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1 – 10 of over 54000Lexis Alexander Tetteh, Amoako Kwarteng, Emmanuel Gyamera, Lazarus Lamptey, Prince Sunu and Paul Muda
The paper aims to investigate the role of corporate governance in the relationship between small businesses financing choice decisions on the business performance.
Abstract
Purpose
The paper aims to investigate the role of corporate governance in the relationship between small businesses financing choice decisions on the business performance.
Design/methodology/approach
The paper was situated within the financial growth cycle theory and stewardship theory and survey approach was adopted for data collection. The statistical analysis was conducted by using partial least square structural equation modelling.
Findings
The results indicate that the interaction of corporate governance and financing choice decisions strengthens the performance relationship. Further, corporate governance mediates the positive relationship between financing choice decisions and performance. Thus, suggesting that corporate governance can carry the effect of the financing choice decisions to business performance.
Practical implications
The findings of our research reveal that, small businesses who follow solid corporate governance procedures should expect higher business performance. This is because financing decisions alone will not assure positive business performance unless they are tied to a broader perspective of effective corporate governance practices.
Originality/value
To the best of the authors’ knowledge, this is the first study that contributes to the small business financing choice and performance literature by combining the strengths of financial growth cycle theory and stewardship theory to explain the financing choice decisions and, in particular, the role of corporate governance in the relationship. Further, the study is unique in its nature because it presents a successful model for small businesses in emerging economies to concentrate more on the role of corporate governance in enhancing business performance.
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Masaya Ishikawa and Hidetomo Takahashi
This study examines the relationship between managerial overconfidence and corporate financing decisions by constructing proxies for managerial overconfidence based on the track…
Abstract
This study examines the relationship between managerial overconfidence and corporate financing decisions by constructing proxies for managerial overconfidence based on the track records of earnings forecasts in Japanese listed firms. We find that managers have the stable tendency to forecast overly upward earnings compared to actual ones and that their upward bias decreases the probability of issuing equity in the public market by about 4.7 percent per one standard error, which economically has the strongest impact on financing decisions. This tendency is observed when we employ alternative measures for managerial overconfidence and other model specifications. However, in private placements, the choice to offer equity is not always avoided by managers. This implies that managers place private equity with the expectation of the certification effect
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The main purpose of this paper is to empirically examine how firm-specific (idiosyncratic) and macroeconomic risks affect the external financing decisions of UK manufacturing…
Abstract
Purpose
The main purpose of this paper is to empirically examine how firm-specific (idiosyncratic) and macroeconomic risks affect the external financing decisions of UK manufacturing firms. The paper also explores the effect of both types of risk on firms' debt versus equity choices.
Design/methodology/approach
The paper uses a firm-level panel data covering the period 1981-2009 drawn from the Datastream. Multinomial logit and probit models are estimated to quantify the impact of risks on the likelihood of firms' decisions to issue and retire external capital and debt versus equity choices, respectively.
Findings
The results suggest that firms considerably take into account both firm-specific and economic risk when making external financing decisions and debt-equity choices. Specifically, the results from multinomial logit regressions indicate that firms are more (less) likely to do external financing when firm-specific (macroeconomic) risk is high. The results of probit model reveal that the propensity to debt versus equity issues substantially declines in uncertain times. However, firms are more likely to pay back their outstanding debt rather than to repurchase existing equity when they face either type of risk. Of the two types of risk, firm-specific risk appears to be more important economically for firms' external financing decisions.
Practical implications
The findings of the paper are equally useful for corporate firms in making value-maximizing financing decisions and authorities in designing effective fiscal and monetary policies to stabilize macroeconomic conditions. Specifically, the findings emphasize on the stability of the overall macroeconomic environment and firms' sales/earnings, which would result stability in firms' capital structure that help smooth firms' investments and production.
Originality/value
Unlike prior empirical studies that mainly focus on examining the impact of risk on target leverage, this paper attempts to examine the influence of firm-specific and macroeconomic risk on firms' external financing decisions and debt-equity choices.
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Rima Bizri, Rayan Jardali and Marwa F. Bizri
The purpose of this paper is to investigate the role of non-economic factors on the financing decisions of family firms in the Middle East. To contextualize the study, the authors…
Abstract
Purpose
The purpose of this paper is to investigate the role of non-economic factors on the financing decisions of family firms in the Middle East. To contextualize the study, the authors steer away from the traditional capital structure debate toward the choice of financing paradigm: conventional vs Islamic.
Design/methodology/approach
This study uses Ajzen’s theory of planned behavior due to its ability to delineate the influence of non-economic motivational factors on the financing decisions of family firms. This study also examines the influence of “familial stewardship (FS),” another non-economic factor which is highly relevant in a collectivistic context. The authors initially use SEM with Amos to analyze 115 surveys of family firm owner-managers. For deeper probing, the authors undertook an additional post hoc qualitative analysis of six case studies using semi-structured interviews.
Findings
The findings of this study suggest that owner-managers’ attitude toward Islamic finance plays a primary motivational role in influencing their intentions to use it. More importantly, the findings depict a significant influence of “FS” and subjective norm on the attitudes of owner-managers. This implies that financing decisions which involve religious beliefs are directly influenced by the decision maker’s personal attitude, which, in turn, is significantly influenced by familial and social pressures.
Originality/value
This study fills a gap in the family-firm financing literature by suggesting that when choosing religion-related financial products, attitude plays a far more significant role than other motivational factors. This study also contributes to the “familiness” area of research by empirically demonstrating that FS has a significant influence on owner-managers’ attitude toward financing choices.
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Masudul Alam Choudhury, Mohammad Shahadat Hossain and Mohammad Taqiuddin Mohammad
The purpose of this study of this methodological abstraction is erected the nature of the well-being function as evaluative criterion. The well-being function (maslaha) evaluates…
Abstract
Purpose
The purpose of this study of this methodological abstraction is erected the nature of the well-being function as evaluative criterion. The well-being function (maslaha) evaluates the interrelationships between long-run investment (real sector), the corresponding financial instruments (financial sector) and the embedded socioeconomic variables and ethical values conveyed by extensive complementarities and participation in a systemic approach of unity of knowledge. Among the financing variables to be selected will be the transformation of debt-instruments into equity instruments. All financial instruments are to be transformed into a holistic participatory pooled portfolio.
Design/methodology/approach
The paper establishes the point that, the idea of long-run is appropriately that of a juncture of Islamic change during which the objective of well-being (maslaha) is evaluated (estimation leading to simulation) with long-run investment and Islamic financing instruments on the basis of the Islamic methodological worldview. This methodological worldview is premised on the ontological foundation of the episteme of organic unity of knowledge and the resulting world-system. The Qur’an refers to this foundation of knowledge as Tawhid. Tawhid is used in this paper to mean the Primal Ontological Law of Unity of Knowledge.
Findings
The most critical long-run investment program focused on is poverty alleviation and its equity-based financing instruments that reduce debt progressively to attain sustainable grassroots development with the ability to own, and the social capability to distribute resources and enable the grassroots. The corresponding interaction, integration and evolutionary dynamics of learning that emanate from the interrelationship of poverty alleviation as the focus of long-run investments and their attenuating financing instruments, along with the implications of inter-causal socioeconomic variables and the embedded episteme of unity of knowledge in the well-being function (maslaha). This paper is thus an abstracto-empirical contribution to the literature of Islamic finance, long-run investment and socioeconomic development with global significance.
Research limitations/implications
The choice of long-run investment for poverty alleviation and the corresponding Islamic financing instruments are summarized by the following Tawhidi epistemic schema (an extractive picture). Upon this epistemic methodological worldview, the entire structure of well-being and sustainability of socioeconomic development lies.
Practical implications
The paper brings out many of the properties that ought to be the truly moral/ethical and thereby the conformable analytical nature of the model of financing and investment in a combination of short-, medium- and long-term mobilization of resources to attain levels of social well-being as the objective criterion. Empirical work is done to bring the objective criterion to an applied level and to critically examine the work in the same field being carried out by many other ones, including authors and institutions. The empirical work done here can be widely extended to the case of estimating of the maslaha function (well-being).
Social implications
This paper carries an essentially moral and social perspective in its methodological orientation that is derived from the Islamic epistemological foundations of unity of knowledge (Tawhid) and applied to Islamic finance and investment theory with the well-being objective criterion.
Originality/value
This is an original paper that combines methodological abstraction with applied financing and investment perspectives. Such an abstracto-empirical approach has not been done in Islamic research writings.
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Ali Uyar and Mustafa Kemal Guzelyurt
The purpose of this paper is to investigate whether SMEs have a target debt ratio or not; who makes financing decisions for investments; the financing preferences; and which…
Abstract
Purpose
The purpose of this paper is to investigate whether SMEs have a target debt ratio or not; who makes financing decisions for investments; the financing preferences; and which factors play a role in external financing policy of the firms.
Design/methodology/approach
The authors adopted questionnaire survey methodology in the study. The questionnaire was administered to SMEs operating in Istanbul through e-mail, telephone, and fax in July 2011. For the analysis, the authors have adopted the non-parametric test of the Kruskal-Wallis.
Findings
The study produced several important findings. Most of the surveyed firms do not follow a target debt ratio. Hence, the trade-off theory is not supported. Partners rather than professional managers are more likely to make financing choices in SMEs. The study has provided evidence regarding the implementation of the pecking order principle. Turkish SMEs primarily prefer internal funding sources over external ones and short-term debt over long-term debt. Thus, the pecking order theory is supported. General economic conditions, debt-paying ability of the firm, and financial distress risk play the most important role in outside financing decisions.
Research limitations/implications
The study has got some limitations as all such studies have. First, it was conducted only on SMEs in Istanbul; hence it has a geographical limitation. Second, the findings may not be generalizable to large and publicly traded companies as the sample consists of only SMEs. For further study, similar research can be carried out across Turkey on a wider sample.
Originality/value
The SMEs are different from large companies in a variety of ways, such as ownership structure, complexity of operations, financing sources, and so on. Hence, there is a need for empirical analysis conducted, particularly, on SMEs. The primary motivation for the study is the scarcity of such empirical works in general. Secondarily, SMEs make up a large proportion of companies in the Turkish economy. Therefore, the subject needs to be studied in Turkey.
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Geeta Duppati, Frank Scrimgeour, Surachai Chancharat and Ploypailin Kijkasiwat
This paper aims to investigate how ethnic diversity and finance options impact the survival of small- and medium-sized enterprises (SMEs) in New Zealand.
Abstract
Purpose
This paper aims to investigate how ethnic diversity and finance options impact the survival of small- and medium-sized enterprises (SMEs) in New Zealand.
Design/methodology/approach
This study incorporates survey data and secondary data from the public domain. The surveys were conducted across six sectors of the economy categorised into four main ethnic groups involving six nationalities. This study adopts regression analysis using Probit, Logit and linear probability.
Findings
The financing choices of the entrepreneurs were consistent with pecking-order theory. The evidence suggests that information asymmetries are prevalent in New Zealand, as SMEs’ owners perceive significant risk from expanding businesses internationally. There is no relationship between ethnicity bias and the survival of firms.
Originality/value
This study provides a contribution to the literature on factors relating to business survival and guides the policymakers to use the benefits of potential factors to increase the survival rate of SMEs.
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Kenneth Yung, Qian Sun and Hamid Rahman
The purpose of this paper is to investigate the role of acquirer's earnings quality on the choice of payment method in mergers and acquisitions (M&A).
Abstract
Purpose
The purpose of this paper is to investigate the role of acquirer's earnings quality on the choice of payment method in mergers and acquisitions (M&A).
Design/methodology/approach
The paper applies a simultaneous equations model to address the concern of endogeneity between earnings quality and payment method in corporate acquisitions. In addition, a propensity score matching model is used for robustness purpose.
Findings
Previous studies imply that short‐term accruals have a significant impact on the choice of payment method in M&A. In this study, This paper shows that acquisition financing is not significantly affected by short‐term earnings quality once control variables are considered. Instead, this paper finds that it is the long‐term earnings quality of the acquirer that matters. Acquiring firms with poor (good) long‐term earnings quality prefer lower (higher) cash payment in acquisitions. Their results are robust to different definitions of earnings quality.
Research limitations/implications
Researchers should consider the effect of long‐term earnings quality in their future investigations.
Practical implications
Investors should be aware of this issue when evaluating corporate mergers.
Originality/value
This is the first study to examine the impact of long‐term quality of earnings on the choice of payment method in M&A.
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Jun Su and Yuefan Sun
The purpose of this paper is to test the effect of informal finance and trade credit on the performance of private firms.
Abstract
Purpose
The purpose of this paper is to test the effect of informal finance and trade credit on the performance of private firms.
Design/methodology/approach
Based on a survey to private firms in 19 cities, the paper empirically tests the promoting effects of informal finance and trade credit on the performance of private firms in China.
Findings
It was found that informal finance and trade credit have positive effects on private firms' performance measured by ROA. The net income reinvestment rate of private firms is positively related to whether or not the firm adopts informal financing or trade credit financing. A private firm having limited access to formal finance is more inclined to rely on self‐funds and is more limited by financing choices. Informal financing and trade credit can relieve the tension of cash flow chain but cannot solve the financing constraints. The empirical results also show that bank credit is still not the main financing choice for private firms and has not yet played a promoting role in private firms' performance and growth. Informal finance is more important to promote performance in manufacturing industry, while trade credit is more effective in wholesale and trading industry. The results show the coexistence viability of informal financing channels and formal financial institutions in China.
Practical implications
The policy implication is the Chinese Government should take careful steps to regulate informal financing sources.
Originality/value
After some theoretical literature, such as Lin and Sun, this paper explores for the first time the effect of informal financing channels on the performance of private firms.
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The purpose of this study is to provide evidence for how business group firms transfer financial resources among affiliated firms by examining the differences in the level of debt…
Abstract
Purpose
The purpose of this study is to provide evidence for how business group firms transfer financial resources among affiliated firms by examining the differences in the level of debt financing and the choices of new equity financing between group affiliated and non‐affiliated firms in an emerging market, Turkey. The role of affiliated banks for internal capital market transactions is also to be examined.
Design/methodology/approach
Univarite analysis and simple pooled OLS regression analysis are performed to examine the role of group affiliation on the level of several debt financing measures. Additionally, a Logit regression analysis is used to analyze the behavior of affiliated firms in their equity financing decisions by issuing new shares.
Findings
Group affiliated firms transfer funds in the group by using transactions such as trade debt, and issuing cash rights and bonus shares. The affiliated firms – especially with a bank in the group – support their higher growth with new equity issues in the forms of cash rights and bonus shares along with higher trade debt. Moreover, non‐affiliated firms utilize a higher percentage of debt to shareholders, while affiliated firms without a bank utilize a higher financial debt. These findings are consistent with the idea that the role of the group bank is very important in financing choices of affiliated firms.
Research limitations/implications
This paper provides direct measures of external and internal funds by focusing on new equity issues and debt structure, which can be applied in different economic environments, rather than using indirect measures or not readily available datasets such as connected party transactions.
Originality/value
The paper provides additional evidence to assess the efficiency of the use of internal capital markets. Moreover, the role of group affiliated banks among affiliated firms has not yet been extensively addressed in the literature and an examination of this issue leads to a better understanding of their roles in diversified business groups.
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