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Article
Publication date: 19 June 2020

Daniel Gyung Paik, Joyce Van Der Laan Smith, Brandon Byunghwan Lee and Sung Wook Yoon

The purpose of this study is to investigate the relationship between off-balance-sheet (OBS) operating leases and long-term debt by analyzing firms’ debt risk profiles measured by…

Abstract

Purpose

The purpose of this study is to investigate the relationship between off-balance-sheet (OBS) operating leases and long-term debt by analyzing firms’ debt risk profiles measured by the constraints on firms in the financial ratios in their debt covenants.

Design/methodology/approach

This study determines debt risk profiles using three measures: the ex ante probability of covenant violation (Demerjian and Owens, 2016), firms in violation of debt covenants and firms close to covenant violations.

Findings

High-risk firms according to all three measures, on average, have a significantly lower level of operating leases, indicating that these firms use OBS leases as a substitute for long-term debt. Interestingly, for firms operating in industries in which leases are widely available, firms with a high probability of covenant violation have a significantly higher level of operating leases, indicating that these firms use OBS leases as a complement to long-term debt. Further analysis indicates that lease financing is less costly than debt financing for these firms.

Research limitations/implications

Overall, evidence of this study indicates that firms facing financial constraints may attempt to lease more of their assets, but the availability of leasing is constrained by their debt covenant obligations and the strength of the leasing market in its industry.

Originality/value

This study identifies states in which risky firms may treat leases as either complements or substitutes for long-term debt, implying that the leasing decision relates to the availability of an active leasing market for a firm’s assets and the firm’s financial constraints. The findings of this study support recent research showing that debt and leases are complementary in the presence of counterparty risk providing insight into the paradoxical relationship identified in prior research between leases and long-term debt.

Details

Review of Accounting and Finance, vol. 19 no. 3
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 14 May 2019

Daniel Gyung Paik, Timothy Hamilton, Brandon Byunghwan Lee and Sung Wook Yoon

The purpose of this paper is to investigate the association between the purpose of a loan and the type of debt covenants, separated into balance sheet-based and income…

Abstract

Purpose

The purpose of this paper is to investigate the association between the purpose of a loan and the type of debt covenants, separated into balance sheet-based and income statement-based covenants.

Design/methodology/approach

Using private loan deal observations obtained from the DealScan database over the period between 1996 and 2013, the authors classify the sample loan deals into three categories based on the purpose of borrowing, namely, borrowings for corporate daily operating purposes, financing purposes and acquisition and investing purposes. The authors conduct multinomial logistic regression analysis to test the relationship between the choice of financial ratios in a debt covenant and the purpose of a loan, controlling for financing constraints and other factors that have been identified as important to debt covenant analysis in prior studies.

Findings

The results provide evidence that the purpose of the loan is significantly associated with the type of debt covenants, suggesting that the lender and the borrower have considered the loan purpose when structuring their debt agreements. More specifically, the results indicate that the loans borrowed to fund acquisitions or long-term investment projects are more likely to have income statement-based covenants and less likely to have balance sheet-based covenants. In contrast, the loans borrowed for corporate daily operating purposes or financing purposes are more likely to contain balance sheet-based covenants relative to income statement-based covenants.

Research limitations/implications

The authors show that loan purpose is significantly associated with the choice between income statement-based and balance sheet-based covenants. This result further illustrates ways in which accounting information improves contracting efficiency. The results are limited to the US market with its institutional structure. In future studies, it would be interesting to perform similar investigations on firms in other countries.

Practical implications

The findings contain important and economically significant implications indicating that loan lenders and borrowers agree to include different types of accounting information (that is, income statement- versus balance sheet-based financial ratios) in their loan covenants for different purpose loans.

Social implications

Overall, the results provide important evidence regarding the connection between debt covenant structure and loan purpose. In doing so, it contributes to the literature on debt contract design (Dichev and Skinner 2002; Chava and Roberts 2008; Demerjian 2011; Christensen and Nikolaev 2012). Despite much interest in debt contract design, Skinner (2011) argues that there still exists incomplete knowledge of the economic factors that structure debt contracts. Income statement-based covenants depend on measures of profitability and efficiency and act as trip wires that transfer control rights to lenders when borrowing firms’ performance deteriorates. On the other hand, balance sheet-based covenants rely on information about sources and uses of capital and align interests between borrowing firms and lenders by restricting the borrower’s capital structure. The authors show that loan purpose is significantly associated with the choice between income statement-based and balance sheet-based covenants. This result further illustrates ways in which accounting information improves contracting efficiency.

Originality/value

This study is the first to identify differences in trends over time for the use of income statement- and balance sheet-based covenants as it relates to different loan purposes. The authors build on prior research to examine the degree to which loan purpose is associated with the choice between income statement-based and balance sheet-based covenants.

Details

Review of Accounting and Finance, vol. 18 no. 2
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 9 May 2013

Sohyung Kim, Cheol Lee and Sung Wook Yoon

The purpose of this paper is to investigate how fair value reporting and increased managerial discretion under the new goodwill accounting affect the asymmetric timeliness of…

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Abstract

Purpose

The purpose of this paper is to investigate how fair value reporting and increased managerial discretion under the new goodwill accounting affect the asymmetric timeliness of earnings;, i.e. accounting conservatism.

Design/methodology/approach

Various empirical models are applied to a sample of 11,034 firms. To capture a cross‐sectional variation in asymmetric timeliness of earnings, Kahn and Watts' C_Score is adopted.

Findings

It is found that financial reporting for firms with purchased goodwill has become more conservative after the enactment of the new standard. However, once an increase in conservatism that is not attributable to new goodwill accounting is controlled for, it is found that accounting earnings for firms with purchased goodwill become less conservative.

Research limitations/implications

The results should be interpreted with caution, because the effect of concurrent events other than the adoption of SFAS 142 on reported earnings is not perfectly controlled.

Practical implications

The results of this paper support Watts' assertion that new goodwill accounting impairs accounting earnings' ability to reflect the economic earnings in a timely manner, but these results should be interpreted with caution, as the main objective of goodwill accounting is not to improve accounting conservatism.

Originality/value

This paper makes a timely contribution to the debate of fair value accounting by focusing on the impact of SFAS 142 on the asymmetric timeliness of earnings. By employing all available firms with purchased goodwill balances rather than relying on firms that report impairment losses, our research design better captures the impact of SFAS 142 on financial reporting.

Details

Review of Accounting and Finance, vol. 12 no. 2
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 29 November 2011

Ji Young Park and Soo Wook Kim

The purpose of this paper is to identify the effect of corporate social responsibility (CSR) and ISO 26000 on a company’s reputation and loyalty. After reviewing the related…

1237

Abstract

Purpose

The purpose of this paper is to identify the effect of corporate social responsibility (CSR) and ISO 26000 on a company’s reputation and loyalty. After reviewing the related articles on CSR and ISO 26000, which is considered the global CSR standard, the authors aim to suggest the available empirical models and research questions to assess the effect of ISO 26000 on business management.

Design/methodology/approach

The authors examine the CSR and ISO 26000 related papers and find out the specific aspects of ISO 26000. Also the authors show all ISO 26000 contents and analyze them in order to understand the effects. Finally, the authors provide the whole empirical model and research questions for future studies.

Findings

The paper provides the research model and several hypotheses about whether ISO 26000 has had an effect on company reputation. Also a research model is suggested with proper research methodology.

Research limitations/implications

Due to the research purpose, the paper ends with the suggestion of an empirical model. Panel data need to be applied to verify the suggested model.

Originality/value

There are various papers regarding the effect of CSR. However, few papers exist about the causal relationship between ISO 26000, which is the global standard of CSR, and company reputation.

Details

Asian Journal on Quality, vol. 12 no. 3
Type: Research Article
ISSN: 1598-2688

Keywords

Article
Publication date: 8 February 2016

Steven Chen

The purpose of this paper is to outline a framework for marketing cultural goods (e.g. music) to global markets by examining modes of entry and positioning strategies used by…

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Abstract

Purpose

The purpose of this paper is to outline a framework for marketing cultural goods (e.g. music) to global markets by examining modes of entry and positioning strategies used by media producers of the South Korean music industry.

Design/methodology/approach

An historic analysis was implemented to investigate the modalities and structures through which cultural products are produced and disseminated. Data for this study came from 314 articles collected from www.allkpop.com, a leading English-language, South Korean popular culture news site.

Findings

The cultural technology framework consists of the institutionalization of cultural technology, exportation of cultural content, collaborations with local talent, and joint ventures with local markets.

Research limitations/implications

The findings emerge from an analysis of South Korean popular music industries, and further research is needed to generalize the results across cultural industries.

Practical implications

The cultural technology framework can be applied to cultural industries such as music, film, comics, and art, where culture and language could be barriers to adoption.

Originality/value

This study outlines a framework for the modes of entry and positioning strategies of cultural goods (e.g. music) in international markets. Extant literature has examined global marketing from the purview of durable consumer goods and brands, with limited insights into cultural products. More broadly, this paper addresses the call for more qualitative inquiry into international marketing topics.

Details

International Marketing Review, vol. 33 no. 1
Type: Research Article
ISSN: 0265-1335

Keywords

Case study
Publication date: 26 March 2018

Wiboon Kittilaksanawong and Margaux Afanyan

Competing in Emerging Markets; Internationalization of Service Firms; Global Marketing.

Abstract

Subject Area

Competing in Emerging Markets; Internationalization of Service Firms; Global Marketing.

Study level/applicability

Senior undergraduate or graduate students in business schools.

Case overview

Uber first entered the South Korean taxi hailing service in Seoul in September 2013. In March 2015, the company shut down its operations after being charged for operating an illegal service. However, in January 2016, Uber decided to re-launch Uber’s premium service, UberBLACK after working with the city government. Given the country’s unique characteristics, was the decision to re-enter the market justifiable? Would Uber’s new strategies including partnering with a local company be sufficient? How could Uber gain more market share against its local powerful competitors?

Expected learning

Outcomes This case allows students to understand the challenges of internationalizing services of a global company in an emerging market that has strong national cultures and domestic preferences. The students will learn how to analyze the country and industry external environment as well as internal resources and capabilities to formulate the appropriate market entry strategies and to effectively implement them. The students will also learn the critical role of host country government and how to manage its relationship, the first- and second-mover advantages/disadvantages and the sustainability of innovative business models.

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 11: Strategy

Details

Emerald Emerging Markets Case Studies, vol. 8 no. 1
Type: Case Study
ISSN: 2045-0621

Keywords

Article
Publication date: 5 March 2018

Minh Tuan Nguyen, Abdelraheem M. Aly and Sang-Wook Lee

This paper aims to conduct numerical simulations of unsteady natural/mixed convection in a cavity with fixed and moving rigid bodies and different boundary conditions using the…

Abstract

Purpose

This paper aims to conduct numerical simulations of unsteady natural/mixed convection in a cavity with fixed and moving rigid bodies and different boundary conditions using the incompressible smoothed particle hydrodynamics (ISPH) method.

Design/methodology/approach

In the ISPH method, the pressure evaluation is stabilized by including both of divergence of velocity and density invariance in solving pressure Poisson equation. The authors prevented the particles anisotropic distributions by using the shifting technique.

Findings

The proposed ISPH method exhibited good performance in natural/mixed convection in a cavity with fixed, moving and free-falling rigid body. In natural convection, the authors investigated the effects of an inner sloshing baffle as well as fixed and moving circular cylinders on the heat transfer and fluid flow. The heated baffle has higher effects on the heat transfer rate compared to a cooled baffle. In the mixed convection, a free-falling circular cylinder over a free surface cavity and heat transfer in the presence of a circular cylinder in a lid-driven cavity are simulated. Fixed or moving rigid body in a cavity results in considerable effects on the heat transfer rate and fluid flow.

Originality/value

The authors conducted numerical simulations of unsteady natural/mixed convection in a cavity with fixed and moving rigid bodies and different boundary conditions using the ISPH method.

Details

International Journal of Numerical Methods for Heat & Fluid Flow, vol. 28 no. 3
Type: Research Article
ISSN: 0961-5539

Keywords

Article
Publication date: 3 April 2009

Geon Woo Kim, Deok Gyu Lee, Jong Wook Han, Seung Hyun Lee and Sang Wook Kim

The purpose of this paper is to identify security technologies that are essential in making home network systems secure and to describe specialized security mechanisms for the…

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Abstract

Purpose

The purpose of this paper is to identify security technologies that are essential in making home network systems secure and to describe specialized security mechanisms for the home network and the relationships among them.

Design/methodology/approach

The research model is designed to support three functions: authentication, authorization, and security policy. Authentication is tested in several methodologies such as id/pw, certificate, or bio; authorization is tested using RBAC methodologies; and security policy is specified using newly‐designed script language, such as xHDL.

Findings

The findings for “authentication” suggest that home network users can access services conveniently and securely. In addition, the findings for “security policy” suggest that security policy for home network requires specialized rather than general specification.

Practical implications

The paper identifies three security functions essential for home network: authentication that supports most existing authentication mechanisms, so as to maximize user accessibility; authorization that is middleware‐independent and beyond the physical transport layer; and security policy optimized for the home network environment.

Originality/value

The paper focuses on an implementation‐based security model for the home network. Though interest and research in home network security are increasing, only limited authentication applications have been adopted in real deployment up to now. This paper introduces an integrated security model and emphasizes safety and convenience so as to promote reliability in home network services.

Details

Internet Research, vol. 19 no. 2
Type: Research Article
ISSN: 1066-2243

Keywords

Book part
Publication date: 21 July 2011

Jon S.T. Quah

The Hanbo (meaning Korean treasure) scandal or “Hanbogate” occurred on January 23, 1997, with the bankruptcy of Hanbo Iron and Steel Company, the second largest steel company and…

Abstract

The Hanbo (meaning Korean treasure) scandal or “Hanbogate” occurred on January 23, 1997, with the bankruptcy of Hanbo Iron and Steel Company, the second largest steel company and 14th largest conglomerate in South Korea, as its debt had accumulated to US$5.6 billion. Hanbo's bankruptcy triggered an investigation by the Public Prosecutor's Office that resulted in the imprisonment for 15 years of Hanbo's founder, Chung Tae-Soo, for bribing politicians and bankers to pressure banks to extend hugh bank loans to Hanbo. Nine other persons were also convicted including Chung's son, who was jailed for three years for bribery and embezzlement, and Kim Hyun-Chol, the second son of President Kim Young-Sam, who was sentenced to three years jail and fined US$1.5 million (New York Times, 1997).

Details

Curbing Corruption in Asian Countries: An Impossible Dream?
Type: Book
ISBN: 978-0-85724-819-0

Open Access
Article
Publication date: 10 September 2021

Jun Sik Kim and Sol Kim

This paper investigates a retrospective on the Journal of Derivatives and Quantitative Studies (JDQS) on its 30th anniversary based on bibliometric. JDQSs yearly publications…

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Abstract

This paper investigates a retrospective on the Journal of Derivatives and Quantitative Studies (JDQS) on its 30th anniversary based on bibliometric. JDQSs yearly publications, citations, impact factors, and centrality indices grew up in early 2010s, and diminished in 2020. Keyword network analysis reveals the JDQS's main keywords including behavioral finance, implied volatility, information asymmetry, price discovery, KOSPI200 futures, volatility, and KOSPI200 options. Citations of JDQS articles are mainly driven by article age, demeaned age squared, conference, nonacademic authors and language. In comparison between number of views and downloads for JDQS articles, we find that recent changes in publisher and editorial and publishing policies have increased visibility of JDQS.

Details

Journal of Derivatives and Quantitative Studies: 선물연구, vol. 29 no. 4
Type: Research Article
ISSN: 1229-988X

Keywords

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