A study on the behavior of earning per share in relation to the changing of capital structure and earning before interest and tax (Ebit) / Rachel Bija Ganing

This paper is aimed to study and analyze the relationship and behavior of company's Earning Per Share and its Capital Structure and EBIT performance. There are 11 construction companies from the KLSE main board selected randomly for the purpose of this study. In order to get a fairer conclusion the study was done for a period of 5 years covering the pre and post economic downturn in Asian region, that is from 1996 through 2000. For the purpose of this study, two models have been selected to test and analyze the above mentioned relationship (multiple regression analysis and hypothesis testing). The regression result showed that there are mixture impacts on EPS by every percentage increase or decrease of each independent variable in each company. However, at the Critical Value equal 2.365 ( Degree of Freedom, v = 7 (11- 4 ), t - statistic = 0.025 (0.05/2 two tail test) the findings in most companies have revealed that there is no significant correlation between most of the independent variables i.e. EBIT, DPR, DER and DAR with EPS. Despite that, the Coefficient of Correlation, denoted by `C, showed that the linear relationship between the dependent variable and the independent variables are generally strong. Similar results are obtained on the Coefficient of Determination, denoted by 1-2', showed that averagely more that 80% of the variation in EPS can be explained by the independent variables in this study i.e. EBIT, DPR, DER and DAR.