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1 – 10 of over 6000Rumanintya Lisaria Putri and Andre Prasetya Willim
Capital structure is an important factor for the company because it will be directly related to the financial condition of the company. This study aims to determine the effect of…
Abstract
Purpose
Capital structure is an important factor for the company because it will be directly related to the financial condition of the company. This study aims to determine the effect of asset structure, earning volatility, and financial flexibility on capital structure.
Design/methodology/approach
The population in this study was 52 companies in the consumer goods industry sector on the Indonesia stock exchange (IDX) and a sample of 39 companies obtained by purposive sampling method. The research method used in this study is multiple linear regression analysis using Eviews software.
Findings
The test results in the study show that asset structure and financial flexibility have a positive effect on capital structure, while earning volatility does not affect capital structure in companies in the consumer goods industry sector on the IDX.
Research limitations/implications
The results of this research can contribute to the addition of knowledge in the field of accounting, especially regarding the capital structure. Company management can use the results of this research as a reference and consideration to find out the factors that affect the capital structure so that company management can still maintain the company's survival and improve company performance.
Practical implications
The results of this study can contribute to the addition of knowledge in the field of accounting, especially regarding capital structure. Company management can use the results of this research as a reference and consideration to determine the factors that affect the capital structure so that company management can still maintain the survival of the company and improve company performance.
Social implications
This study only uses the variables of asset structure, financial flexibility and earning volatility as independent variables. Further research is recommended to consider the use of other variables that can affect capital structure and if using the same variable is expected to use research objects that have stable or increasing asset and income values, so that asset structure variables and profit volatility can show significant results and influences.
Originality/value
This study is one of the few studies that examines how the effect of asset structure, profit volatility and financial flexibility on capital structure in companies in the consumer goods industry sector on the IDX. Company management must pay attention to the composition of the capital structure as well as possible and make careful planning and the right decisions so as to produce a capital structure that can provide profits.
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The purpose of this paper is to explore the dynamic interdependence structure and risk spillover effect between the Chinese stock market and the US stock market.
Abstract
Purpose
The purpose of this paper is to explore the dynamic interdependence structure and risk spillover effect between the Chinese stock market and the US stock market.
Design/methodology/approach
This paper mainly uses the multivariate R-vine copula-complex network analysis and the multivariate R-vine copula-CoVaR model and selects stock price indices and their subsector indices as samples.
Findings
The empirical results indicate that the Energy, Materials and Financials sectors have leading roles in the interdependent structure of the Chinese and US stock markets, while the Utilities and Real Estate sectors have the least important positions. The comprehensive influence of the Chinese stock market is similar to that of the US stock market but with smaller differences in the influence of different sectors of the US stock market on the overall interdependent structure system. Over time, the interdependent structure of both stock markets changed; the sector status gradually equalized; the contribution of the same sector in different countries to the interdependent structure converged; and the degree of interaction between the two stock markets was positively correlated with the degree of market volatility.
Originality/value
This paper employs the methods of nonlinear cointegration and the R-vine copula function to explore the interactive relationship and risk spillover effect between the Chinese stock market and the US stock market. This paper proposes the R-vine copula-complex network analysis method to creatively construct the interdependent network structure of the two stock markets. This paper combines the generalized CoVaR method with the R-vine copula function, introduces the stock market decline and rise risk and further discusses the risk spillover effect between the two stock markets.
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P.K. Priyan, Wakara Ibrahimu Nyabakora and Geofrey Rwezimula
The study aims to evaluate the influence of capital structure decisions and asset structure on firms' performance for East African listed nonfinancial firms.
Abstract
Purpose
The study aims to evaluate the influence of capital structure decisions and asset structure on firms' performance for East African listed nonfinancial firms.
Design/methodology/approach
The research is descriptive and employs secondary data from the East African capital markets' websites. The generalized method of moments approach is used to estimate the relationship due to its ability to account for endogeneity problems.
Findings
The result shows that capital structure decisions and asset structure strongly influence the firms' performance. When long-term debts, short-term debts and tangible fixed assets increase, the return on total assets increases. An increase in the total debt ratio raises the return on equity (ROE). However, the increase in long-term debt lowers the ROE.
Practical implications
The results will help investors and potential investors decide on a financing policy that maximizes performance. Likewise, governments and other policymakers review the capital markets' frameworks to attract institutional and individual investors to the markets for financial availability and to increase profitability.
Originality/value
The research provides evidence on the influence of capital structure decisions and asset structure on firms' performance. Furthermore, its results contribute to firms' financing policy formulation and the corporate finance literature.
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Hani El-Chaarani, Tariq H. Ismail, Zouhour El-Abiad and Mohamed Samy El-Deeb
The aim of this paper has twofold: (1) to explain and compare the financial evolution of Islamic and conventional banking sector in the Gulf Cooperative Council (GCC) countries…
Abstract
Purpose
The aim of this paper has twofold: (1) to explain and compare the financial evolution of Islamic and conventional banking sector in the Gulf Cooperative Council (GCC) countries before and during the COVID-19 pandemic and (2) to explore the key success factors that might affect Islamic and conventional banks performance before and mainly during COVID-19 pandemic period.
Design/methodology/approach
Orbis Bank Focus database and annual financial reports are used to collect financial information of Islamic and conventional banks in GCC countries over four years: 2017, 2018, 2019 and 2020. Descriptive statistics, T-test, multiple regression, and 2SLS and GMM models are employed to analyze the financial structure and performance of Islamic and conventional banks before and during the COVID-19 pandemic period.
Findings
Results of this study reveal that (1) there is a significant difference between Islamic banks and conventional banks during the crisis of COVID-19, where the conventional banks have presented a higher level of financial performance and financial liquidity than their Islamic counterparts, (2) conventional banks have revealed higher capacity to manage their financial risk during the crisis period, and (3) a high level of non-performing loan, high inflation rate and high percentage of non-important cost have a negative impact on the financial performance of Islamic banks mainly during the pandemic period of COVID-19. However, the result indicates that a high level of liquidity risk increased the performance of Islamic banks but this impact falls sharply during the pandemic period.
Originality/value
This study provides information that supports investors, regulators and executive managers in GCC countries. A well-structured balance sheet would improve the financial performance and risk management of the banking sector in GCC countries, especially in times of crisis and pandemics.
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Shams Ur Rahman, Afef Khalil, Luigi Pio Leonardo Cavaliere and Soumaya Ben Khelifa
This study aims to explore the effect of the board of directors on the capital structure of listed non-financial firms on the Pakistan Stock Exchange (PSX).
Abstract
Purpose
This study aims to explore the effect of the board of directors on the capital structure of listed non-financial firms on the Pakistan Stock Exchange (PSX).
Design/methodology/approach
Using a panel data set of 208 financial Pakistani enterprises from 2015 to 2020, regression analysis is employed to examine the data utilizing independent variables such as board size, outside directors, directors' remuneration and managerial ownership to evaluate board characteristics and the total debt ratio for capital structure.
Findings
The results show that the board size positively impacts the debt ratio. However, outside directors, directors' remuneration and managerial ownership are negatively connected with the capital structure. The empirical findings indicate that corporate governance mechanisms play an important role in the capital structure decision of Pakistani non-financial companies.
Practical implications
This research contributes to the literature by addressing the function of the board of directors in the governance of Pakistani enterprises.
Originality/value
Few studies in Pakistan focus on board characteristics and those that do utilize different variables. This research aims to fill a critical gap by investigating the effect of the board of directors' attributes and the capital structure of the listed non-financial sector of Pakistan.
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R.M. Ammar Zahid, Muhammad Kaleem Khan and Muhammad Shafiq Kaleem
Executive decisions regarding capital financing are an important management aspect, especially during financing constraints and growth opportunities. The current study examines…
Abstract
Purpose
Executive decisions regarding capital financing are an important management aspect, especially during financing constraints and growth opportunities. The current study examines the impact of managerial skills of a company on capital financing decisions. Furthermore, it analyzed this nexus in financing constraints and growth opportunity situations.
Design/methodology/approach
The authors use the GMM (generalized method of moments) estimation approach on a dataset of 20,651 firm-year observations of Chinese A-share companies from 2010 to 2019.
Findings
The authors’ findings are compatible with management signaling and reputation enhancement theories, since they show that managerial skill is connected with more substantial debt financing. Managers with high management skills are likely to have more debt financing as they can foresee the economic future of their companies and tactfully convey private information, lowering information inequality and enhancing their reputation. Furthermore, the authors also show that firms with restricted financial resources and growth opportunities make this relationship stronger. Capital structure and managerial skill findings are unaffected by alternative specifications, omitted factors, industry group bias and endogeneity.
Originality/value
This study sheds fresh light on the essential manager personality trait of managing ability and how it influences complicated corporate decision-making, particularly in the tough environment due to financing constraints and competitive growth. The authors argue that high-ability managers are compelled to use debt financing not only to lessen information asymmetry but also to guarantee that the market finds their superior ability. This work contributes significantly to the managerial ability literature and the capital structure literature supporting signaling theory.
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Murad Harasheh, Alessandro Capocchi and Andrea Amaduzzi
There is still an ongoing debate on the value relevance of capital structure and its determinants. Recently the issue has been explored in family firms after being explored in…
Abstract
Purpose
There is still an ongoing debate on the value relevance of capital structure and its determinants. Recently the issue has been explored in family firms after being explored in mature firms. This paper investigates the role of institutional investors and the firm's innovation activity in influencing the firm's decision and ability to acquire debt capital.
Design/methodology/approach
A large sample of 700 privately-held family firms in Italy from 2010 to 2019. Two analysis techniques are used: panel analysis and path analysis. The value of debt and the debt ratio are used as leverage measures. The value of patent (as a proxy for innovation) and institutional investor are the explanatory variables.
Findings
The results show that institutional investors have no relationship with financial leverage measures except when controlling for an interaction variable (Institutional investors × Lombardy region). The patent value is positively correlated with debt; however, the ratio patent-to-asset is negatively related to financial leverage indicating higher risk exposure. The nonlinearity test demonstrates a turning point when the relationship between patent value and debt inverts.
Practical implications
Firms should monitor their innovation activity since excessive innovation increases risk exposure and affects financing opportunities and value. The involvement of institutional investors does not always enhance value.
Originality/value
Existing literature focuses separately on family firm innovations and financial leverage as outcome variables, emphasizing the role of institutional investors in both fields by adopting agency theory and socioemotional wealth framework. In this study, the authors go further by merging both relationships, investigating the dynamics of the institutional-family firm innovation relationship in influencing the firm's capital structure. The authors contribute to the ongoing debate by providing original findings on capital structure, governance and innovation, supported by rigorous methods to enhance family firms' decision-making.
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Sanjay Goel, Diógenes Lagos and María Piedad López
We investigate the effect of the adoption of formal board structure and board processes on firm performance in Colombian family firms, in a context where firms can choose specific…
Abstract
Purpose
We investigate the effect of the adoption of formal board structure and board processes on firm performance in Colombian family firms, in a context where firms can choose specific aspects of board structure and processes. We deploy insights from the behavioral governance perspective to develop arguments about how family businesses may choose board elements based on their degree of control over the firm (absolute control or less), and its effect on firm performance.
Design/methodology/approach
We use an unbalanced data panel of 404 firm-year observations. The data was obtained from the annual financial and corporate governance reports of 62 Colombian stock-issuing firms for the period 2008–2014 – due to change in regulation, data could not be added beyond 2014. Panel data technique with random effects was used.
Findings
The results show that board structure is positively associated with financial performance, however, this relationship is negative in businesses where family has absolute control. We also found that there is a negative association between board processes and performance, but positive association in family-controlled businesses.
Originality/value
Our research contributes to research streams on effects of family control in firm choices and on the interactive effect of governance choices and institutional context and more generally how actors interact (rather than react) with their institutional context.
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Aashi Rawal, Venkata Mrudula Bhimavarapu, Anureet Virk Sidhu and Shailesh Rastogi
Distressed companies create panic among investors. The overall effect comes on the economy and leads to a degraded image and value of all the companies operating in a country…
Abstract
Purpose
Distressed companies create panic among investors. The overall effect comes on the economy and leads to a degraded image and value of all the companies operating in a country. These distressing situations are harmful to the efficient development of a country in process of development. Financial distress (FD) is when a company or individual cannot promise to pay their obligations on time. Therefore, to analyze the threatening impacts of FD, the current study aims to reveal the impact of FD on the debt ratio (proxy of capital structure) of firms working in India.
Design/methodology/approach
Panel data analysis (PDA) has been used in the current study to analyze the data and generate novel results. The authors have considered the secondary data of firms present in the S&P BSE 100 index for ten financial years, i.e. 2010 to 2019.
Findings
This study has established that FD has no significant impact on the firm's capital structure. In addition, it has also been proved that asset size, learner's index, market capitalization and operating profit margin (OPM) have no interacting impact on the association between FD and the capital mix of firms.
Originality/value
As per the authors’ observation, no such study has been conducted till now that involves finding out the moderating impact of four different but significant factors of the business environment (assets size, learner's index, market capitalization and OPM) on the association between FD and capital structure of companies operating in a such an extensive and diverse economy.
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The paper investigates if the process that led to the birth of the Euro Area had a significant impact in homogenizing the capital structure decisions of European firms since the…
Abstract
Purpose
The paper investigates if the process that led to the birth of the Euro Area had a significant impact in homogenizing the capital structure decisions of European firms since the first introduction of the common currency.
Design/methodology/approach
A large sample of firms was constructed, and a Tobit-censored regression model was utilized to investigate the determinants of firms' observed capital structures. The Black–Scholes–Merton model was used to infer market values of assets, as well as the volatility of those values, from the observed market values of equity and the corresponding volatility. The existing differences in national tax rules were considered for estimating firm-specific marginal tax rates.
Findings
It was found that, despite the currency union and the institutional harmonization process, certain factors still play a different role. In particular, the impact of profitability is consistent with the pecking order view in some countries, and with the trade-off theory in others. Assets risk, measured as the annualized volatility of the market enterprise value, is the best predictor of observed leverage ratios. The sector of activity is significant in determining leverage decisions even when assets' risk is taken into account. Despite the monetary union and the increased financial and institutional integration in the Euro Area, the country of origin still plays a significant role in capital structure decisions, suggesting that other country-level factors may affect firms' financing behaviour.
Practical implications
The paper indicates that, despite the long harmonization process of institutions, regulations and public budget required to join the Euro, firms' financing decisions are still affected by country-specific factors once the common currency is introduced. Therefore, new entrant countries in the Euro area should not expect their companies to immediately conform with those located in other countries within the common currency area.
Originality/value
This article investigated the impact of the currency change from national currencies to the Euro on the determinants of capital structure choices. It was shown that, despite the long harmonization process that led to the birth of the Euro Area, national factors still affect firms' financing decisions. This provides guidance for policymakers in countries that are planning to join the Euro about the impact this will have on firms' financing decisions in the entrant country.
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