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1 – 10 of over 10000Jon Tucker, John Pointon and Moji Olugbode
The purpose of this study is to investigate the incidence of target gearing behaviour in firms as well as the drivers of such behaviour.
Abstract
Purpose
The purpose of this study is to investigate the incidence of target gearing behaviour in firms as well as the drivers of such behaviour.
Design/methodology/approach
The paper employs a triangulation approach across three methodological phases: a questionnaire survey, logistic regression modelling of firm data, and interviews with finance directors. The results are then discussed under the key themes of gearing optimality, valuation issues, external drivers, the finance life‐cycle, the impact of risk, and the relationship between gearing and corporate strategy.
Findings
The results reveal that the majority of firms engage in targeting, though targets are subject to fairly frequent revision as both external and internal drivers evolve. Important external drivers include macroeconomic variables and analysts' views, whereas important internal drivers include income gearing and profitability.
Practical implications
Given the range and variety of drivers, target gearing evidently represents a complex strategic decision for finance directors. The paper provides a benchmark perspective for finance directors when determining their firm's gearing strategy.
Originality/value
The innovation of the paper is the study of target gearing across three methods, the results of which are then triangulated to provide a deeper understanding of both the quantifiable and qualitative drivers of gearing. This provides a far broader insight into the real‐world determination of gearing strategy than a conventional empirical approach.
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The aim of the paper is threefold: to provide an overview of gearing in the Australian real estate investment market; formally examine the relationship between property returns…
Abstract
Purpose
The aim of the paper is threefold: to provide an overview of gearing in the Australian real estate investment market; formally examine the relationship between property returns, risk and gearing; and provide some guidance in evaluating “optimal” gearing levels for real estate investment.
Design/methodology/approach
A mathematical modelling framework is presented for evaluating the relationship between investment returns, risk and gearing levels.
Findings
The study highlights that risk rises with rising gearing levels and that risk‐adjusted returns fall with rising gearing. Furthermore, it is shown that the gearing‐risk relationship is influenced not only by the cost of debt structure but also the interdependency between ungeared returns and interest rates.
Research limitations/implications
The study suggests that current gearing levels from Australian listed property trusts and unlisted wholesale property funds are relatively conservative. This implies that current gearing could be increased, in particular for wholesale funds, without taking on substantially more risk whilst enhancing returns.
Practical implications
The paper is of value to industry and academia as it offers an extended framework for evaluating the relationship between risk and gearing. In particular, the framework provides insight for gauging gearing levels when constructing real estate investment strategies.
Originality/value
Importantly, the paper shows that the interdependency between ungeared returns and interest rates significantly impacts the relationship between risk and gearing.
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Lyton Chithambo and Venancio Tauringana
– The purpose of this paper is to investigate the relationship between company-specific factors and the extent of greenhouse gas (GHG) disclosures.
Abstract
Purpose
The purpose of this paper is to investigate the relationship between company-specific factors and the extent of greenhouse gas (GHG) disclosures.
Design/methodology/approach
The study is based on a sample of 210 FTSE 350 companies and uses the disclosure index to quantify GHG disclosures made in the annual reports, sustainability reports and web sites in 2011. Ordinary least squares regression is employed to model the relationship between the company-specific factors and the extent of GHG disclosures.
Findings
The results indicate that company size, gearing, financial slack and two industries (consumer services and industrials) are significantly associated with GHG disclosures while profitability, liquidity and capital expenditure are not. When the authors disaggregate GHG disclosures into qualitative and quantitative, the results suggest that the effect of some company factors differ depending on the type of GHG disclosures.
Research limitations/implications
The study is cross-sectional. A longitudinal study is necessary to understand the dynamics of GHG disclosures as firms may change their disclosure policy as the importance of GHG increases. The results imply that policy makers need to take into account certain company-specific factors when formulating policy aimed at improving GHG disclosures.
Originality/value
The results add evidence to the growing body of research focusing on the relationship between company-specific factors and GHG disclosure. The study also provides evidence that the effect of some company-specific factors on GHG disclosures differ depending on whether the GHG disclosures are quantitative or qualitative.
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One form of property development incentive is the provision of tax shelters by way of tax depreciation allowances for buildings and parts of buildings. Since a tax depreciation…
Abstract
One form of property development incentive is the provision of tax shelters by way of tax depreciation allowances for buildings and parts of buildings. Since a tax depreciation allowance can only be claimed against income from the subject property, or from another source, in order to assess the effect of the allowance, some form of after tax analysis is required. After tax analysis for both capitalisation and cash flow techniques is described and illustrated. Furthermore, slices of equated yield attributable to the main components of return from real property are demonstrated.
This paper introduces the reader to the London Stock Exchange's Alternative Investment Market (AIM) and seeks to identify those companies listed that would be in the broad apparel…
Abstract
Purpose
This paper introduces the reader to the London Stock Exchange's Alternative Investment Market (AIM) and seeks to identify those companies listed that would be in the broad apparel sector.
Design/methodology/approach
The paper gives a numerical value of the stability/success of those companies by using the QuiScore rating system and capital gearing.
Findings
The paper considers the progress made by the companies in this sector on corporate governance looking at the extent of their moves towards the provisions of the combined code.
Originality/value
The paper sets out areas for further research in this field to extend this study and broaden the knowledge on secondary market development.
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KC. LAM, G. RUNESON, C.M. TAM and S.M. LO
The present research explores capital requirement models used in medium‐size, private construction firms. The decision‐maker of a contracting firm can implement a cash flow…
Abstract
The present research explores capital requirement models used in medium‐size, private construction firms. The decision‐maker of a contracting firm can implement a cash flow forecasting model as an early warning system by using a model to identify likely cash‐flow problems in advance of the occurrence of these difficulties. Arrangements for acquiring any needed funds from other sources can then be made to avoid the possibility of financial problems in the corporation. In the present research, a model for financial decisionmaking is developed which, as demonstrated in a case study, provides a method of solving borrowing decision problems. The model includes the ability to evaluate qualitative and fuzzy circumstances. The model also assists in the selection of sources of funding, taking into consideration the capital structure ratio, the period of cash requirements, the borrowing limits and the tax conditions of the firm. The purpose of the model is to provide the decision‐maker with a tool kit to analyse her/his financial options.
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Rhoda Brown and Mark Whittington
The choice of accounting policies by a company has implications for the market’s understanding of corporate performance. Whilst the critical areas of choice may change over time…
Abstract
The choice of accounting policies by a company has implications for the market’s understanding of corporate performance. Whilst the critical areas of choice may change over time with new developments and changes in standards, the underlying issue remains relevant. This paper examines the effect of accounting techniques upon the relationship between accounting variables and UK share prices.
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The swaps market has been the world’s fastest growing financial market in the last few decades and the literature has sought reasons to explain this rapid growth. This study…
Abstract
The swaps market has been the world’s fastest growing financial market in the last few decades and the literature has sought reasons to explain this rapid growth. This study addresses this issue from a UK perspective and seeks to find out which UK organizations participate in the swaps market, why they choose to use it and the problems that they have encountered. The study consisted of a survey of the treasurers of 594 organizations in the UK. The most important reason why UK companies used swaps was to match their asset and liability cash flows and to stabilize their bottom line earnings. The results of this research will be of interest to both academics and to financial managers worldwide.
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Students are exposed to debt and equity financing; analysis of company affairs using selected financial statement information; use of ratios in financial analysis; the impact of…
Abstract
Learning outcomes
Students are exposed to debt and equity financing; analysis of company affairs using selected financial statement information; use of ratios in financial analysis; the impact of adequate financing on company performance; and trade-offs companies must make in their day-to-day operations.
Case overview/synopsis
Jetcon Corporation’s business model involved the importation of pre-owned cars from Japan for re-sale in Jamaica. It was a fiercely competitive business as there were over 100 companies involved in this sector. There was also a vibrant new-car sector. Jetcon focused on importing mid to low price Japanese pre-owned models, which were already common on Jamaican roads, and which would be affordable to the larger segment of buyers. Like most small businesses, it experienced difficulty raising financing in the amounts and cost that is required and this contributed to its decision to raise equity capital through an initial public offer. It was the first used-car dealer to list on the Jamaica Stock Exchange.
Complexity academic level
This case is suitable for final-year undergraduate students in finance. By that time they should already have been exposed to debt, equity and stock markets. It helps students to explore some of the issues involved in financing a company’s operations.
Supplementary materials
Teaching Notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.
Subject code
CSS 3: Entrepreneurship.
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Chiang Yat Hung, Chan Ping Chuen Albert and Hui Chi Man Eddie
This paper examines the inter‐relationship between profitability, cost of capital and capital structure among property developers and contractors in Hong Kong. Whilst major…
Abstract
This paper examines the inter‐relationship between profitability, cost of capital and capital structure among property developers and contractors in Hong Kong. Whilst major indigenous local developers are among the largest and the most profitable in the world, their contractor counterparts are generally small and nowhere near as profitable. An analysis of financial data suggests that gearing is generally higher among contractors than developers. However, it does not mean that contractors borrow more than developers. Indeed they do not need to borrow as much as developers even if they have the assets to pledge as collateral. Contractors do not have to pay for high land costs, and they obtain project finance from developers through interim payments in lump sum contracts that are widely adopted in the industry. Their high gearing reflects more their low equity base than high level of debts. Their costs of equities are about double the developers’, probably due to their usually low or negative profit margins. This conclusion is substantiated by further regression analysis of the data. The findings indicate that capital gearing is positively related with asset but negatively with profit margins. This article concludes with a discussion on implications of such profitability divide between the two sectors on the unequal relationship between developers and contractors, and on their competitiveness.
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