The relationship between non-financial stakeholders and capital structure

Abstract

In today’s dynamic environment, both intellectual capital (IC), the main value added factor, and perceived environmental uncertainty (PEU), an unpredictable contingency factor, influence corporate performance (CP). Financial accounting literature highlights the importance of non-financial factors. Therefore, it is important for organizations to rely more on non-financial criteria than on financial factors to achieve higher competitive advantage. Identifying the most important non-financial factors that affect corporate performance and their relationship with capital structures (CS) is the main issue in today’s dynamic conditions. This research examines the relationship between non-financial factors of IC and PEU and evaluates their influence on CS directly or indirectly by considering the mediation effects of corporate performance. Questionnaires were distributed to 339 public listed Iranian manufacturing companies selected based on census data. Data was analyzed using structural equation modeling. The main findings of this study are as follows: IC can enhance corporate performance, PEU is positively linked to corporate performance, and corporate performance is positively linked to capital structure. The results also indicated a full mediation effect of corporate performance in the relationship between PEU and capital structure. Also, we analyze intellectual capital relation with 1) traditional vs. secular-rational values and with 2) survival vs. self-expression values. In order to determine the most efficient versions of intellectual capital, an Intellectual Capital Multiple Criteria Decision Support (ICMCDS) system was developed, consisting of a database, database management system, model-base, model-base management system, and user interface. This study contributes to determining capital structure decision making by considering IC and PEU in the context of companies in Iran. Further in-depth research is needed to examine the links between non-financial factors and capital structure with different measurement and perspectives to develop a deeper understanding of their effect on capital structure.