scholarly journals Risk factors influencing the debt leverage of project financing initiatives in the energy industry

2017 ◽  
Vol 11 (3) ◽  
pp. 444-462 ◽  
Author(s):  
Alberto De Marco ◽  
Giulio Mangano
Keyword(s):  
Risk Factors ◽  
Capital Structure ◽  
Capital Investment ◽  
Stability Index ◽  
Energy Industry ◽  
Project Financing ◽  
Data Set ◽  
Content Type ◽  
Average Size ◽  
The Capital Structure

Purpose This paper aims to contribute to understanding the crucial influence of risks on the capital structure of project financing (PF) initiatives in the energy sector. Design/methodology/approach The debt leverage of a capital investment is selected as the response variable, and its relation with select identified risk factors is examined using a regression analysis on a data set of 72 projects carried out all over the world in the energy industry. Findings Results have highlighted that the debt leverage is significantly influenced by several sources of risk measured through specific indicators, namely, country stability index, the construction duration, the concession period and the average size of partners. Therefore, country, project and special purpose vehicle-related risks have been shown to have an impact on the debt leverage of a PF scheme. Research limitations/implications The results could support both investors and lenders to better define the financial leverage of projects delivered under a PF mechanism. In particular, the study could help to have a better understanding of the main factors that influence the debt leverage in PF initiatives. Originality/value This paper contributes to filling the lack of works addressing the relationship between risk factors and capital structure in PF projects. In this way, this research leads to a better understanding of the risk factors that influence the capital structure of a PF initiative, and they have, therefore, been proposed as a basis for the establishment of improved methods to design refined capital structures.

scholarly journals The influence of risk on the equity share of build-operate-transfer projects

2017 ◽  
Vol 7 (1) ◽  
pp. 45-58 ◽  
Author(s):  
Alberto De Marco ◽  
Giulio Mangano ◽  
Timur Narbaev
Keyword(s):  
Risk Factors ◽  
Capital Structure ◽  
Design Methodology ◽  
Data Set ◽  
Content Type ◽  
Special Purpose Vehicle ◽  
Main Factors ◽  
The Relationship ◽  
Improved Methods ◽  
The Capital Structure

Purpose The purpose of this paper is to contribute to the understanding of the crucial influence of risks on the capital structure of build-operate-transfer (BOT) projects. Design/methodology/approach The equity portion of capital injected in a BOT investment is selected as the response variable and its relation with select identified risk factors is examined using a regression analysis on a data set of BOT projects. Findings Results have pointed out that the level of equity is significantly influenced by several sources of risk. Country, revenue, project and special purpose vehicle-related risks have been shown to have an impact on the size of the equity share of a BOT investment. Research limitations/implications The results could support both investors and lenders to better define the financial leverage of BOT projects. In particular, the study could help to have a better understanding of the main factors that influence the equity apportion of capital in BOT investments. Originality/value This paper contributes to fulfilling the lack of works addressing the relationship between risk factors and capital structure in BOT projects. In this way, this research leads to a better understanding of the risk factors that influence the capital structure of BOT project and they have therefore been proposed as a base for the establishment of improved methods to design refined capital structures in BOT projects.

An explanation of capital structure of China's listed property firms

2014 ◽  
Vol 32 (1) ◽  
pp. 4-15 ◽  
Author(s):  
Jian Liang ◽  
Liu Fang Li ◽  
Han-Suck Song
Keyword(s):  
Panel Data ◽  
Capital Structure ◽  
Property Market ◽  
Market Conditions ◽  
Data Set ◽  
Accounting Data ◽  
Content Type ◽  
Property Companies ◽  
Financial Behaviour ◽  
The Capital Structure

Purpose – The purpose of this paper is to investigate the determinants of the capital structure of listed property firms in China. Design/methodology/approach – The study is based on quantitative methods such as dynamic panel data models and a panel data set containing financial and accounting data for all listed property companies from 2006 to 2010 in China. Findings – The findings confirm that the state-own shares, the fixed asset values, the total size of assets and profitability have a positive and significant impact on the leverage ratio of listed property firms in China. The negative impact of the tax shields and the currency ratio, and significant impact of state-own shares on capital structure cannot be explained by existing capital structure theory but the unique property market regulation environment and market conditions in China. Research limitations/implications – The findings confirm the applicability of trade-off theory (except for the correlation between leverage and the tax shield) on property companies in China. They also highlight the importance of government policies and special market conditions in explaining the financing behaviour of property companies in transaction countries like China. Practical implications – Complimentary policies should be established along with property market restriction policies to offset their unequal negative effect on property companies with less state-owned shares. Furthermore, government should invest efforts to eliminate the discrimination credit treatment of banks against property companies with non-existent or few state-owned shares. Originality/value – The special financial behaviour of China's property firms and the unique financial and property market conditions highlight the necessity of researching the capital structure of listed property firms in China. However, most of the existing literature focuses on the company financial behaviour in developed countries, and very few studies have been done concerning property firms’ financing behaviour in emerging economies such as China, and this research prospects to fill this blank.

A dynamic simulator for the ergonomics evaluation of powered torque tools for human assembly

2017 ◽  
Vol 37 (1) ◽  
pp. 1-12 ◽  
Author(s):  
Haluk Ay ◽  
Anthony Luscher ◽  
Carolyn Sommerich
Keyword(s):  
Risk Factors ◽  
Joint Torque ◽  
Human Hand ◽  
Model Parameters ◽  
Test Rig ◽  
Musculoskeletal Discomfort ◽  
Data Set ◽  
Content Type ◽  
Working Posture ◽  
Displacement Measurements

Purpose The purpose of this study is to design and develop a testing device to simulate interaction between human hand–arm dynamics, right-angle (RA) computer-controlled power torque tools and joint-tightening task-related variables. Design/methodology/approach The testing rig can simulate a variety of tools, tasks and operator conditions. The device includes custom data-acquisition electronics and graphical user interface-based software. The simulation of the human hand–arm dynamics is based on the rig’s four-bar mechanism-based design and mechanical components that provide adjustable stiffness (via pneumatic cylinder) and mass (via plates) and non-adjustable damping. The stiffness and mass values used are based on an experimentally validated hand–arm model that includes a database of model parameters. This database is with respect to gender and working posture, corresponding to experienced tool operators from a prior study. Findings The rig measures tool handle force and displacement responses simultaneously. Peak force and displacement coefficients of determination (R2) between rig estimations and human testing measurements were 0.98 and 0.85, respectively, for the same set of tools, tasks and operator conditions. The rig also provides predicted tool operator acceptability ratings, using a data set from a prior study of discomfort in experienced operators during torque tool use. Research limitations/implications Deviations from linearity may influence handle force and displacement measurements. Stiction (Coulomb friction) in the overall rig, as well as in the air cylinder piston, is neglected. The rig’s mechanical damping is not adjustable, despite the fact that human hand–arm damping varies with respect to gender and working posture. Deviations from these assumptions may affect the correlation of the handle force and displacement measurements with those of human testing for the same tool, task and operator conditions. Practical implications This test rig will allow the rapid assessment of the ergonomic performance of DC torque tools, saving considerable time in lineside applications and reducing the risk of worker injury. DC torque tools are an extremely effective way of increasing production rate and improving torque accuracy. Being a complex dynamic system, however, the performance of DC torque tools varies in each application. Changes in worker mass, damping and stiffness, as well as joint stiffness and tool program, make each application unique. This test rig models all of these factors and allows quick assessment. Social implications The use of this tool test rig will help to identify and understand risk factors that contribute to musculoskeletal disorders (MSDs) associated with the use of torque tools. Tool operators are subjected to large impulsive handle reaction forces, as joint torque builds up while tightening a fastener. Repeated exposure to such forces is associated with muscle soreness, fatigue and physical stress which are also risk factors for upper extremity injuries (MSDs; e.g. tendinosis, myofascial pain). Eccentric exercise exertions are known to cause damage to muscle tissue in untrained individuals and affect subsequent performance. Originality/value The rig provides a novel means for quantitative, repeatable dynamic evaluation of RA powered torque tools and objective selection of tightening programs. Compared to current static tool assessment methods, dynamic testing provides a more realistic tool assessment relative to the tool operator’s experience. This may lead to improvements in tool or controller design and reduction in associated musculoskeletal discomfort in operators.

Predictive view of the value relevance of earnings in India

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hajam Abid Bashir ◽  
Manish Bansal ◽  
Dilip Kumar
Keyword(s):  
Capital Investment ◽  
Stock Return ◽  
Value Relevance ◽  
Stock Exchange ◽  
Predictive Ability ◽  
Cash Flows ◽  
Data Set ◽  
Content Type ◽  
Uniform Sample ◽  
Reported Earnings

Purpose This study aims to examine the value relevance of earnings in terms of predicting the value variables such as cash flow, capital investment (CI), dividend and stock return under the Indian institutional settings. Design/methodology/approach The study used panel Granger causality tests to examine causality relationships among variables and panel data regression models to check the statistical associations between earnings and value variables. Findings Based on a data set of 7,280 Bombay Stock Exchange-listed firm-years spanning over ten years from March 2009 to March 2018, the results show higher sensitivity of earnings toward cash flows, CI, divided and stock return and vice-versa. Further, the findings deduced from the empirical results demonstrate that earnings are positively related to value variables. Overall, the results established that earnings are value-relevant and have predictive ability to forecast the value variables that facilitate investors in portfolio valuation. The results are consistent with the predictive view of the value relevance of earnings. Several robustness checks confirm these results. Originality/value This study brings new empirical evidence from a distinct capital market, India, and provides a new facet to the value relevance debate in terms of its prediction view. The study is among earlier attempts that jointly measure the ability of earnings in forecasting different value variables by taking a uniform sample of firms at the same period. Hence, the study provides a comprehensive view of the predictive ability of reported earnings.

Capital structure puzzle and banks: need for a unique approach?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ashish Pandey
Keyword(s):  
Capital Structure ◽  
Banking Industry ◽  
Methodological Approach ◽  
Theory Model ◽  
Argumentation Theory ◽  
Future Research ◽  
Content Type ◽  
Unique Approach ◽  
The Capital Structure

Purpose This study aims to examine some of the commonly proposed deviants associated with the banking industry in the context of the capital structure puzzle. The paper considers the role of guarantees, information asymmetry and other frictional factors in the context of modern financial markets and examines whether these factors deserve special consideration in solving the capital structure puzzle for banks. Design/methodology/approach The authors adopt the argumentation theory model proposed by Toulmin (1958) as the methodological approach in this paper. Findings The findings from this paper demonstrate that any solution to the capital structure puzzle, whenever available, will also solve the capital structure puzzle for banks without additional efforts. The focus of future research should be on solving the generic capital structure puzzle for a universal set of firms rather than focusing on the banking industry as a subset with unique features. Originality/value The paper adopts a novel methodological approach offered by argumentation theory to pursue the enquiry. To the best of the knowledge, this paper is the first paper in the finance literature that uses argumentation theory to develop a theoretical construct. The finding from this study offers guidance for the proliferation of research paradigms in the capital structure puzzle.

Does intellectual capital impact firms' capital structure? Exploring the role of firm risk and profitability

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
A. D'Amato
Keyword(s):  
Capital Structure ◽  
Intellectual Capital ◽  
Value Added ◽  
Firm Risk ◽  
Financial Leverage ◽  
Data Set ◽  
Content Type ◽  
Novel Approach ◽  
Firm Profitability ◽  
The Relationship

PurposeThe purpose of this paper is to analyze the relationship between intellectual capital and firm capital structure by exploring whether firm profitability and risk are drivers of this relationship.Design/methodology/approachBased on a comprehensive data set of Italian firms over the 2008–2017 period, this paper examines whether intellectual capital affects firm financial leverage. Moreover, it analyzes whether firm profitability and risk mediate the abovementioned relationship. Financial leverage is measured by the debt/equity ratio. Intellectual capital is measured via the value-added intellectual coefficient approach.FindingsThe findings show that firms with a high level of intellectual capital have lower financial leverage and are more profitable and riskier than firms with a low level of intellectual capital. Furthermore, this study finds that firm profitability and risk mediate the relationship between intellectual capital and financial leverage. Thus, the higher profitability and risk of intellectual capital-intensive firms help explain their lower financial leverage.Research limitations/implicationsThe findings have several implications. From a theoretical standpoint, the paper presents and tests a mediating model of the relationship between intellectual capital and financial leverage and its underlying processes. In terms of the more general managerial implications, the results provide managers with a clear interpretation of the relationship between intellectual capital and financial leverage and point to the need to strengthen the capital structure of intangible-intensive firms.Originality/valueThrough a mediation framework, this study provides empirical evidence on the relationship between intellectual capital and firm financial leverage by exploring the underlying mechanisms behind that relationship, which is a novel approach in the literature.

The effect of the number of bank relationships on firm leverage: high-risk shift and the curse of mainstream banks

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yusuf Dinc ◽  
Rumeysa Bilgin
Keyword(s):  
High Risk ◽  
Capital Structure ◽  
Banking Sector ◽  
Negative Relationship ◽  
Estimation Method ◽  
Shareholder Wealth ◽  
Cost Of Debt ◽  
Content Type ◽  
Firm Leverage ◽  
The Capital Structure

Purpose Firms prefer to have more than one bank relationship to secure the flow of funds for their operations, particularly in bank-based economies. On the other hand, banks lean toward expanding their customer base with firms already in the credit market. The purpose of this study is to investigate the effect of the number of bank relationships as a firm-specific determinant of capital structure and to discuss its impact on the banking sector. Design/methodology/approach A two-step system generalized method of the moments estimation method is used in this study. The sample comprises 213 Turkish non-financial, publicly listed firms with a positive shareholder’s value for the 2012–2017 period. Findings The findings show that the number of bank relationships increases the leverage of sample firms while the concentration in the banking sector decreases it. These rather intriguing findings are attributed to an under-the-counter credit policy that causes a high-risk shift and a curse of mainstream banks. Once the mainstream banks allocated credit to the firm, its credibility is consumed by the following banks, which is implied by the significantly negative relationship between bank concentration and firm leverage. This problem is defined as the mainstream bank curse in the study. Originality/value The previous literature focuses on the effects of the number of bank relationships on firm profitability, cost of debt and shareholder wealth. However, its impact on the capital structure has not yet been systematically investigated. To the authors’ knowledge, this is the first study to critically analyze the effect of the number of bank relationships on the capital structure. The findings will be of immense benefit to the banking sector and the regulatory bodies.

The capital structure decision of Islamic and conventional banks: empirical evidence from Malaysia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Moncef Guizani ◽  
Ahdi Noomen Ajmi
Keyword(s):  
Capital Structure ◽  
Decision Criterion ◽  
Content Type ◽  
Leverage Ratio ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
Main Determinants ◽  
Conventional Banks ◽  
The Capital Structure

PurposeThe purpose of this paper is to investigate how Islamic banks (IBs) and conventional banks (CBs) in Malaysia choose their capital structure and what are the most significant factors that affect their decisions regarding their capital structure.Design/methodology/approachThis study applies the autoregressive distributed lag (ARDL) approach for a sample of 54 Banks listed on Malaysian stock market over the period 2010–2018.FindingsThe study findings show that the capital structure of IBs appears to be driven by similar factors to those previously found in the corporate finance literature. They also provide evidence of the existence of a long-run and short-run relationship between leverage and its main determinants for Islamic and CBs. However, the results show that various independent variables on the capital structure do exhibit different effects (in magnitude of the coefficient) among Islamic and CBs. Moreover, we find that IBs slowly adjust their capital structure toward the desired leverage ratio than CBs.Research limitations/implicationsThis research contributes to the theory in re-validating capital structure theories on IBs. It helps understand the capital structure of IBs in comparison with CBs. If in conventional finance, the standard presiding decisions of an economic agent is optimizing the risk-return ratio, this standard is not the only or the primary decision criterion in the Islamic finance context where spiritual and theological considerations are taken into consideration.Practical implicationsThis research can contribute to managers in understanding the choice of capital structure for IBs within the bound of Sharia requirement. Such an understanding provides managers with applied knowledge of determining their appropriate capital structure to compete locally and globally in which IBs operate.Originality/valueThis paper offers some insights on the determinants of capital structure by investigating Islamic and CBs. It explores the implication of relevant Islamic principles on capital structure. Moreover, it analyses the determinants of capital structure using ARDL method that permits to identify the short-run and long-run relationships between capital structure and its main determinants.

scholarly journals Determinants of capital structure for firms in an Islamic equity index: comparing developed and developing countries

2020 ◽  
Vol 4 (2) ◽  
pp. 167-191
Author(s):  
Evrim Hilal Kahya ◽  
Hüseyin Yiğit Ersen ◽  
Cumhur Ekinci ◽  
Oktay Taş ◽  
Koray D. Simsek
Keyword(s):  
Developing Countries ◽  
Capital Structure ◽  
Developing Country ◽  
Global Financial Crisis ◽  
Muslim Country ◽  
Data Set ◽  
Content Type ◽  
Country Level ◽  
Muslim Majority ◽  
Equity Index

PurposeThe paper aims to identify the differences between developed and developing country firms with respect to firm-specific and country-level determinants of their capital structure. For this purpose, all constituent firms in one of the oldest Islamic equity indices, Dow Jones Islamic Market World Index (DJIM), are considered and the Muslim-majority status of each firm's domicile country is recognized.Design/methodology/approachThe study employs Hausman–Taylor random effects regression with endogenous covariates to explain the debt ratios of firms in DJIM by separating them into developed and developing country subsamples in an unbalanced panel data setting. Developing country subsample is further split into two based on the Muslim-majority status of each firm's domicile country.FindingsConsistent with the previous literature, this study finds that firm-specific characteristics are the main determinants of their capital structure. Additionally, the paper shows that country-level characteristics have an impact on the debt ratio, however, the types of factors vary across developed and developing countries. Debt ratios in developing country firms are lower than those in developed country firms, largely due to the significantly smaller leverage ratios of firms in Muslim-majority countries. Although the debt ratios of DJIM firms are higher in “non-Muslim” countries, the set of firm-level capital structure determinants are not statistically explained by operating in a “Muslim” country. The study also documents that, before the global financial crisis of 2008, companies in developing countries have gradually become less leveraged worldwide.Originality/valueThis paper provides a new perspective into the differences between developed and developing country firms' capital structures by focusing on a relatively homogeneous data set restricted by leverage screening rules of an Islamic equity index and recognizing the Muslim-majority status of each firm's domicile country.

Determinants of capital structure of banks: evidence from the Kingdom of Saudi Arabia

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Shoaib Khan ◽  
Usman Bashir ◽  
Md. Saiful Islam
Keyword(s):  
Saudi Arabia ◽  
Capital Structure ◽  
Commercial Banks ◽  
Kingdom Of Saudi Arabia ◽  
Content Type ◽  
Factors Affecting ◽  
Earnings Volatility ◽  
Explanatory Variables ◽  
Practical Implications ◽  
The Capital Structure

Purpose The purpose of this study is to investigate the most important factors that affect the capital structure of commercial banks in the Kingdom of Saudi Arabia. Design/methodology/approach This study uses annual data of 11 Saudi commercial, national banks listed on the tadawul Saudi stock exchange for the period 2010–2017. Data was collected from the banks financial statements, tadawul annual publications and Saudi Arabian Monetary Authority. By constructing a balanced panel, this study uses pooled ordinary least squares regression along with fixed effects and random effects to examine the relationship between the bank’s book leverage as the dependent variable and bank-specific explanatory variables that include profitability, tangibility, earnings volatility, growth opportunities and bank size, while controlling for macroeconomic conditions. Findings The findings of this study suggest that banks in Saudi Arabia are highly leveraged, endorsing the fact that the nature of banks’ business is different from non-banking firms. Earnings volatility, growth and bank size show positive and significant relations with book leverage. Profitability and tangibility are negatively related to the book leverage. Empirically, the explanatory variables profitability, earnings volatility, tangibility, growth and bank size have material effects on the capital structure decisions of Saudi commercial banks. In summary, the determinants of capital structure for Saudi banks are the same as those of non-financial firms but are distinctive in nature. Research limitations/implications An extensive study on all the banks operating in Gulf Cooperation Council (GCC) countries is suggested. Practical implications The findings have practical implications for bank managers, which will help them to identify the bank-specific factors affecting the capital structure and choose the values enhancing optimal capital structure. The results of this study can assist regulatory agencies to formulate an effective regulatory framework. Moreover, the findings lay a foundation for the development of financial sector under the umbrella of the Vision 2030 program in the Kingdom. Originality/value To the best of the authors’ knowledge, this is the first study to explore the factors affecting the capital structure choices of commercial banks operating in the Kingdom of Saudi Arabia. Moreover, the findings of the study would prove useful in detailed studies of capital structure in the GCC countries as well.

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