Firms’ Financing Choices and Profitability in the For-Profit Education Industry: An Empirical Survey of Education Companies Listed on the NYSE and NASDAQ Stock Markets

Andrea Quintiliani


This study seeks to understand financing choices and its relationships with profitability of for-profit education companies listed on NASDAQ and NYSE. This study tests the hypothesis that knowledge-based firms with higher assets intangibility used less debt in their capital structures than capital-intensive firms with higher assets tangibility. Capital structure theory is a useful framework to explain research findings. Tests were conducted on a sample consisting of education companies and capital-intensive firms listed on NASDAQ and NYSE during the period 2000-2018. Data collected by Zacks Premium database were submitted to regression analysis. Findings suggest that capital-intensive firms have higher debt ratios than education companies. Also, this study finds existence of a strong inverse relationship between profitability and the amount of debt in the capital structure of capital-intensive firms while no such relationship was found between these two variables for the education companies. This study’s findings could provide valuable information to policymakers and investors to identify suitable financing policies in the for-profit education industry. Findings can also be useful to stimulate debate on the role of equity financing to supporting growth policies of for-profit education industry. This study attempts to fill the absence of empirical studies on financial policies of for-profit education firms.

Contribution/ Originality: The main contribution of this study is that it will increase knowledge about funding able to sustain for-profit education firm's growth. Furthermore, this study tries to fill the lack of studies who investigate explicitly (empirically or theoretically) funding policies of for-profit education firms.

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