Impact of Covid-19 on the capital structure of UK firms

Yang, Chen (2023) Impact of Covid-19 on the capital structure of UK firms. MPhil(R) thesis, University of Glasgow.

Full text available as:
[thumbnail of 2023YangMPhil(R).pdf] PDF
Download (1MB)


Capital structure is a useful prerequisite for analyzing a company's financing behavior and financial risk appropriateness. Capital structure also affects the efficiency of the corporate governance structure and the realization of corporate value. A reasonable capital structure not only reduces corporate costs through financial leverage, but also improves the efficiency of corporate governance and creates wealth for longterm corporate development. The outbreak of the COVID-19 epidemic has brought an unprecedented crisis to the global economy. The financial and economic markets in the UK have been drastically affected by the pandemic, which has seriously impacted the survival and development of local enterprises. Therefore, taking the COVID-19 epidemic as its background, this paper examines the profitability, solvency, and cash flow levels of UK enterprises as factors that impact the capital structure of those enterprises.

This paper draws on company data from the UK for the period 2015-2021 as the foundation of its analysis. To determine capital structure, this paper examines the elements of broad capital structure indicators, such as gearing, long-term debt ratio and short-term debt ratio. The paper focuses on exploring the impact of firms' profitability, solvency, and cash flow levels on their capital structure. Because the level of capital structure of firms changed after the epidemic, the analysis contained herein also examines the moderating role of the epidemic in the relationship between profitability, solvency and cash flow levels and capital structure in the context of the pandemic era. The paper further explores the moderating effect of the epidemic on capital structure in terms of profitability, solvency and cash flow compared to the pre-epidemic period. To further analyze the impact of the epidemic, this paper also considers the effects of COVID-19 on capital structure.

The conclusions of this paper are as follows: (1) After the occurrence of the pandemic, the level of capital structure of enterprises (debt ratio, short-term debt ratio, long-term debt ratio) increased. (2) Compared to the pre-pandemic period, the negative inhibitory effects of profitability, solvency, and cash flow levels on capital structure became more pronounced after the pandemic. (3) Considering industry characteristics, the promoting effect of the pandemic on capital structure is smaller in manufacturing companies, while it is more significant in the retail and transportation industries. (4) From a lifecycle perspective, the promoting effect of the pandemic on capital structure is more significant in early-stage and growth-stage enterprises.

Finally, the conclusions of this paper are summarized, and several effective recommendations are proposed. The research conducted in this paper holds significant research significance in terms of enriching the theory of capital structure, assisting companies in navigating through crises, and determining the optimal level of enterprise capital structure.

Item Type: Thesis (MPhil(R))
Qualification Level: Masters
Keywords: Epidemic, COVID-19, capital structure.
Subjects: H Social Sciences > HG Finance
Colleges/Schools: College of Social Sciences > Adam Smith Business School > Accounting and Finance
Supervisor's Name: Strieborny, Dr. Martin and Tsoukas, Professor Serafeim
Date of Award: 2023
Depositing User: Theses Team
Unique ID: glathesis:2023-83727
Copyright: Copyright of this thesis is held by the author.
Date Deposited: 19 Jul 2023 09:07
Last Modified: 19 Jul 2023 09:10
Thesis DOI: 10.5525/gla.thesis.83727

Actions (login required)

View Item View Item


Downloads per month over past year