Analysis of capital structure stability of listed firms in China

2019 ◽  
Vol 10 (2) ◽  
pp. 213-228 ◽  
Author(s):  
Kelvin Henry Kyissima ◽  
Gong Zhang Xue ◽  
Thales Pacific Yapatake Kossele ◽  
Ahmed Ramadhan Abeid
Keyword(s):  
Panel Data ◽  
Capital Structure ◽  
Fixed Effects ◽  
Structure Stability ◽  
Individual Investors ◽  
Content Type ◽  
Corporate Managers ◽  
Listed Firms ◽  
Financing Decisions ◽  
Corporate Capital Structure

Purpose The purpose of this paper is to analyze the corporate capital structure stability of listed firms in China during the period 1990–2013. Design/methodology/approach The study uses panel data from a sample of 716 firms that have been listed in China for at least 15 years. A fixed-effects panel data regression model with time effects is used in the estimation. Findings The findings show that size, profitability and investment opportunities have a significant influence on capital structure, whereas the tangibility of assets is not found to be significant. Few industries show significance in explaining differences and variation in leverage ratios. Social implications It is recommended by this study that corporate managers of listed firms in China should consider leverage ratios variation while choosing the capital structure. Originality/value This study can be helpful in assisting companies to make financing decisions and setting up strategies relevant in their growth and profitability. The study will also have a significant assistance to bring to light corporate issues to policy makers, especially in the areas of both equity and debt financing, particularly the bond market. To the society, this study will show the nature of Chinese-listed companies, and it can assist individual investors in making decisions regarding companies in which they hold investments and in making meaningful comparisons with other companies. The paper also aims at contributing to the existing literature on the empirical study on capital structure.

Corporate governance practices and capital structure decisions: the moderating effect of gender diversity

2020 ◽  
Vol 20 (5) ◽  
pp. 939-964
Author(s):  
Mohammad A.A Zaid ◽  
Man Wang ◽  
Sara T.F. Abuhijleh ◽  
Ayman Issa ◽  
Mohammed W.A. Saleh ◽  
...  
Keyword(s):  
Corporate Governance ◽  
Panel Data ◽  
Capital Structure ◽  
Generalized Method Of Moments ◽  
Gender Diversity ◽  
Business Environment ◽  
Board Structure ◽  
Content Type ◽  
Financing Decisions ◽  
The Impact

Purpose Motivated by the agency theory, this study aims to empirically examine the nexus between board attributes and a firm’s financing decisions of non-financial listed firms in Palestine and how the previous relationship is moderated and shaped by the level of gender diversity. Design/methodology/approach Multiple regression analysis on a panel data was used. Further, we applied three different approaches of static panel data “pooled OLS, fixed effect and random effect.” Fixed-effects estimator was selected as the optimal and most appropriate model. In addition, to control for the potential endogeneity problem and to profoundly analyze the study data, the authors perform the one-step system generalized method of moments (GMM) estimator. Dynamic panel GMM specification was superior in generating robust findings. Findings The findings clearly unveil that all explanatory variables in the study model have a significant influence on the firm’s financing decisions. Moreover, the results report that the impact of board size and board independence are more positive under conditions of a high level of gender diversity, whereas the influence of CEO duality on the firm’s leverage level turned from negative to positive. In a nutshell, gender diversity moderates the effect of board structure on a firm’s financing decisions. Research limitations/implications This study was restricted to one institutional context (Palestine); therefore, the results reflect the attributes of the Palestinian business environment. In this vein, it is possible to generate different findings in other countries, particularly in developed markets. Practical implications The findings of this study can draw responsible parties and policymakers’ attention in developing countries to introduce and contextualize new mechanisms that can lead to better monitoring process and help firms in attracting better resources and establishing an optimal capital structure. For instance, entities should mandate a minimum quota for the proportion of women incorporation in boardrooms. Originality/value This study provides empirical evidence on the moderating role of gender diversity on the effect of board structure on firm’s financing decisions, something that was predominantly neglected by the earlier studies and has not yet examined by ancestors. Thereby, to protrude nuanced understanding of this novel and unprecedented idea, this study thoroughly bridges this research gap and contributes practically and theoretically to the existing corporate governance–capital structure literature.

scholarly journals The influence of internal corporate governance mechanisms on capital structure decisions of Chinese listed firms

2017 ◽  
Vol 16 (4) ◽  
pp. 444-461 ◽  
Author(s):  
Agyenim Boateng ◽  
Huifen Cai ◽  
Daniel Borgia ◽  
Xiao Gang Bi ◽  
Franklin Nnaemeka Ngwu
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Fixed Effects ◽  
The State ◽  
Ownership Concentration ◽  
Governance Mechanisms ◽  
Data Set ◽  
Content Type ◽  
Listed Firms ◽  
Corporate Governance Mechanisms

Purpose The purpose of this paper is to examine the effects of internal corporate governance mechanisms on the capital structure decisions of Chinese-listed firms. Design/methodology/approach Using a large and more recent data set consisting of 2,386 Chinese-listed firms over the period from 1998 to 2012, the authors use different statistical methods (OLS, fixed effects and system GMM) to analyse the effects of firm-specific and corporate governance influences on capital structure. Findings The authors find that the proportion of independent directors and ownership concentration exert significant influence on the level of Chinese long-term debt ratios after controlling for firm-specific determinants and split share reforms. Further analysis separating the sample of this paper into state-owned enterprises (SOEs) and privately owned enterprises (POEs) suggests that ownership concentration in the hands of the state leads to decrease in debt ratios. Research limitations/implications The finding implies that concentrated ownership in the hands of the state appears more efficient compared to their private counterparts in their monitoring role. Originality/value This paper extends prior literature, which has concentrated disproportionately on firm-specific influences on capital structure, to the effects of within-firm governance mechanisms on capital structure decisions. The paper contributes to the agency theory–capital structure discourse in an emerging country context where corporate governance system appears weak.

Credit supply and corporate capital structure: evidence from Pakistan

2016 ◽  
Vol 5 (2) ◽  
pp. 250-267 ◽  
Author(s):  
Amjad Iqbal ◽  
Tanveer Ahsan ◽  
Xianzhi Zhang
Keyword(s):  
Panel Data ◽  
Capital Structure ◽  
Dynamic Panel Data ◽  
Manufacturing Firms ◽  
Short Term ◽  
Dynamic Panel ◽  
Content Type ◽  
Corporate Capital ◽  
Credit Supply ◽  
Corporate Capital Structure

Purpose – The purpose of this paper is to investigate the relevance of credit supply for corporate capital structure decisions of manufacturing firms in Pakistan. Design/methodology/approach – The implicit assumption in much of the work on capital structure is that for a firm, the availability of incremental capital depends solely on its characteristics. However, the capital market frictions suggest that suppliers of credit may also affect firms’ ability to borrow. The authors investigated this intuition by employing dynamic panel data estimators using 8,984 firm-year observations for the period 1990-2010. Findings – The results show that short-term debt is a major source of financing in these firms. Further, credit supply plays a significant role in these firms’ capital structure decisions and hence, they increase their short-term debt (main financing source) with an increase in credit supply in the market while payoff their long-term debt with internal funds. Practical implications – The findings of this study can enhance the practitioners’ and analysts’ understanding of capital structure of manufacturing firms in a bank dominated financial system, like Pakistan. Also, it can provide them more insight in understanding the alternative choices of financing and the reasons why firms prefer one over the other. Originality/value – To the authors’ best knowledge, this is the first study in Pakistan that considers both supply-side as well as demand-side factors of capital structure and applies dynamic panel data techniques.

Determinants of capital structure: an empirical study of firms in Iran

2015 ◽  
Vol 57 (1) ◽  
pp. 53-83 ◽  
Author(s):  
Mohammad Alipour ◽  
Mir Farhad Seddigh Mohammadi ◽  
Hojjatollah Derakhshan
Keyword(s):  
Capital Structure ◽  
Fixed Effects ◽  
Stock Exchange ◽  
Negative Relationship ◽  
Ordinary Least Squares ◽  
State Ownership ◽  
Manufacturing Firms ◽  
Content Type ◽  
Corporate Managers ◽  
Financial Firms

Purpose – This paper aims to investigate the determinants of capital structure of non-financial firms in Iran. Design/methodology/approach – This paper reviews different conditional theories of capital structure to formulate testable propositions concerning the determinants of capital structure of Iranian companies. Pooled ordinary least squares and panel econometric techniques such as fixed effects and random effects are used to investigate the most significant factors that affect the capital structure choice of manufacturing firms listed on Tehran Stock Exchange Iran during 2003-2007. Findings – The results of the study suggest that variables such as firm’s size, financial flexibility, asset structure, profitability, liquidity, growth, risk and state ownership affect all measures of capital structure of Iranian corporations. Short-term debt is found to represent an important financing source for corporations in Iran. The results of the present research are consistent with some capital structure theories. Research limitations/implications – In general, the results provide evidence that the five theories discussed influence emerging markets. Due to the existence of a negative relationship between profitability and capital structure, investors must consider capital structure before making investment decisions. Practical implications – This study has laid some groundwork to explore the determinants of capital structure of Iranian firms upon which a more detailed evaluation could be based. Furthermore, the empirical findings will help corporate managers in making optimal capital structure decisions. Originality/value – To the authors’ knowledge, this is the first study that explores the determinants of capital structure of manufacturing firms in Iran by using the most recent data. Moreover, this paper provides a theoretical model to explain the mechanism of how the ownership structure impacts debt financing.

Does digital proximity between countries impact entrepreneurship?

Info ◽  
2015 ◽  
Vol 17 (5) ◽  
pp. 46-65 ◽  
Author(s):  
Maria Veronica Alderete
Keyword(s):  
Panel Data ◽  
Spatial Dependence ◽  
Fixed Effects ◽  
Spatial Models ◽  
Negative Influence ◽  
Entrepreneurial Activity ◽  
Spatial Effects ◽  
Content Type ◽  
Spatial Spillovers ◽  
Information And Communication

Purpose – This paper aims to determine if there is a spatial dependence in the entrepreneurial activity among countries. The existence of a “digital proximity” could explain the spatial pattern of entrepreneurship. Design/methodology/approach – This question is empirically addressed by using a five-period, 2008-2012, panel data for 35 countries. A spatial fixed effects panel data model is estimated by using the total entrepreneurial activity published by the global entrepreneurship monitor as the dependent variable. Findings – A significant negative influence of the digital proximity on the entrepreneurial activity is observed. Mobile broadband (MB) direct effect is positive while the indirect effect (the spatial spillovers) is negative, leading to a negative total effect on the total entrepreneurial activity. This result is contrary to non-spatial models’ results. Besides, a higher MB penetration in a country would lead to a competitive advantage fostering its opportunities for entrepreneurship, but reducing those of its neighbours’. Originality/value – This paper examines the relationship between information and communication technology (ICT) and entrepreneurship, by introducing the spatial effects is the main contribution. This paper expands the scant literature on the ICT impact on entrepreneurship. Results obtained support policies towards enforcing innovation, education and reducing entry regulations for encouraging entrepreneurship. Meanwhile, MB policies could counteract the entrepreneurial policies’ results due to the spatial dependence.

Assessing the effects of flight delays, distance, number of passengers and seasonality on revenue

Kybernetes ◽  
2019 ◽  
Vol 48 (9) ◽  
pp. 2138-2149
Author(s):  
Murat Guven ◽  
Eyup Calik ◽  
Basak Cetinguc ◽  
Bulent Guloglu ◽  
Fethi Calisir
Keyword(s):  
Panel Data ◽  
Fixed Effects ◽  
Future Research ◽  
Negative Effects ◽  
Flight Delays ◽  
Content Type ◽  
Positive Effects ◽  
Common Correlated Effects ◽  
Flight Delay ◽  
Airline Company

Purpose This study aims to investigate the effects of flight delays, distance, number of passengers and seasonality on revenue in the Turkish air transport industry. Design/methodology/approach The domestic return routes of a Turkish airline company were examined to address this issue. Among five cities and six airports, 14 major domestic return routes were selected. The augmented mean group (AMG) estimator and common correlated effects mean group (CCEMG) estimator were conducted with a two-way fixed effects (FE) robustness test in this study. Findings The results show that arrival flight delay and departure flight delay had negative effects on revenue, whereas the distance between airports, the number of air passengers and seasonality had positive effects on revenue. Research limitations/implications The data used in this study were retrieved from a Turkish airline company; for future research, other airline companies operating in Turkey may be included. Practical implications These findings could be evaluated by air transportation leaders to provide a guide to make strategic decisions to achieve greater performance in this competitive environment. Originality/value The originality of the paper comes from the facts that besides distance and number of passengers, the authors control for the seasonality when assessing the effects of flight delay on revenue; they use panel data techniques, which permit them to control for individual heterogeneity, and create more variability, more efficiency and less collinearity among the variables; they use two recent panel data techniques, CCEMG and AMG, allowing for cross-section dependence.

Equity market timing and capital structure: evidence on post-IPO firms in Indonesia

2019 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Dewi Ratih
Keyword(s):  
Capital Structure ◽  
Market Timing ◽  
Equity Market ◽  
Content Type ◽  
Corporate Capital ◽  
Corporate Capital Structure ◽  
Short Run ◽  
Practical Implications ◽  
Equity Market Timing

Purpose The purpose of this paper is to analyze and evaluate the impacts of equity market timing on corporate capital structure policies in Indonesia by apply Baker and Wurgler’s analytical approach to firms in Indonesia to see, first, if that approach applies to Indonesian firms and, second, if it can be generalized to other emerging markets. Design/methodology/approach This study will focus on capital structure policies based on Market Timing Theory in developing countries, which uses the panel data of companies listed in Indonesian Stock Exchange after IPO. The companies used as research object are 70 firms in the non-financial/non-banking sector with the observation period of 2000–2015. The period of measurement is five years after IPO. Using a past market value in which equity market timing is measured in two-time measurements, i.e. yearly timing and long-term timing to prove its persistence. Findings Consistent with equity market timing theory, the results suggest that firms tend to issue equities when their market valuations are relatively higher than their book values and their past market values are high. As a consequence, the firms become underleveraged or have their debts reduced in the short run. The results of long-term measurement on equity market timing do not appear to affect the firms’ capital structure decisions due to the firms’ relatively quick adjustments of optimal capital structures. The conclusion is that equity market timing is an important element in the short run but not in the long run. Research limitations/implications The results of this study describe how firms in Indonesia take advantage of temporary market share fluctuations through equity market timing in their capital structure policies before ultimately making adjustments to the directions they are targeting. Practical implications The use of equity market timing is more aimed at reducing the debt ratio and avoiding unfavorable conditions in the debt market, as well as taking advantage of the capital gains derived from the differences in their stock prices. This study also has practical implications on investment policies that need to consider the adaptation factor of the industrial environment when it comes to making capital structure decisions, including how the entity must take policy when uncertain economic conditions. Social implications Through the research behavior of capital structure more in-depth decision is expected to provide an overview for investors widely in determining investment policy. Thus, the investment strategy is more planned and can also anticipate unexpected conditions. Originality/value This research is the first study to analyze and to evaluate the impacts of equity market timing on corporate capital structure policies on post-IPO firms in Indonesia. This research is an empirical study that investigates the relevance of equity market timing considerations in the determination of debt-equity choices in the capital structure, included in the conditions of the global financial crisis.

The determinants of profitability in Sharia-compliant corporations: evidence from Jordan

2019 ◽  
Vol 10 (4) ◽  
pp. 546-564 ◽  
Author(s):  
Nizar Mohammad Alsharari ◽  
Turki Raji Alhmoud
Keyword(s):  
Panel Data ◽  
Voluntary Disclosure ◽  
Fixed Effects ◽  
Management Style ◽  
Least Square ◽  
Return On Assets ◽  
Content Type ◽  
Return On Equity ◽  
Independent Variables ◽  
Internal And External Factors

Purpose The purpose of this paper is to examine the determinants of profitability of 28 Sharia-compliant corporations in Jordan over the three-year period of 2013-2015. Design/methodology/approach The two-stage least square (2SLS) regression analysis with fixed effects was conducted using two measures of profitability, namely: return on assets and return on equity. The empirical data were collected from 28 Sharia-compliant corporations in Jordan over the study period. A variety of internal and external factors was used to determine profitability. Findings In general, this analysis of the determinants of profitability for Sharia-compliant corporations confirmed previous findings. Regression findings revealed that previous year profitability, debt ratio, organizational structure, the size of the audit firm and voluntary disclosure to be important determinants of profitability of Sharia-compliant corporations in Jordan from 2013 to 2015. The independent variables of firm size, ownership ratio greater than 5%, liquidity ratio, percentage of non-Jordanian ownership or the age of the firm were not found to significantly influence the profitability of the corporations studied. Research limitations/implications The authors determined that the independent variables selected, with few exceptions, behaved according to expectations. Moreover, the current literature on the influence of management on performance, and thus, profitability, does not consider the philosophy under which business is conducted (a limitation with respect to the type of business conducted). For example, Sharia-compliant and non-Sharia-compliant firms operate under different sets of principles and rules. This variance in business philosophies may have an important bearing on management style, an aspect that has been neglected in the organizational management literature. The panel data from a three-year period was insufficient to validate the consistency of the results; future researchers may increase the length of the study periods to confirm results and increase the robustness of the data collection method. Practical implications The findings from the study have implications that may be functional for businesses, investors and policymakers in their focus on the Sharia-compliant business sector in Jordan. The factors influencing profitability may inform the setting of regulatory policy designed to stabilize and sustain the performance of Sharia-compliant corporations more broadly. Originality/value This study contributes to the growing body of literature on Islamic finance, and can be considered one of a very few that have examined the internal and external determinants of the profitability of Sharia-compliant corporations in a developing country such as Jordan, using panel data.

Does earnings transparency affect corporate payout decisions?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yogesh Chauhan ◽  
Rajesh Pathak
Keyword(s):  
Path Analysis ◽  
Fixed Effects ◽  
Financial Constraints ◽  
Dividend Policy ◽  
Cash Dividend ◽  
Content Type ◽  
Listed Firms ◽  
Panel Data Estimation ◽  
Signaling Hypothesis ◽  
Data Estimation

PurposeThe paper examines how earnings transparency affects dividend payouts for Indian firms. The authors also explore the channels through which earnings transparency affects dividend payouts.Design/methodology/approachThe authors employ panel data estimation with fixed effects to examine the role of earnings transparency on dividend payouts. The authors also use path analysis to explore causation. The paper uses a sample of more than 2000 Indian listed firms, over the period 2001–2016.FindingsThe authors report that firms showing grater earning transparency pay more cash dividend. Their results do not support the signaling hypothesis about the dividend. However, these results provide explicit support to the theory that corporate dividend policy is an outcome of information asymmetry. Moreover, the path analysis reveals the effect of earnings transparency on corporate payout through the financial constraint channel. The results are robust to idiosyncratic controls; alternate measures of payout; alternate models; endogeneity concerns; and the alternate channel of returning money to stockholders.Practical implicationsManagers should also examine earnings transparency while formulating an adequate dividend policy for their firms. This study also helps investors to identify dividend-paying stocks.Originality/valueThis study particularly contributes to the literature examining the effect of earnings quality on dividend payouts through its effect on financial constraints. We, therefore, connect two streams of research that contemplate the relation between accounting-based information variables and dividend payouts and the relationship between financial constraints and dividend payouts. Moreover, using path analysis uniquely, the authors provide evidence on the relative importance of both the direct and the indirect link.

“Peer effects” in capital structure decision of Chinese firms-empirical investigation based on Chinese a-share listed firms

2018 ◽  
Vol 9 (3) ◽  
pp. 289-315 ◽  
Author(s):  
Tianli Zhong ◽  
Tianyu Zhang
Keyword(s):  
Capital Structure ◽  
Peer Effects ◽  
Management Practices ◽  
Structure Theory ◽  
Outcome Variable ◽  
Content Type ◽  
Financial Decisions ◽  
Listed Firms ◽  
Social Multiplier ◽  
Peer Firms

Purpose The purpose of this paper is to identify if peer firms’ capital structure decision plays a role in determining focal firms’ capital structure decision, despite the fact that correlated effects can also lead to co-movement of financing behavior among firms from the same industry (i.e. industry-specific capital structure). Design/methodology/approach Instead of using relative measurement (of individual outcome variable over industry variable) as in previous work, this paper borrows the linear-in-means model and, after controlling for potential endogeneity problems, directly identifies the existence of peer effects with coefficient estimation. To deal with correlated effects, additional empirical investigations such as test of heterogeneity in direction and scale, social multiplier identification test and instrumental regression test based on another instrumental variable (that is less influenced by correlated effects) are performed. Findings Using data from Chinese listed firms, this paper, for the first time, identifies the presence of peer effects in capital structure and debt maturity decision. Further investigations show that first, focal firms react asymmetrically to peer firms’ debt adjustment of different direction and scale. Second, social multiplier, a unique attribute of peer effects, is identified in the leverage choices. Third, the significant correlation of capital structure decision remains even if we use another “correlated effects-immune” instrument. All these results point to the fact that peer effects, rather than correlated effects, play a significant role in determining capital structure. Practical implications The empirical results of this paper provide strong evidence that firms, driven by motivations such as either learning or competition, will actively react to peers’ financial decisions. As the bridge between individual firms and the industry, social multiplier can be fully taken advantage of to induce positive spillover of good management practices and prohibit inefficient decisions from spreading. Originality/value This paper theoretically and empirically introduces peer effects – a well-acknowledged social concept – into capital structure decision of Chinese listed firms, thus both complementing the traditional capital structure theory and providing an empirical paradigm for peer effects research.

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