of comfort and also influences the perception of other stakeholders that may have a significant impact on the business planning and decision making. It may have a significant impact on the strategic planning and financing decisions of companies (Lumapow and Tumiwa, 2017). Kurshev and Strebulaev (2015) argued that the amount of revenue is being termed as the most important tool to business partners, suppliers, community members along with the other stakeholders for determining the efficiency of business operations and effectiveness of corporate planning and decision making. The high value of revenue offers more confidence to stakeholders for making more risks decisions to support the business operations along with decision making process. As per the research of Pattiruhu (2020), it has found that the revenue plays a critical role in influencing the flow of funds within the business operations that influences the availability of working capital to manage the financing requirements. Therefore, the revenue plays a critical role in influencing the corporate financing operations along with the capital structure.

The study of Dang, Li and Yang (2018) was focused to evaluate revenue trends in the banking sector. In this regard, the retail banking has been perceived as key driver of revenue and it plays a critical role in influencing the flow of funds that may have a significant influence over the corporate financing decision. However, Hashmi and Akhtar (2018) argued that wholesale banking which is the second highest revenue generating segment and it typically accounts for 15% to 40% of the revenue generated by banks in modern times all over the world refers to a special banking operation which is also known by the name of investment banking. The major services provided by banks under this Wholesale banking includes trading and sales, corporate lending, mergers and acquisitions and many more. These services are playing a critical in estimation of the organisation’s capabilities along with the firm’s size (Hashmi and Akhtar, 2018). This is because the bigger firms have more capabilities to generate the high value of revenue margin. Therefore, the revenue plays a critical role in evaluating the firm’s size.

On the other hand, Dang, Li and Yang (2018) argued that revenue of an organisation cannot present the firm’s size in an appropriate manner because several factors affect the revenue generation capabilities some of these variables can be controlled by an organisation or some of these factors cannot be controlled by a firm in an efficient manner. In this context, the economic growth of a country has been addressed as the key driver higher revenue because the high rate of economic growth encourages the market demand of different products and services so as companies would find several opportunities to generate the extra sales or revenue with reference to change in the economic conditions of country. In this context, the revenue of an organisation is influenced by different market drivers and companies would not find any significant influence of the business strategies over its revenue generation. Furthermore, the nature of goods or services may have direct influence over the strategic planning along with their market demand. In some cases, companies are generating higher revenue even after low capital investment (Sardo and Serrasqueiro, 2017). For example, IT sector. However, some companies are generating the low revenue even after the higher capital investment. Therefore, Shah (2012) stated that revenue cannot be considered as an important element for determining the firm’s size in an appropriate manner. This is because the sales of an organisation may be fluctuated with reference to different internal and external factors that may have direct impact on the long term business sustainability. Therefore, the consideration of revenue as the firm’s size would not be suitable in all types of companies.

2.9 Profitability and firm’s size

The profitability is being perceived as earnings of an organisation from the revenue after deducting all expenditures and taxes. Singh and Bagga (2019) stated that the percentage of net profit determines the proportion of net earnings in relation to total revenue. It plays a critical role in determining the availability of internal source of finance to support the corporate planning and decision making. Thippayana (2014) asserted that profitability is being termed as the amount of profit or money a firm that is able to generate within its limited resources. In majority of the cases, the primary objective of the organization’s existence to increase its profitability. In the context of contemporary business environment, all the efforts and business strategies of companies along with the planning are being directed for improving the profitability. It seems a great tool to evaluate the efficiency of organisational capabilities. Theoretically, firms that are generating the higher profit margin can expand their size of business operations with consideration of internal financing operations (Vătavu, 2015). However, the whole financing process is not as simple as it looks because companies have to consider various factors before making the financing decisions. In addition to that, firms have to carry out an appropriate financial planning for selecting different modes of financing because it has a direct influence over the share price and market standing. If the management selects the debt financing, then the business entity would find the higher risk of solvency and many of the investors might get detracted.

Yazdanfar (2012) argued that firm performance can be measured with consideration of different tools and tactics. In the context of the financial analysis, the use of profitability ratios has been termed as key measures to determine an organisation’s overall efficiency and performance. In this regard, various studies were being examined different variables that may have a significant influence over the firm’s performance because the survival or business success is significantly influenced by the profitability of the firm. In this regard, the investigation of Willis, Carryer and Henderson (2017) determined that the size of a firm has been addressed the primary factor in determining the profitability so as the profitability can be considered as an important indicator of firm’s size. It reveals that contradictory to smaller firms, items can be produced on much lower costs by bigger firms. As per the study goals, different studies have extracted that a positive relationship between firm size along with its profitability. This is because big firms would be able to generate higher profit margin.

As per the research of Airehrour, Vasudevan Nair and Madanian (2018), it has found that the profitability influences the amount of amount of retained earnings and availability of internal sources of finance that may have a significant influence over the corporate financing decisions. This is because the increased in the amount of retained earnings or profit margin to consider internal sources of finance for supporting various investment decisions. This thing reduces the requirement of funds from other sources. Moreover, Hatem (2014) argued that the increased in the company’s profitability could be considered as an important indicator of firm’s size and it has a significant influence over the corporate financing operations because the higher profit margin may reduce the requirements of debt capital for supporting the different investment and financing operations. On the other hand, the reduction in the profitability of different companies has influenced companies to consider the alternative sources of finance. Therefore, the profitability of the business entity may have a significant influence over the financing decisions of different companies. In this context, Błach (2020) argued that big companies are found more capable to generate the high value of profit margin. Therefore, profitability of business entity could be considered as an important indicator of firm’s size.

On the other hand, the investigation of Shen, Firth and Poon (2016) determined that the profitability of an organisation may present the in appropriate information about the firm’s size because the profitability of an organisation could be influenced by various critical factors such as the level of market competition, demand of different products and services, efficiency of marketing compaign, cost of goods or services, efficiency of production process, business planning and resource management and many more. All these variables are playing a critical role in the strategic planning and resource management operations. In this regard, some uncontrollable factors may hamper the profitability of different companies such as inflation, high level of market competition, price wars, and others (Gabaix, Landier and Sauvagnat, 2014). Therefore, profitability cannot be considered as a reliable tool for predicting the size of the business entity.

2.10 Total Assets and Firm’s size

In the context of financial planning, the ‘total assets’ is being termed as an important financial term that plays a critical role in evaluating the organisational capabilities. In this regard, Dewally and Shao (2014) stated that the value of total assets covers the investment of an organisation in the current assets and non-current assets that include the monetary value of inventory, machines, building and others. It also covers the value of cash, debtors and others. It determines the capabilities of an organisation that would support the business entity in generating appropriate revenue and profit margin. Vithessonthi and Tongurai (2015) stated that the value of total assets is being termed as an important indicator of firms size because the management can evaluate the efficiency of its investment in different by evaluating the relationship between the total assets and revenue through assets turnover ratio. Therefore, the overall value of total assets within the balance sheet has been found as the most appropriate tool to estimate the size of an organisation. In this context of corporate financial planning and investment management practices, the assessment of total assets assists mangers in evaluating the income generation capabilities along with expected rate of return.

Lawrenz and Oberndorfer (2018) argued that the assessment of the value of total assets has found a most easy and reliable approach to predict size of companies. This is because big companies manage the huge investment in different types of short and long term assets. On the contrary, the investment of small companies in different assets has found relatively low. Therefore, the total assets can be termed as the most appropriate approach that is considered by managers in the financial planning and corporate financing operations (Erel, Jang and Weisbach, 2020). Moreover, Mitton (2020) argued that some companies have maintained low investment in their assets even after generating the higher revenue as compared to companies related to other industries. Therefore, managers would find misleading information about the firm’s size in those companies that have maintained the low investment in fixed assets. Apart from that, the value of assets has been found as a reliable tool to evaluate the size of an organisation.

2.11 Market Value of Equity and Firm’s size

Lerner and Seru (2017) stated that market value of equity is also known as the market capitalisation and it is used to measure the company’s value by multiplying the current stock prices with outstanding shares. In this context of corporate planning and financial management, the market value of the equity is being termed as the most reliable tool to evaluate the efficiency of business operations and effectiveness of management decision. Moreover, the market value of equity is being altered with reference to stock price fluctuations. In the context of contemporary business planning, Tunyi (2019) determined that the market value of equity can be compared to other valuation techniques like book value and enterprise value. In this regard, a company’s enterprise value of equity can be predicted the rough idea of company’s takeover valuation.

Dang, Ngo and Hoang (2019) stated that the market value of equity can be used to measure the firm’s size because it helps the investors for managing the diversity in their investment. Therefore, it is termed as a reliable tool to measure the size of business entity. In the context of contemporary business environment, equity value provides the great support in evaluating the efficiency of the business operations along with appropriateness of the business expansion plan and other financing decisions. Lumapow and Tumiwa (2017) stated that the market value of equity is influenced by various factors of the internal and external business environment in which economic condition of countries along with strategic decisions are having a significant influence the share prices. Therefore, the market value of equity plays a critical role in the strategic planning along with the estimation of the value of the firm’s size. In the context of contemporary business environment, market value of equity plays a critical role to influence different activities related to financial planning and investment management (Drempetic, Klein and Zwergel, 2020).

Hashmi and Akhtar (2018) argued that the efficiency of equity valuation is significantly influenced by various critical factors. In this context, macroeconomics factors are associated with the economic growth, inflation, and income of people, public spending, and many more. The accurate prediction plays a critical role in performing the accurate valuation. In the context of contemporary business environment, companies consider different approaches to assess the optimum value of firm’s size with reference to equity capital. Moreover, the selection of the valuation of model plays a critical role in evaluating the firm value in an efficient manner (Humphery-Jenner and Powell, 2014). Therefore, the market of value of equity has been found very effective in determining the size of an organisation with reference to its market capitalisation.

2.12 Usage of financial leverage to evaluate the corporate financing operation

As per the research of Arnold (2012), the leverage is aligned with the usage of borrowed capital as a funding source for managing different investments to expand the business operations with the acquisition of new assets for the business entity so as an organisation would be able to generate higher returns on risk capital. Leverage has been addressed as an appropriate investment strategy of the consideration of the borrowed money that covers the usage of various financial instruments or borrowed capital that would support companies for increasing the potential return of an investment. It is considered as key variable of corporate financing operations (Gong, 2020). Agrawal and Matsa (2013) determined that corporate financing operations influence the management for consideration of different sources of finance that could minimise the cost of capital and influence the returns for the business entity. It can be used to assess the tax benefits and new investments would support the management to enhance the business profitability. Moreover, the financial leverage plays a critical role in managing the value of an organisation because if the operating profit of an organisation is below than a critical value then the consideration of debt capital will reduce the equity value of company and it would reduce the overall value of business entity (Demirci, Huang and Sialm, 2019).

The investigation of Vo (2019) determined that the corporate financing is being termed as key variable of capital structure related decisions. In this regard, the assessment of capital structure decisions has determined that the first step of capital structure decision making process is focused to examine the needs of external capital to expand the business operations. Furthermore, the corporate financing practices are being used by companies for determining different terms to raise the funding requirements. In this context, companies evaluate different variables of financial market. In this context, companies examine the cost of capital that are aligned with the usage of debt securities and equity capital so as corporate financing operations have been found very useful to minimise the overall cost of capital. Azizan (2016) argued that leverage plays a critical role in influencing the corporate financing operations in which the management of different companies are focused to develop an appropriate policy related to capital structure for the construction of an appropriate package of financial instruments that should be sold to investors. In this context, managers adopt systematic procedures in the context of financing decisions with consideration of long-run strategic plans that play critical role in stimulating the growth of business entity (Dwenger and Steiner, 2014).

As per the research of Saeed, Belghitar and Clark (2015), the usage of financial leverage is significantly varied that is mainly influenced by the nature of industry and type of business. Therefore, some industries are managing the business operations with the high degree of financial leverage. For example, retail stores, airlines, utility companies, and banking institutions, and others. However, Harjoto (2017) argued that the excessive use of financial leverage in different has been emerged as key driver that influences the companies for filling the bankruptcy because the increased use of leverage capital may increase the solvency risk of different companies. In the context of contemporary business environment, leverage plays a critical in determining the corporate financing policies because an organisation has to consider several variables while taking the financing decisions based on debt capital. Norden and van Kampen (2013) stated that the assessment of risk of financial leverage is being termed as the key of financing decisions. This is because the consideration of financial leverage increases the revenue generation capabilities of companies but it could increase the chances of disproportionate losses that are aligned with the payment of interest for the asset overwhelm the borrower because an organisation finds in appropriate returns from assets. This kind of situation may emerge when the decline in the asset value is identified due to increment in the interest rate to unmanageable levels (Chen, Sensini and Vazquez, 2021).

The investigation of Hamrouni, Boussaada and Toumi (2019) found that the increased amount of financial leverage plays a critical role in influencing the volatility of stock price. This is because the financial leverage influences the huge swings in the company’s profit that could influence the frequent rise and fall in the stock prices. This thing plays a crucial role in making different types of corporate financing decisions. However, Kalantonis, Kallandranis and Sotiropoulos (2021) argued that companies would find the increased risk of bankruptcy when there is prefect competition identified in the market and low barriers to entry in the particular industry. This is because these factors influence revenue and profitability of different companies that could increase the chances of bankruptcy due to delay in the repayment of loans and interests. Therefore, leverage has been addressed as an important variable in the corporate financing decisions (Chen, Sensini and Vazquez, 2021).

Moreover, Hamrouni, Boussaada and Toumi (2019) argued that when companies meet its financial requirements with the high level of debt capital then it would enhance the debt-to-equity ratio. Therefore, companies would find some problems to assess more debt in the critical business conditions because the lenders are less likely to provide more funding to borrowers because the high debt-to-equity ratio may increase the chances of defaults. In addition to that, the high risk in lending decision will increase the interest rate for compensating the risk factors (Chen, Sensini and Vazquez, 2021). Therefore, financial leverage presents the risk factor in investments so as companies has gained a significant success to enhance the effectiveness of corporate financing decisions. Furthermore, the research of Kalantonis, Kallandranis and Sotiropoulos (2021) determined that operating leverage has been found a very useful term to manage corporate financing decisions. This is because the operating leverage has been defined as the ratio of fixed cost to variable costs that are incurred by an organisation within certain specific time period. In this context, an organisation would find the high proportion of operating profit when the fixed costs exceed the variable cost. It may influence the sensitivity to change in the sales volume and returns on invested capital. Furthermore, the high value of operating leverage has found a common term in the capital-intensive companies such as manufacturing companies (Chen, Sensini and Vazquez, 2021). Therefore, the operating leverage has been addressed as an important element to influence the financing decisions among different companies.

2.13 Assessment of the impact of the firm size on the financial leverage

As per the study of Amihud and Mendelson (2012), it firm size plays a critical role in determining the usage of the financial leverage. This is because big companies are enjoying a variety of tax deduction along with the reputational benefit in the perception of investors. In this regards, some recent studies on the capital structure have determined similar outcomes that are similar to past studies. These studies reported that firm size leaves both negative as well as positive influence over the financial leverage with reference to economic system of a country along with the nature of industry (Kurshev and Strebulaev, 2015). Dang, Li and Yang (2018) examined the efficiency of business operation with consideration of the size of different companies and found that the larger firms are have more stable operational capabilities and can easily expand their assets that would support companies for enhancing the capacity of the business entity to qualify for additional debt by minimizing the solvency risk. Further, scholar addressed that financial leverage is significantly correlated with the size of an organisation and profitability of business entity. In the context of theoretical view point, the pecking order theory has determined the negative association between size and leverage. On the other hand, the trade off theory has determined the positive correlation between the firm’s size and leverage (Hashmi and Naz, 2020). Nakatani (2019) stated that financial leverage among companies is influenced by size of a company but it may be varied across countries. In this regard, scholar further addressed that the small firms are highly dependent on the short term borrowing and these companies are having the higher propensity to finance long term asset through short term funding as compared to larger firms.

The investigation of Siahaan (2014) was focused to study the influence of firm size on leverage in different countries and researcher found that the large economies provide several benefits to firms of different sizes but these economies facilitates some additional benefits to small firms so as they could get the access to the long-term debt while rapidly growing economies only provides addition access for the large and medium firms in the context of the long-term debt. In this regard, Humphery-Jenner and Powell (2014) argued that developing countries firms do not manage their dependence on the long term debt as compared to companies that are related with the developed countries. In addition to that, optimal financing choice in different types of companies is also influenced by the growth, cash flow and size of industry. On the other hand the investigation of Hashmi and Akhtar (2018) determined that profitability along with the performance are accounted as important aspects for firms financial leverage choice. In addition to that the average debt utilized by firms has been influenced by the firm’s performance in the form of profitability, revenue and other financial motivators. According to trade-off theory, a positive relationship could be identified in different circus between the debt level and firm’s performance (Drempetic, Klein and Zwergel, 2020).

However, Lumapow and Tumiwa (2017) opposed the argument and determined the negative correlation between leverage level along with the firm performance. In this context, the higher level profitability would be emerged as an appropriate source of internal finance so as companies can retain some profit to manage financing needs of a variety of long and short term financing requirements for different types of investment proposals (Ibhagui and Olokoyo, 2018). However, the investigation of MALIK and et.al. (2021) determined that the short term debt along are positively associated with firm’s profitability; whereas long term debt is negatively related with firm’s profitability. In this context, the evaluation of the Pecking order theory determined that when companies are facing some financing issues then they have to prioritize their funding sources with consideration of the availability of internal sources of funds, cost of capital, existing debt capital, and capabilities of an organisation to assess more debt in the loans and advances (Arnegger and Vetter, 2014).

As per the research of Arnegger, Pull and Vetter (2014), it has been addressed that profitability of the firms will more likely to rely on internal financing so as some companies could find the negative relation between debt and profitability. According to study of Harisa, Mohamad and Meutia (2019), it found that the existing positive correlation between probitability and leverage when the profitable firms indicate the quality of investment by leveraging up, whereas some scholar addressed that highly profitable firms are having the subordinate levels of leverage as compared to the less profitable firms that utilise their earnings to manage distinct financial sources with reference to size of organisation.

2.14 Summary

The above literature review determines that an organisation can consider different variables to determine the firm’s size such as revenue, profitability, market value of equity, total assets and many more. These elements are having significant implications over the financial planning and investment management practices in different companies. Moreover, the assessment of views and findings of different scholars evaluates the corporate financing operations in which financial leverage has been addressed an important component of corporate financing practices and it is aligned with size of companies working in the banking sector.

Chapter 3: Research Methodology

3.1 Introduction

The section of research methodology plays a most critical role in supporting the contemporary research operations. This is because it has direct influence over the data collection process along with their assessment with reference to study objectives. In this context, researcher examines a systematic comparison along with the evaluation of different research tools and approaches through an investigator would be able to select an appropriate combination of different research approaches that are significantly aligned with the nature of investigation (Saunders and Bezzina, 2015). In the current investigation, researcher has tried to evaluate the impact of organisation’s size of an organisation on the corporate finance with reference to banking industry within Australia and New Zealand. In this context of research planning, research methodology manages the most critical role to manage a variety of data so as researcher could generate useful findings.

3.2 Research Philosophy

The concept of the research philosophy deals with sources, nature and development of information with reference to study objectives. As per the requirements of the contemporary studies, there are mainly two types of research philosophies such as positivism and interpretivism philosophy considered by researchers to manage different types of researches. The Positivist is mainly applied when a researcher is focusing on the scientific quantitative methods to manage the information that has been acquired from different sources (Devi, 2017). On the other hand, the interpretivism philosophy influences the researcher for paying extra attention attention on the humanistic or qualitative methods so as it provides a great support for performing the social studies aligned with human nature and qualitative in nature. In this context of present investigation, researcher focused to evaluate the implications of firm size over the corporate finance operations in which researcher considered a variety of variable such as profitability, total assets, total revenue, market value of equity, and leverage to evaluate financial data banking companies (Pruzan, 2016.). With consideration of nature of investigation, researcher considered the positivism research philosophy to meet the study goals. The rationale behind consideration of the positivism research philosophy was that this tool would be found very effective to examine a variety of quantitative data in the value-free manner. In addition to that, Basias and Pollalis (2018) stated that positivism research philosophy is aligned with the deductive logical reasoning in which a researcher could gain a variety of supporting tool and approaches for analysing a variety of quantitative data through which assessment of relationship among different variables can be performed in an efficient manner.

As per the study goals, the positivism research philosophy was being addressed as the most appropriate tools to examine different determinants of capital structure. Moreover, it assisted researcher for making the research process in highly structured manner in which large sample sizes could be examined within consideration of different tools and method of quantitative analysis (Zangirolami-Raimundo, Echeimberg, and Leone, 2018). On the other hand, interpretivism research philosophy was not considered as an appropriate tool in the context of current study because it pays extra attention on the different social studies in which an interpretivist researcher concentrates on the meanings that people bring to situations and behaviour for interpreting the different social issues. Moreover, the interpretitive study approach was not finding appropriate to produce generalised laws in the way and it would not find an appropriate tool for managing the rigid explanation about the subject matter (Taherdoost, 2016). In addition to that, the interpretivism research philosophy has been found very effective for carrying out qualitative in which a researcher examines different theories and perception of others to establish a new phenomena with the help of a detailed investigation. This tool of research methodology supports the investigator for carrying out an in-depth review about the subject matter with small sample size. Therefore, the interpretivism research philosophy was not found appropriate in the context of present investigation.

3.3 Research Approach

The research approach is being termed as a systematic plan and procedures in which a researcher determines a variety of broad assumptions to support the data collection, analysis and interpretation with reference to study objectives. With consideration of the study nature and study goals, researchers are mainly applied either inductive or deductive research approach with consideration of areas of study (Mackey and Gass, 2015). In this regards, Pandey and Pandey (2015) stated that argued that the inductive research approach is mainly applied for developing a new theory with consideration of the generalised data. Moreover, it provides a great support in assessing responses of people by assessing different observation with reference to study objectives. In this context, researcher mainly examines different patterns and trends for generating new approach that could assist researcher for attainment of study objective in an efficient manner. As per the research of Kumar (2018), it found that the inductive research approach has been found very effective for analysing a variety of data in the context of qualitative studies in which a researcher has tried to examine different social issues along with the behavioural context with consideration of the area of investigation.

However, Opoku, Ahmed and Akotia (2016) argued that a researcher cannot draw an appropriate conclusion in an appropriate manner with consideration of inductive research approach because it pays extra attention for performing an in-depth evaluation of different aspects of a systematic investigation. On the other hand, Nayak and Singh (2021) asserted that the application of deductive approach is being performed in order to evaluate the findings of past studies and researcher also applies different tests for analysing the selected set of quantitative data. A deductive approach to research is mainly aligned with the scientific investigation. However, the efficiency of deductive research approach is significantly influenced by appropriateness of sources of information. As per the nature of present investigation, researcher tried to examine the influence of size of an organisation towards its leverage position (Rhedding-Jones, 2013). Therefore, researcher adopted the deductive research approach in which researcher could generate study findings with consideration of different methodologies of statistical analysis for testing of a variety of quantitative. The main reason behind the selection of deductive research approach was that it supports the researcher for testing a variety of theories and approaches. By considering the deductive research approach, researcher was being able to test the relationship among different variables with consideration of financial data of different companies.

3.4 Research Design

In the context of contemporary studies, the efficiency of study outcomes is significantly influenced by the research design which is being followed by researcher for attainment of the study goals. A research design contains a certain set of research operations or activities that support the researcher to achieve the study objectives in an efficient manner. In the context of modern studies, researchers are mainly adopted two types of research design that include exploratory as well as descriptive research design (Taherdoost, 2016). As per the requirements of present investigation, researcher adopted the quantitative research methodology for assessing the implications of the firm’s size over its leverage position. In this context, the descriptive research design was being considered through which a researcher is able to meet the study objectives in an efficient manner. The key driver of selection of descriptive research design was that it would be found very effective for investigator for describing different characteristics along with the functions aligned with study goals (Snyder, 2019). Furthermore, Pandey and Pandey (2015) stated that descriptive research design provides a rigid structure through which a researcher is able to evaluate a variety of statistical data and other facts with consideration of appropriate statistical tools. In addition to that, it influences the researcher for the application of the systematic structure for the data collection along with assessment of a variety of information to achieve appropriate research goals by testing the hypothesis and can determine the relationship among different variables by applying different statistical measures (Kumar, 2018). On the contrary, the exploratory research design did not found suitable in the area of current investigation because it would be offer better outcomes when a researcher is going to explore a problem with consideration of a variety of the new ideas and thoughts so as it would be found a reliable approach to carry out qualitative investigation. As per study of Opoku, Ahmed and Akotia (2016), it found that that the exploratory research design pays extra attention on the qualitative data so as researcher would find a significant flexibility through which an investigator would be able to implement several change in the research operations so as researcher would be able to generate the most reliable decisions for developing new approaches and theories (Nayak and Singh, 2021). Therefore, researcher applied the descriptive researcher design for carrying out a quantitative research because it would offer a rigid structure so as investigator would be able to apply different statistical tools and other measures that have not been identified in the exploratory research design.

3.5 Data Collection

For attainment of study goals in an efficient manner, the collection process plays the most critical role. As per the study goals, researcher identified two possible sources of information for the collection of a variety of information that include primary and secondary sources. The primary data collection influences the researcher to assess the fresh data about the area of study that is mainly performed with consideration of views and perception of participants about the study. In this context, researcher considers different tools that include face-to-face interview, building of questionnaire and preparing the observation (Rhedding-Jones, 2013). In this context, Taherdoost (2016) stated that the secondary data collection supports the researcher in collection of both qualitative and quantitative data in relatively less as compared to primary data collection in which researcher uses a variety of secondary sources of information such as online articles, internet-based journals, government report, reports of different companies studies of different researcher, and others. Therefore, an investigator would be able to assess the large quantity and variety of data for attainment of the study objectives in an efficient manner. In the present study, researcher aimed to examine the impact on firm’s size over the leverage position in the context of banking sector so as secondary data collection was being considered by investigator (Taherdoost, 2016). The main reason behind application of sources of information in the present investigation was that it would support investigator in assessing the views and findings of different scholars towards the firm size, capital structure and others. In the context of current study, the consideration of secondary sources of information is mainly carried out to save the research time. In addition to that, the quantitative nature of current investigation influenced researcher to focus on the secondary data that can be termed as the financial data of different companies (Mackey and Gass, 2015). On the other hand, the application of primary sources of information was not found appropriate in the area of current investigation because it would not facilitate reliable outcomes and it could be emerged as time consuming process to generate the useful information about the subject matter. In the context of secondary data process, the researcher considered the financial data of 25 banking and finance companies related to banking industry of Australia and New Zealand. As per the study goals, researcher examined a variety of data related to financial statement of banking firm to evaluate the impact of the firm size over the leverage.

3.6 Data Analysis

With consideration of the nature of current study and characteristics of data collection process, researcher was identified two possible tactics of data analytics that could be applied to evaluate the information for generating useful findings i.e. thematic analysis and statistical analysis. As per the aim and objectives, the statistical analysis was being selected by researcher for determining the relationship among different variables. Therefore, researcher considered several measures or tools of the descriptive statistics and regression analysis for assessing key features of selected data and testing the hypothesis by evaluating the relationship among different variables that were being considered by researcher (Mackey and Gass, 2015). The main reason behind consideration of statistical analysis was that researcher has addressed a variety of financial data aligned with banking and finance companies related to banking industry of Australia and New Zealand so as the application of statistical analysis supported investigator to evaluate the relationship among different critical variables an appropriate manner so as a conclusion could be draw with consideration with reference to positive and negative correlation among different variables. However, the thematic analysis was not being considered by researcher because it would provide appropriate results when a researcher is going to evaluate the perception and responses of participants Rhedding-Jones, 2013). It would be found very effective in the context qualitative studies so as the approach of thematic analysis did not apply in the current investigation in which researcher was tried to assess the relationship between the firm’s size and financial leverage.

Regression Model

For establishing an appropriate regression model, researcher adopted different the firm-specific variables along with commonly used proxies to test the hypothesis and relationship among different variables with reference to study goals:

Leverage or debt: This is dependent variable within the regression model. It covers all types of interest bearing debt that could be termed as an important indicator for corporate financing operations. In the context of corporate financing decisions, leverage position of an organisation plays a critical role in evaluating the effectiveness or importance of strategic planning and resource management (Mackey and Gass, 2015). The leverage value plays a critical role in the capital structure decisions. In the context of corporate financing decisions, the concept of financial leverage is used by companies to manage the borrowing of business entity to meet distinct business requirements. It assists in evaluating the solvency risk of an organisation because an organisation has to maintain an appropriate balance between equity and share capital. It also determines the preference of management towards the sources of finance to support the different investment decisions (Drempetic, Klein and Zwergel, 2020).

Total Revenue: As per the study objectives, researcher focused to evaluate the implications of firm size on the corporate finance. In this context, the total revenue of an organisation can be considered as an important tool to evaluate the firm’s size. The total revenue of an organisation determines the important indicator of the overall organisation capabilities. This is because every organisation is always tried to enhance the sales of an organisation so as the value of total sales determines the efficiency of overall operational capabilities of an organisation (Ibhagui and Olokoyo, 2018). Therefore, the total revenue is being termed as an important indicator of the size of an organisation. This is because the revenue of organisation has a significant influence over the business profitability, business expansion, effectiveness of managerial decisions, capital structure related decisions. In the context of contemporary of business environment, size of an organisation has direct impact on the total sales.

Total assets: It is also considered as an important proxy of firm’s size. Moreover, it is also acted as an independent variable in the context present in which a researcher was focused to evaluate the impact of firm’s size over the corporate finance or leverage. The value of total assets determines the total investment made by an organisation over the current and fixed assets that present the overall organisational capabilities (Arnegger and Vetter, 2014). For attainment of assets acquisition decisions, companies consider different sources of finance with reference to long and short terms sources. Therefore, the total assets of an organisation are being termed as an important indicator or proxy of the firm’s size. This is because it has a significant influence over the financial leverage.

Market value of equity capital: In the context of present investigation, it is acted as independent variable and it may have a significant influence over the firm’s corporate financing operations (Siahaan, 2014). The market value of equity capital can be extracted by multiplying the market value of per share with the total number of outstanding shares. In the context of contemporary business planning, the market value of equity capital is also termed as an important indicator of firm’s size so as it plays a critical role in the investment planning and resource management.

Profitability: The profitability of an organisation is having direct implications on the borrowing capabilities of an organisation. This is because the higher profit margin will enhance the availability of internal sources of finance but it would enhance tax liabilities of companies (Hashmi and Naz, 2020). Therefore, the profitability leaves a significant impact on the corporate financing operations. In the context of present investigation, the profitability is also termed as an important indicator firm’s size. Therefore, it is used as independent variable.

With reference to study goals, the basic regression model is mentioned below:

LEVER= α+ β 1* REV+ β 2*ASST+ β 3*PROF + β 4*MVE + ε

LEVER = Leverage of company

REV = Revenue of company

ASST = Total assets value

PROF = Profitability of the company

MVE = Market value of equity capital

3.7 Validity and Reliability

For the completion of whole study as per different norms of validity and reliability, researcher ensured about the authenticity of the source of secondary information. The consideration of authentic resource of information provided a great support to researcher for enhancing the validity and reliability of study outcomes as per the study objectives. In this context, researcher used appropriate references and citation for validating different views and arguments of different scholars that were being considered in the secondary data collection process for carrying out a systematic literature review (Mackey and Gass, 2015). In addition to that, the consideration of valid and reliable source of secondary would support the investigation to enhance usefulness of study outcomes in real business conditions.

Chapter 4: Results, Summary and Discussion

4.1 Introduction

The section presents the findings of data analysis in which researcher has adopted the secondary source of information. In the context of present of present investigation, researcher has focused to evaluate the influence the firm’s size over its corporate financing operations or the leverage of Australian banking industry. In this regard, researcher used the financial data of 25 companies associated with banking and finance industry. In this context, the independent variables include revenue, profit, total assets, and market value of equity. As per the study goals, researcher applied the quantitative analysis for assessing the characteristics of secondary data. In addition to that, correlation and regression analysis were being considered to assess the relationship between firm’s size and leverage. With reference to study objective, the evaluation of findings of current study is carried out below:

Revenue: As per the above table, the minimum and maximum value of revenue is near to £4.19 Mn and £32439.5 Mn respectively among the 25 banking and finance sector. The mean value of the revenue has recorded neat to £5641.71 Mn with the standard deviation of 10817.27 in which the value of Skewness and Kurtosis is respectively 1.829 and 1.712. The evaluation of above descriptive statistics has recorded the huge variation in the revenue values of banking firms.

Profit: The assessment of profit value of different companies has recorded that the maximum and minimum value of profit margin is near to £905.5 Mn and £7774 Mn respectively among the 25 banking and finance sector. In addition to that, the mean value of profit is near to £862.31 with the standard deviation of 2008.39. Furthermore, the value of Skewness and Kurtosis is respectively 2.46 and 5.72. In similar way, the value of standard deviation is near to 0.464.

Total assets: The evaluation of descriptive statistics of total assets value of 25 banking and industry has recorded that the minimum and maximum value of total asset is £3.69 Mn and £1011711.5 Mn respectively. The mean value of the revenue has recorded neat to £165511.99 Mn with the standard deviation of 348757.81 in which the value of Skewness and Kurtosis is respectively 1.97 and 1.21. The evaluation of above descriptive statistics has recorded the huge variation in the total assets values of banking firms.

Market Value of Equity: The above table determines the minimum and maximum value of the market value of equity is £5.79 Mn and £145476.46 Mn respectively. In similar way, the value of mean and standard deviation of the selected data is respectively £16986.57 Mn and 36535.33. In addition to that, the value of Skewness and Kurtosis is respectively 2.5 and 6.0.

Total Debt: As per the above table of descriptive statistics, the minimum and maximum value of the selected set of data about the total debt of 25 banking companies is respectively £0.5115 Mn and £265351.50 Mn. In similar way, the value of mean and standard deviation of the selected data is respectively £39994.44 Mn and 84961.09. Furthermore, the value of Skewness and Kurtosis is respectively 2.5 and 6.0.

4.3 Correlation matrix

The next table presents the correlation matrix in which researcher is going to determine the relationship among different variables:

As per the above table of correlation, there has been positive correlation addressed between the revenue and total debt in which 100% change in revenue leaves 96.6% change in the total debt of banking firms. In addition to that, p-value is 0.000 that is lower than alpha value of 0.05 so as the relationship between the revenue and total debt is statistically significant.

The above table determines the 88.6% correlation between profit and total debt of banking firms. Therefore, the positive correlation has been addressed between the two variables. In addition to that, the p-value is coming out near to 0.000 that is lower than alpha value of 0.05 that determines the statistically significant relationship within the two critical elements.

With consideration about able of correlation, the total assets value is correlated with total debt because the value of correlation is 98.6%. Moreover, the p-value is also coming out the below the alpha value of 0.05 so as there has been statistically significant relationship identified among different variables.

Furthermore, the above table presents the correlation of 91.8% between the market value of equity and total debt that determines the positive correlation among two variables. In addition to that, p-value is 0.000 that is lower than alpha value of 0.05 so as the relationship between the markets value of equity and total debt is statistically significant. Overall, it can be stated that the all independent variables are correlated with dependent variable. Therefore, firm’s size is positively correlated with the leverage of banking firms or corporate financing operations.

4.4 Regression model

The value of R-square is being termed as the proportion of variance in dependent variable which can be predicted from the interdependent variables. It determines the proportion of variance between the independent and dependent variables collectively It usually applies to measure the strength of relationship between model and dependent variable. As per the above table, the value of R-square is near to 98.8%. Therefore, there is appropriate relationship identified between the independent and dependent variances. By the way, the ‘Adjusted R’ is focused to ‘control for’ overestimates of the population of R-square resulting from a small set of sample. In the present case, the value Adjusted R-Square has recorded near to 98.6%. Therefore, it can be stated that 100% change in independent variable would result 98.8% change in dependent variable.

The next table is called as the ANOVA table that determines how well the regression equation fits the data for predicting the dependent variable.

The above table presents findings of regression with reference to ANOVA in which the p-value or ‘sig’ value is coming out 0.000 that is lower than the ideal value of 0.05. This indicates the statistical significance of regression model that was run. In the context of present case, researcher has focused to evaluate the influence of the firm’s size over the leverage of banking companies. Therefore, the overall outcomes present a significant relationship between the independent and dependent variable so as it can be stated that firm size has a significant influence over the corporate financing operations.

In addition to that, the F-ratio is used to evaluate the improvement in the prediction of variable by fitting the model after considering the inaccuracy in the selected model. In this context, a value is higher than 1 for F-ratio yield efficient model. As per the above able, F value has found 415.75 that is appropriate in the context of present investigation. Overall, p-value is coming out below 0.05 so as alternative hypothesis would be accepted because the relationship between independent and dependent variable has recorded statistically significant.

The next table is called as the coefficient table that determines the significance of relationship between each independent variable to dependent variable. It seems a great tool for testing the hypothesis of current investigation.

In the context of present investigation, researcher has aimed to evaluate the influence of firm’s size over the corporate financing operations. In this regard, the researcher considered the financial data of 25 banking companies. For analysing the firm’s size, investigator considered revenue, profit, total assets and market value of equity as the independent variable. However, the value of total debt was being for examining the corporate financing operations as the dependent variable. As per the above table, the first independent variable is revenue. In this context, the application of regression analysis has recorded the p-value of 0.652 that is higher than the alpha value of 0.05 so as the relationship between the revenue and total debt has not found the statistically significant. Therefore, null hypothesis would be accepted because revenue flow within banking and finance companies of Australia does not have any significant influence on the total debt capital of banking firms. Overall, it can be stated that revenue flow among banking firms may not leave any significant impact over the corporate financing decisions.

The second independent variable that was considered to evaluate the firm’s size is the Profit Margin or net earnings of banking companies of Australia. In this context, the p-value of this variable is coming out near to 0.000 that is lower than the alpha value of 0.05. Therefore, the relationship between the profitability and total debt of banking firms has found statistically significant that shows that the change in profitability of banking companies in the Australia and New Zealand plays a critical role in changing the value of total debt. Moreover, the above table determines the negative standard coefficients or beta value that is -0.609. The negative coefficient presents the adverse relationship between independent and dependent variables. In context of present investigation, the above findings conclude the increment in total debt of banking firms due to reduction in their profitability and vice-versa.

As per the study objective, the third independent variable that was considered by researcher to determine the firm’s size is Total Assets value. In the context of current investigation, there has been a statistically significant relationship identified between the value of Total Assets and Total Debt of banking firm’s because the p-value is coming out near to 0.000 that is lower than the alpha value of 0.05. Therefore, the alternative hypothesis would be accepted that determines that total assets value has a significant influence over the total debt capital. In addition to that, the positive coefficient determines the positive relationship between the independent and dependent variables. Therefore, it can be state that the increment in total assets may also increase the total debt capital of banking firms.

The last variable that was being considered by the investigator as the independent variable to present the firm’s size is the Market Value of Equity Share. In the present case, the above table of regression analysis has disclosed that the p-value is 0.015 which is lower than the alpha value of 0.05. Therefore, the relationship between the market value of equity and total debt is found statistically significant so as the increase in the market value of equity capital drivers the acquisition of debt capital within the banking companies. Moreover, the positive value of coefficient determines the positive association between the dependent and independent variable. Therefore, market value of equity capital has been perceived as an important proxy of firm’s size that plays a critical role in influencing the corporate financing decisions along with amount of total value debt capital. These findings determine the acceptance of alternative hypothesis in which the market value of equity capital has a significant influence total debt capital of banking firm.

Overall, the evaluation of different outcomes has disclosed that the firm’s size has a significant influence over the corporate financing decisions and firm’s leverage in the context of banking and finance industry of Australia. In this context, independent variables include profitability, total assets value, and market value of equity capital has been addressed reliable indicators of firm’s size. However, the leverage or debt capital has been identified as an appropriate dependent variable for analysing the corporate financing activities within banking companies.

4.5 Discussion

The present study is aimed to evaluate the impact of organisation’s size of an organisation on the corporate finance with reference to banking industry within Australia and New Zealand. In this regards, researcher was acquired the financial data of 25 banking companies associated with the banking sector of Australia and New Zealand to meet the study gaols with consideration of statistical analysis. In this regard, researcher considered different measures of firm’s size i.e. revenue, total assets, profitability, and market value of equity that were being acted as dependent variables and leverage or debt capital of banking firms. The assessment findings of correlation determine the positive relationship between the firm’s size and corporate financing operations or leverage. Therefore, it can be stated that change in independent variable also encourages alteration in dependent variable. As per the study goals, the comparison of findings of current study with reference to views and findings different scholar in the past studies has disclosed similar outcomes. In this regard, Amihud and Mendelson (2012) stated that the firm size plays a critical role in determining the usage of the financial leverage for meeting different financing requirements to meet the long and short term strategic planning and resource management. In this regard, big companies working in different industries have gained a variety of tax deduction along with the reputational benefit in the perception of investors that may have direct impact on the value of returns. It also affects fund raising decisions of different companies.

As per the study objective, the evaluation of a variety of secondary data has disclosed that the banking sectors have reported a significant expansion along growth in such countries where these companies were being less affected by the crisis, that include mainly emerging market economies (EMEs). Therefore, concentration within the banking systems has influenced several changes in the business model that also affects the corporate financing operations. In this context, the size of banking firm’s played a critical for supporting the business expansion with consideration of debt capital. Ruming and Baker (2021) supported the relationship between the firm’s size and leverage within banking sector and determined that the shifting in the bank business models has been considered as the most important element that influences financing decisions among banking firms in all over the word. This is because big banking firms related to advanced economy have a tendency in order to reorient their business away from the complex business operations in which companies have reported several change in the business operations and funding decisions that are aligned the size of business entity and market capitalisation within the higher competitive market trends. Therefore, researcher has reported the positive correlation between the firm’s size and corporate financing operations. With reference to findings of statistical data of banking firm, it can be stated that the leverage value of banking firms is significantly aligned with the size. In this context, different studies on the capital structure have recorded the similar outcomes. Kurshev and Strebulaev (2015) stated that the firm size leaves both negative along with the positive influence over the financial leverage in which the economic system of a country along with the nature of industry plays a critical role in influencing the fund raising decision.

Moreover, the investigation Dang, Li and Yang (2018) also determined similar results that are aligned with study objective in which researcher stated that the efficiency of business operation plays a critical role in the investment planning. In this regard, the larger firms are having the more stable operational capabilities and investment so as they would be able to expand their assets with the help of additional investment that would support companies for enhancing the capacity of companies to qualify for additional debt by minimizing the solvency risk. In addition to that, the outcomes of Nakatani (2019) addressed that the value of the financial leverage is highly correlated with the size of an organisation in which the profitability of business entity plays a critical role in the investment planning and corporate finance. In the context of theoretical view point, the pecking order theory opposed the findings of current study in which there is negative association identified between size and leverage. On the other contrary, Hashmi and Naz (2020) examined different variables of the trade off theory and researcher found the positive correlation between the firm’s size and the value of debt capital so as it can be stated that the financial leverage among companies is influenced by market capitalisation, total assets and others. In this regard, scholar further found that the small firms are highly dependent on the short term borrowing for meeting the day-to-day business requirements. Moreover, small companies have faced the higher propensity to meet the different financing requirement for the long term asset through short term funding with reference to the larger firms.

In the context of current investigation, the application of regression analysis has determined that different measures of firm’s size such as profitability, total assets, market value of equity and other leave a significant impact on the financial leverage or debt capital companies associated with the banking and finance sector of Australia. However, the revenue does not leave any significant impact on the corporate financing decisions or the total value of debt capital. In the context of revenue management, researcher found mixed responses from different scholar about its implication on the debt capital of different companies. In this regards, Pattiruhu (2020) stated that that the revenue has been addressed as a critical factor that plays a critical role in influencing the flow of funds within the business operations. Moreover, it has significant implications on the availability of working capital for managing the financing requirements of different companies. Therefore, the revenue has addressed an important driver for influencing the corporate financing operations along with the capital structure of banking. However, the investigation of Dang, Li and Yang (2018) determined that the usage of the revenue related data of an organisation to present the firm’s size could not be emerged as a reliable approach because several factors affect the revenue generation capabilities some of these variables can be controlled by an organisation or some of these factors cannot be controlled by a firm in an efficient manner. Therefore, revenue has not been found a suitable tool for determining the relationship between the firm’s size and debt capital. This is because the economic growth of a country has been addressed as the key driver of generating the higher revenue because the high rate of economic growth encourages the market demand of different products and services so as it cannot represent the actual capabilities of business entity.

The evaluation of findings of regression analysis has disclosed the adverse relationship between the profitability and the value of financial leverage. These findings are aligned with the views of the Thippayana (2014) in which the scholar asserted that profitability is being termed as the amount of profit or money a firm that is able to generate within its limited resources. In the context of contemporary business environment, all the efforts and business strategies of companies along with the planning are being directed for improving the profitability so as it can be used to examine the efficiency of organisational capabilities. Further comparison of different studies has disclosed that firms that are generating the higher profit margin would gain a significant success for expanding the size of business operations with consideration of internal financing operations. In this regard, Airehrour, Vasudevan Nair and Madanian (2018) stated that the profitability has direct impact on the amount of amount of retained earnings along with the availability of internal sources of finance that has been addressed as key driver that have a significant influence over the corporate financing decisions. In the context of contemporary business environment, the increment in the amount of retained earnings or profit margin is considered as the great internal sources of finance for supporting various investment decisions. This thing reduces the requirement of funds from other sources. Therefore, the present investigation has recorded the adverse relationship between the debt capital and profitability of banking companies in which the increase in the amount of profitability adversely affects the demand of debt capital. Moreover, the current study has also found that positive influence over total assets over the long term debt of banking firms. These outcomes are significantly aligned with the findings of Vithessonthi and Tongurai (2015) in which the scholar stated that the value of total assets has been addressed as an important indicator of firms size because the management is able to evaluate the efficiency of company’s investment by evaluating the relationship between the total assets and revenue with consideration of the assets turnover ratio. Therefore, the overall value of total assets within the balance sheet has been found as the most appropriate tool for estimating the size of an organisation. For managing the corporate financial planning, the assessment of total assets of an organisation provides a significant assistance to mangers for evaluating the income generation capabilities along with expected rate of return. In addition to that, the assets acquisition decisions of companies influence the managers for assessing the more debt capital to meet the financing needs.

As per the study goals, the investigation in the current investigation has also found the positive relationship between market value of equity capital and the leverage. In similar way, the findings of Dang, Ngo and Hoang (2019) supported the outcome of current in which the scholar stated that the market value of equity has been found a most appropriate measure to determine the firm’s size in an efficient manner because it helps the investors for managing the diversity in their investment. Therefore, it has been addressed as the most reliable tool for measuring the size of business entity. In the context of contemporary business environment, equity value provides the great support in evaluating the efficiency of the business operations and it may have direct impact on the fund raising capabilities of an organisation to raise debt capital. Moreover, Hashmi and Akhtar (2018) stated that the efficiency of equity valuation is aligned with the various macroeconomics factors that include the economic growth, inflation, and income of people, public spending, and many more. The accurate prediction plays a critical role in performing the accurate valuation of organisation. In the context of contemporary business environment, the increment in equity capital may have direct influence over debt ratio along with the availability of sources of debt capital so as companies would be able to enhance debt capital within their capital structure to support the long term investment decisions.

Overall, it can be stated the size of banking firms affect the leverage of the business entity and corporate financing decisions. In this context, the assessment of arguments of different scholars and researcher has incorporated similar outcomes. In this regard, Arnegger and Vetter (2014) stated several factors of business environment are having a significant influence over the size so as an organisation has to restructure corporate decision for controlling the financing decisions of an organisation. In the context of contemporary business environment, the Nature of Industry has been termed as the most critical element to influence the business planning that leaves the direct impact on the size of an organisation because manufacturing industries are having a large infrastructure and they have maintained the huge investment in different types of assets with reference to companies which are operating in the trading and service industry. It affects the financing decisions of different companies. Moreover, Lerner and Seru (2017) asserted that investors perceive the debt issuance as a better signal for raising the issuance of ordinary shares to meet distinct funding requirement because the issuance of share by an organisation has been found as the overvalued solution by the investors. Moreover, the greater the size of an organisation will influence stable growth and lowering the risk of investors in the lending decisions. Therefore, the financial leverage has been found very effective to meet financial needs of companies because it has been valued with consideration of different interest tax shield with reference to income tax law that may have a significant impact on the corporate financing practices of banking firms.

The findings of current study have been supported by the views of Błach (2020) in which author stated that concept of leverage is also being used by both investors and management of different companies because the leverage provides an opportunity to investors about the increment in the company’s returns that can be aligned with the additional investments of an organisation within different investment proposals and business expansion projects. Furthermore, the investigation of Hatem (2014) determined appropriate information about the area of current investigation and stated that a company’s capital structure is being termed as the most crucial tool that can be used by companies for maximizing the value of the business. It determines an appropriate structure that can be emerged as an important combination of long-term and short-term debt along with the preferred equity. The ratio between a firm’s debt capital along with its equity values has been found very effective for determining the value of risk factor within different decisions of capital financing by evaluating the proportion of the debt and equity capital. Moreover, Baltac and Ayaydın (2014) supported the outcomes of current study in which researcher stated that the high operating leverage is good when the sales are rising, however it could be emerged as the risky approach when companies would find the downfall in the sale volume. In this regard, the grounded approach pays extra attention in the debt capital over strategic variables and it encourages the managers for developing appropriate relationships between suppliers as well as consumers for maintaining the availability of working capital. In the context of corporate financing operation, the business strategy of the firm has to be established in such manner that may control the risk factor within the company’s capital structure.

Chapter 5: Conclusion and Recommendation

5.1 Conclusion

The present study has aimed to evaluate the implications of the firm’s size on the corporate finance or financial leverage in the context of banking industry of Australia and New Zealand. In the context of study objectives, the selection of different measures of firm’s size has been found very effective to evaluate the size of an organisation associated with the banking sector. In this regard, the firm’s size has been measured with reference to financial data related to total revenue, profitability, total assets, and market value of equity that have been taken as independent variable to meet the study objectives in an efficient manner. However, the efficiency of corporate financing decision has been measured with consideration of total debt capital of the banking firm as the dependent variable. For attainment of study goals in an efficient manner, the consideration of financial data of 25 banking firms aligned with the banking and finance sector of Australia over a period of 2 years. The consideration of secondary data or findings of past studies provides a great support to researcher for assessing the in-depth understanding about different aspects of firm’s size assessment and their implication on the corporate financing decision. The usage of literature has been found an appropriate tool to compare and evaluate the views and findings of different scholars about different variables that are considered in the current investigation. The consideration of a variety of variables shows that researcher has performed an appropriate cross-sectional study.

As per the study aim, the current investigation has focused to evaluate the relationship among two different variables such as size of banking firms and total debt. Therefore, researcher has adopted the quantitative research methodology in which investigator concludes that the usage of ANOVA, Correlation and other elements of Regression analysis has been found very effective to test the hypothesis along with the characteristics of selected data set to gain appropriate understanding about the areas of investigation. The overall evaluation of suggests that different measures of firm’s size such as total revenue, profitability, total assets, and market value of equity are having the direct influence over the leverage of total debt of banking firms in Australia and New Zealand. This is because the regression analysis has disclosed the p-value below the 0.05 so as the relationship among the selected variable is statistically significant so as the null hypothesis has been rejected and alternative hypothesis has been accepted. Therefore, it can be stated that the size of banking firm has major influence over its corporate financing decisions.

Further assessment of descriptive statistics has disclosed appropriate results that show that the selected data set has appropriate characteristics to meet the study goals in an efficient manner. In the context of present case, the mean value of the revenue has recorded neat to £5641.71 Mn with the standard deviation of 10817.27. Furthermore, the average of profit margin has been floated near to £862.31 Mn, Moreover, the average value of the total assets has recorded neat to £165511.99 Mn with the standard deviation of 348757.8. In the context of current study, the change in profitability has recorded the adverse relationship with the financial leverage. In addition to that, the value of mean and standard deviation of the selected data about market value of equity capital of the banking firms is respectively £16986.57 Mn and 36535.33. However, the average value of debt capital in the banking companies has recorded near to £39994.44 Mn that shows that the debt funding is being termed as an important part of capital structure of banking firms as per the financial data of 25 banking firms for the period of 2 years. In the context of contemporary business environment, corporate financing decisions are having a significant influence over the long term investment planning and decision making process. In this regard, the firm’s size determines the capabilities of the business entity and efficiency of business operations that may have a significant influence over the capital structure and debt capital structure.

5.2 Connecting with objectives

5.2.1 To evaluate different elements that determines the firm’s size.

In the context of contemporary business environment, companies use different variable and elements to measure the size of the business entity. As per the study objective, the assessment of a variety of secondary data and views of different scholars concludes that the value of total assets is being termed as the most important indicator of firm’s size because this value presents an organisation’s investment within a variety of the current and non-current assets that are having direct influence over the operational capabilities of companies. In addition to that, the total monetary value of an organisation’s sales or total revenue has been addressed as a great measure to present the firm’s size among the banking firms. This is because it presents the efficiency of business operations that may have direct impact on the long term organisational sustainability. Apart from that, the monetary value of all the products and production volume of an organisation has been found an effective approach for evaluating the overall value of firm. In similar way, the profitability has been perceived as an important indicator of firm’s size because it determines the growth in the business operation or expansion of business capabilities that are aligned with the business profitability. Moreover, the profitability has direct relationship with the financing decisions of an organisation. Furthermore, the size of the market plays an important role in influencing the size of an organisation because an organisation would extra opportunities for the business expansion and identification of new sources of finance in large market scenarios. In similar way, the market value of equity capital has addressed as an important indicator of firm’s size that could be extracted by multiplying the market value of shares with the total number of outstanding shares. This is because share prices of an organisation are being influenced by various internal and external elements of the business environment so as it can be used as an important indicator of size of the business entity.

5.2.2 To examine key aspects of corporate finance related operations in different companies

With reference to above objective, the evaluation of a variety of secondary in the literature review concludes that corporate finance activities are being executed from a range of capital investment operations to generate better returns and assessing tax benefits. This study has addressed the financing operations in the banking industry are significantly influenced by several critical elements that include the cost of capital, availability of source of finance, requirements of funds and expected return of different business plans. As per the study, it concludes that companies either raise financial capital by issuing the debt securities or by selling common stocks for attainment of distinct financing needs with reference to long and short term business goals and corporate strategies. Moreover, it has found that investors consider the leverage as an option for fund raising through which management in different companies would find a significant increase in the company’s returns that can be aligned with the different investments projects of an organisation. In addition to that, a company that is highly dependent on the debt capital is being considered as an aggressive capital structure and it could enhance the risk for shareholders. Furthermore, the comparison of arguments of different scholar concludes that the large companies are having the better access to capital markets that would support companies in lowering the total cost of borrowing and increasing the overall business profitability. This is because the large companies have higher more operational capabilities to manage the large proportion of debt capital in an efficient manner.

return on investment is being termed as key driver of corporate financing operations because

5.2.3 To investigate the role of corporate finance in capital structure decisions

As per the above objective, this assessment of a variety of information concludes that the efficiency of an organisation is significantly aligned with the capital structure planning and other decisions to ensure the optimum usage of resource in the context of contemporary business environment. By considering an appropriate combination of debt and equity capital, the corporate financing decisions assists managers in examining the profit generation capabilities of an investment proposal that may enhance the overall value of capital structure along with the business entity associated with banking sector. In this regards, the different theories have tried to establish the link between the organisation’s capital structure and contemporary business trends and concludes that the corporate financing decision the controlling the level of debt capital with reference to risk factors and returns on investment. These factors are having direct impact on the effectiveness of manager’s decision.

5.2.4 To assess the impact of revenue on the financial leverage of banks operating within the banking sector of Australia and New Zealand

In the context of above objective, the application of statistical analysis with the help of correlation matrix has recorded the positive association between the revenue and total value of debt capital among the banking firm that is near to 0.966. However, the application of regression analysis for testing the hypothesis does not find any significant impact of the revenue on the debt capital because the p-value is below than 0.05. Therefore, null hypothesis has been accepted in which total revenue of banking firms does not have a direct impact on their financial leverage. But, revenue has some relationship with debt capital.

5.2.5 To evaluate the impact of total assets on the financial leverage of banking firm operating within the banking sector of Australia and New Zealand

With reference to above objective, the assessment of financial data of banking firm with consideration of correlation matrix and regression analysis concludes the significant relationship between the total assets and debt capital. This is because p-value is below than 0.05 so as relationship between the two variables is statically significant with the positive correlation of 0.986 between the total assets and debt capital. Therefore, the alternative hypothesis has been accepted that determines that total Assets has a direct impact on the financial leverage of banking firm associated with the banking sector of Australia and New Zealand. Therefore, it can be stated that change in the value of total assets affects the value of total debt in banking firms.

5.2.6 To assess influence of market value of equity on the financial leverage of banking companies that operating within the banking sector of Australia and New Zealand

For attainment of study goal, the above objective has influenced the researcher to apply different tools of quantitative analysis for determining the impact of market value of equity over the total debt. In this regards, the evaluation of findings of current investigation concludes the positive relationship among two variables because the value of correlation of has recorded near to 0.918 between the market value of equity and total debt. In similar way, the p-value in regression analysis is lower than the alpha value of 0.05 that determines the relationship between two variables statistically significant. The findings of quantitative analysis have accepted alternative hypothesis in which the Market Value of Equity Capital has a direct impact on the financial leverage of banking that are working in the banking sector of Australia and New Zealand

5.2.7 To identify the impact of profitability on the financial leverage of banking companies that operating within the banking sector of Australia and New Zealand

In the context of present investigation, the profitability is termed as an important variable for determining the firm’s size. In this regard, researcher has addressed the positive relationship within two variables because the value of correlation has recorded near to 0.886 between profit and total debt of banking firms. Moreover, the application of regression analysis concludes that the p-value is below than the alpha value of 0.05 that presents statistically significant relationship among two elements of corporate financing and firms. Therefore, the alternative hypothesis has been considered that determines that the Net Income has a direct impact on the financial leverage of banking firm. Moreover, regression analysis has found the negative coefficient that shows the inverse relationship between the net profit and total debt. It shows the increase in net earnings reduces the leverage and vice-versa. Therefore, it can be stated that the higher profit margin within the banking firm influences the management to pay extra attention on the internal sources of finance to support the investment decisions.

5.3 Limitation of the study

The particular investigation is mainly focused to determine the influence the firm’s size on the corporate finance or financial leverage in the context of banking industry of Australia and New Zealand. However, the weakness of the current can be determined in the form of non-consideration various other measures of firm size such as monetary value of products, brand value and others. This is because the researcher has selected only four measures of the firm’s size such as revenue, total assets, market value of equity and profit margin. In similar way, the usage of only debt capital as an dependent variable to present the corporate financing operation has limited the usefulness of study findings. Moreover, the current study has been carried out a variety of secondary data along with the application of different tools of quantitative tools. In this regard, the non-consideration of primary data to assess the views of experts about the subject matter could be considered as an important limitation of the current investigation. Furthermore, the present study has focused on the financial data of the banks working in Australia and New Zealand so as the findings the current investigation lacks its application to carry out global scale studies. Moreover, some limitations can be seen in form of the consideration of only 25 banking firms listed in Australian Stock Exchange because several other non-listed firms could enhance the reliability of findings.

5.4 Scope of future research work

The future area of investigation should consider the impact of monetary and fiscal policies on the interest rates of banking firm or lending trends in the context of the Australia and New Zealand. This is because these monetary and fiscal policy trends are having direct impact on corporate policies and efficiency of the business operations. Moreover, another area of investigation should cover the evaluation of determinants of capital structure in the banking firms of Australia and New Zealand. This investigation will consider the exploratory research methodology to identify different elements that influence the capital structure related decisions within the banking firms.

5.5 Recommendations

In the context of present study, the users of research will mainly include the researchers, financial managers, banking and financing institutions, and other monetary control agencies. Therefore, all users should only focuses on the selected variable independent and dependent variables because the several other factors like market trends, market demand, economic growth, level of competition, brand value, cost of finance and many more may have a significant impact over the firm’s size and corporate financing decisions within the banking and finance industry. In addition to that, the findings of current investigation would mainly applicable in the context of list firms and large companies so as users of information should have consider several variables while evaluating the efficiency of small finance and banking firms.

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