scholarly journals The influence of country governance on the capital structure and investment financing decisions of firms: an international investigation

2021 ◽  
Author(s):  
İlhan Çam ◽  
Gökhan Özer
Keyword(s):  
Capital Structure ◽  
Financing Decisions ◽  
Investment Financing ◽  
The Capital Structure

scholarly journals Testing the pecking order theory of capital structure: the case of Islamic financing modes

2020 ◽  
Vol 6 (1) ◽  
Author(s):  
Moncef Guizani
Keyword(s):  
Capital Structure ◽  
Random Effect ◽  
Order Theory ◽  
Equity Financing ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Corporate Financing ◽  
Financing Decisions ◽  
Executive Managers ◽  
The Capital Structure

AbstractThe purpose of this paper is to examine whether or not the basic premises according to the pecking order theory provide an explanation for the capital structure mix of firms operating under Islamic principles. Pooled OLS and random effect regressions were performed to test the pecking order theory applying data from a sample of 66 Islamic firms listed on Kingdom of Saudi Arabia stock market over the period 2006–2016. The results show that sale-based instruments (Murabahah, Ijara) track the financial deficit quite closely followed by equity financing and as the last alternative to finance deficit, Islamic firms issue Sukuk. In the crisis period, these firms seem more reliant on equity, then on sale-based instrument and on Sukuk as last option. The study findings also indicate that the cumulative financing deficit does not wipe out the effects of conventional variables, although it is empirically significant. This provides no support for the pecking order theory attempted by Saudi Islamic firms. This research highlights the capital structure choice of firms operating under Islamic principles. It explores the implication of the relevant Islamic principles on corporate financing preferences. It can serve firm executive managers in their financing decisions to add value to the companies.

scholarly journals Tax Policy and Firms' Financing Decisions: Empirical Evidence from the Dominican Republic

2021 ◽  
Vol 18 ◽  
pp. 732-750
Author(s):  
Alessandra Amendola ◽  
Marinella Boccia ◽  
Gianluca Mele ◽  
Luca Sensini
Keyword(s):  
Dominican Republic ◽  
Capital Structure ◽  
Tax Policy ◽  
Fixed Effects ◽  
Financing Decisions ◽  
Tax Returns ◽  
Financial Behaviour ◽  
The Individual ◽  
The Impact ◽  
The Capital Structure

Numerous studies have tried to explain the financial behaviour of firms based on different theories. Despite the vast and rich literature, only in the last decade has attention also been focused on emerging economies. In the first place, the purpose of this paper is to investigate the determinants of the capital structure in an emerging economy, such as that of the Dominican Republic, testing the sustainability of the trade-off and pecking order theories. Secondly, we also investigated the impact of tax policy on the financial behaviour of businesses. In this perspective, this study overcomes the distorting problems associated with estimating the tax variable, as it uses data from each company's tax returns. The data were provided by the Ministry of Finance to the World Bank as part of a collaboration on the analysis of fiscal policy. A fixed-effects (FE) estimation technique has been employed to analyse the financial structure of companies. Overall, the results show that the individual determinants have a strong ability to explain the capital structure of companies, also highlighting that, in some cases, the fiscal variable influences the financial behaviour of companies

scholarly journals Empirical Analysis of Capital Structure Determinants of Russian Oil and Gas Companies

2018 ◽  
Vol 13 (5) ◽  
pp. 80-109 ◽  
Keyword(s):  
Capital Structure ◽  
Oil And Gas ◽  
Structure Form ◽  
Financing Decisions ◽  
Western Market ◽  
Definition Of ◽  
Oil And Gas Companies ◽  
A Company ◽  
The Capital Structure

The theory of capital structure, developed in the last century, determines the factors on the basis of which the management of a given company must form its system of financing decisions in order to optimize the capital structure and, accordingly, to increase the company’s value. Despite the fact that the data of the theory are based on the fundamental concepts of corporate finance, such as the present value of future revenues, information asymmetry, and profitability, the tenets of different theories contradict each other. These ambiguous results concerning the influence of various factors on a company’s capital structure form the motivation and problem of this study. Decisions on financing a company have an impact on its value, and therefore its financing method is a very significant factor for investors, directors and other stakeholders, which makes the study of target capital structure determinants particularly relevant. The topic of the capital structure of Russian companies has barely been addressed in existing studies, since most often they are based on the Western market. Thus, the identification of regularities in the system of decisions on capital structure through the case study of oil and gas companies in Russia, as well as the definition of theories that explain these patterns, are of particular interest, motivated by the ambiguity of previous studies, and the lack of such studies on Russian companies. Identifying the existing patterns affecting decisions on capital structure and the theoretical framework that describes them will enable companies to develop their own system of capital structure decisions.

scholarly journals Does board characteristics affect the capital structure decisions of Ghanaian SMEs?

2006 ◽  
Vol 4 (1) ◽  
pp. 113-118 ◽  
Author(s):  
Joshua Abor ◽  
Nicholas Biekpe
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Small And Medium Enterprises ◽  
Governance Structures ◽  
Outside Directors ◽  
Corporate Board ◽  
Board Size ◽  
Board Characteristics ◽  
Financing Decisions ◽  
The Capital Structure

The issue of corporate governance has been a growing area of management research especially among large and listed firms. However, less attention has been paid in the area with respect to Small and Medium Enterprises (SMEs). This current study explores the link between corporate board characteristics the capital structure decision of SMEs. The paper specifically assesses how the adoption of corporate governance structures among Ghanaian SMEs influences their financing decisions by examining the relationship between corporate governance characteristics and capital structure using an appropriate regression model. The results show negative association between capital structure and board size. Positive relationships between capital structure and board composition, board skills, and CEO duality are, however, found. The control variables in the model show signs which are consistent with standard capital structure theories. The results generally suggest that SMEs pursue lower debt policy with larger board size. Interestingly, SMEs with higher percentage of outside directors, highly qualified board members and one-tier board system rather employ more debt. It is clear, from the study, that corporate governance structures influence the financing decisions of Ghanaian SMEs.

Agency or stewardship?

2018 ◽  
Vol 30 (3) ◽  
pp. 1352-1373 ◽  
Author(s):  
Danny Woosik Choi ◽  
Hyun Kyung Chatfield ◽  
Robert Evans Chatfield
Keyword(s):  
Capital Structure ◽  
Least Square ◽  
Lodging Industry ◽  
Future Research ◽  
Content Type ◽  
Financing Decisions ◽  
Bivariate Correlation ◽  
Leadership Structure ◽  
Managerial Implications ◽  
The Capital Structure

Purpose This study aims to empirically investigate agency and stewardship theories in the US lodging market by examining the influence of fiscal and non-fiscal leadership structures on the debt financing decisions of lodging firms. Design/methodology/approach Secondary financial data have been collected for USA-based lodging firms. Subsequently, bivariate correlation, pooled ordinary least square) and endogeneity analyses have been performed on the data. Findings The findings support the significant influence of some corporate governance attributes on the capital structure of US lodging firms and show the limited applicability of agency and stewardship theories. Practical implications Theoretical and managerial implications are suggested in terms of balancing leadership structure attributes from the agency and stewardship theories, the capital structure of lodging firms and the future research. Originality/value Despite its importance considering the intensive capital and relatively high liabilities needed for success in the lodging industry, the influence of leadership structure on capital structure has not been examined either empirically or theoretically. Leadership structure attributes, both fiscal and non-fiscal, are included in the study to gain a richer understanding of their influence. The outcomes of the analysis suggest managerial implications for leadership structure as well as theoretical generalizability for agency and stewardship theories within the lodging industry.

The nexus between capital structure and firm-specific factors: evidence from Indian companies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohit Pathak ◽  
Arti Chandani
Keyword(s):  
Capital Structure ◽  
Least Square ◽  
Growth Potential ◽  
Company Size ◽  
Content Type ◽  
Ordinary Least Square ◽  
Financing Decisions ◽  
Size Growth ◽  
Specific Factors ◽  
The Capital Structure

PurposeThe aim of this study is to empirically examine firm-specific factors that influence the financing decisions of companies listed on BSE-500 index. Firm-specific variables such as profitability, company size, growth potential, liquidity, non-debt tax shields, age and tangibility were evaluated in this study.Design/methodology/approachThis empirical research is performed using longitudinal data of 366 companies listed on the BSE 500 index during 2006–2020. Pooled ordinary least square method is employed to classify primary determinants of capital structure.FindingsThe results show that profitability, liquidity and non-debt tax shield are negatively associated whereas, company size, growth potential, age and tangibility are positively associated with the capital structure. The authors’ observations are aligned with either the trade-off hypothesis or the principle of the pecking order.Research limitations/implicationsThis study helps to better understand how firm-specific factors play a vital part in deciding the capital structure of businesses and makes a significant contribution to the literature. Thus, the present study examines the drivers of the capital structure among sample Indian companies, which allow firm managers and regulators to recognise relevant variables that optimise performance. This study is limited to Indian companies and only firm-specific variables were considered.Originality/valueThe current research focuses on the impact of firm-specific variables upon the financing decisions of Indian companies. In the background of developed countries, numerous studies in this field have been carried out. In the Indian context, however, there are not many researches in this area. However, the existing studies use one or two ordinary least square (OLS) models, resulting in a lack of thorough research and robust results. To address this gap in the analysis, the current study used four models and used a 15-year time frame, as well as a bigger sample size, which was not used in earlier investigations.

Capital structure and corporate governance of soccer clubs

2014 ◽  
Vol 37 (7) ◽  
pp. 658-678 ◽  
Author(s):  
Panagiotis Dimitropoulos
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Content Type ◽  
Financing Decisions ◽  
Corporate Governance Mechanisms ◽  
Football Clubs ◽  
Future Viability ◽  
Corporate Governance Quality ◽  
The Impact ◽  
The Capital Structure

Purpose – The present study aims to examine the impact of corporate governance quality on the capital structure of European soccer clubs and specifically on the level of debt that soccer clubs decide to issue. Design/methodology/approach – A sample from 67 European soccer clubs over the period of 2005-2009 was analyzed, and panel data techniques were performed to assess the impact of specific corporate governance provisions on the capital structure of football clubs (FCs). Findings – Evidence indicate that efficient corporate governance mechanisms such as the increased board size and independence and the existence of more dispersed ownership (managerial and institutional) result in a reduction in the level of leverage and debt, thus reducing the risk of financial instability. Practical implications – This evidence suggests that corporate governance could be used as a monitoring mechanism for reducing the fictitious level of debt that characterizes the majority of European soccer clubs. This study could prove useful to Union of European Football Associations (UEFA) regulators because it provides an additional insight for the importance of establishing sound governance principles in European soccer so as to enhance the effectiveness of the recent “financial fair play” regulation which was launched in 2010, as well as to improve the financial status of the clubs and sustain their future viability. Originality/value – This is the first study internationally that examines capital structure within FCs, thus extending the existent empirical evidence in the literature and adding to a growing body of research on the issues of corporate governance and financing decisions.

The capital structure dynamics of Malaysian firms: timing behavior vs adjustment toward the target

2017 ◽  
Vol 13 (3) ◽  
pp. 226-245 ◽  
Author(s):  
Islam Abdeljawad ◽  
Fauzias Mat Nor
Keyword(s):  
Capital Structure ◽  
Ownership Structure ◽  
Timing Behavior ◽  
Partial Adjustment ◽  
Content Type ◽  
Financing Decisions ◽  
Partial Adjustment Model ◽  
The Cost ◽  
Target Leverage ◽  
The Capital Structure

Purpose The purpose of this paper is to investigate how the timing behavior and the adjustment toward the target of capital structure interact with each other in the capital structure decisions. Past literature finds that both timing and targeting are significant in determining the leverage ratio which is inconsistent with any standalone framework. This study argues that the preference of the firm for timing behavior or targeting behavior depends on the cost of deviation from the target. Since the cost of deviation from the target is likely to be asymmetric between overleveraged and underleveraged firms, the direction of the deviation from the target leverage is expected to alter the preference toward timing or targeting in the capital structure decision. Design/methodology/approach This study used the GMM system estimators with the Malaysian data for the period of 1992-2009 to fit a standard partial adjustment model and to estimate the speed of adjustment (SOA) of capital structure. Findings This study finds that Malaysian firms, on average, adjust their leverage at a slow speed of 12.7 percent annually and this rate increased to 14.2 percent when the timing variable is accounted for. Moreover, the SOA is found to be significantly higher and the timing role is lower for overleveraged firms compared with underleveraged firms. Overleveraged firms seem to find less flexibility to time the market as more pressure is exerted on them to return to the target regardless the timing opportunities because of the higher costs of deviation from the target leverage. Underleveraged firms place lower priority to rebalance toward the target compared with overleveraged firms as the costs of being underleveraged are lower and hence, these firms have more flexibility to time the market. Research limitations/implications The findings of this study support that firms consider both targeting and timing in their financing decisions. No standalone theory can interpret the full spectrum of empirical results. The empirical work is based on partial adjustment model of leverage; however, this model has been criticized by inability to distinguish between active adjustment behavior and mechanical mean reversion. This is an avenue for future research. Originality/value This study investigates if targeting and timing behaviors are mutually exclusive as theoretically expected or they can coexist. A theoretical explanation and an empirical investigation support the conclusion that firms consider both targeting and timing in their financing decisions. This study provides evidence from Malaysian firms that are characterized by concentrated ownership structure and separation of cash flow rights and control rights of the firm due to pyramid ownership structure. Therefore, it provides evidence on how environmental characteristics may affect the capital structure determinants of the firm.

scholarly journals Are financing decisions of family-owned SMEs different? Empirical evidence using panel data

2012 ◽  
Vol 18 (3) ◽  
pp. 363-382 ◽  
Author(s):  
Zélia Serrasqueiro ◽  
Paulo Maçãs Nunes ◽  
Jacinto Vidigal da Silva
Keyword(s):  
Panel Data ◽  
Capital Structure ◽  
Important Determinant ◽  
Order Theory ◽  
Pecking Order Theory ◽  
Speed Of Adjustment ◽  
Financing Decisions ◽  
Short And Long Term ◽  
The Capital Structure

AbstractThis paper analyses if ownership structure is an important determinant of capital structure decisions, on the basis of two sub-samples of family-owned and non-family owned SMEs, and using panel data models. The results suggest that family ownership is an important determinant for: i) the variations of short and long-term debt stimulated by financial deficit; ii) the speed of adjustment of short and long-term debt towards the respective target levels; and iii) the relationships between determinants and short-term debt and long-term debt. In general, the capital structure decisions of family-owned SMEs are closer to what is forecast by trade-off theory than those of non-family owned SMEs, whereas the capital structure decisions of non-family owned SMEs are closer to the forecasts of pecking order theory than those of family-owned SMEs.

scholarly journals Are Growth Led Financing Decisions Causing Insolvency in Listed Firms of Pakistan?

2020 ◽  
Vol 23 (2) ◽  
pp. 89-115
Author(s):  
Rana Yassir Hussain ◽  
Xuezhou Wen ◽  
Rehan Sohail Butt ◽  
Haroon Hussain ◽  
Sikandar Ali Qalati ◽  
...  
Keyword(s):  
Capital Structure ◽  
Negative Impact ◽  
Negative Relationship ◽  
Debt Maturity ◽  
Growth Opportunities ◽  
Listed Firms ◽  
Insolvency Risk ◽  
Financing Decisions ◽  
The Relationship ◽  
The Capital Structure

AbstractWe examine the relationship between growth opportunities and insolvency risk in a mediating framework through financing decisions for 330 listed firms on the Pakistan Stock Exchange (PSX) This study covers a data period of five years ranging from 2013 to 2017. Financing decisions used in this study involve capital structure decision and debt maturity decision. We applied robust clustered panel OLS regression to the data and found a negative relationship between growth opportunities and insolvency risk in all samples consisting of overall, large and small firms. Growth opportunities have a negative impact on the capital structure, but debt maturity was influenced positively. Financing decisions influenced the insolvency risk positively. We used Baron and Kenny’s (1986) approach to detect the intervening effects of financing decisions. Further, Sobel’s test used to check the significance of mediation. Partial mediation was found for the debt maturity ratio in the large and overall sample of firms. However, the capital structure did not mediate the relationship between growth opportunities and insolvency risk in this study.

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