scholarly journals Trade credit, firm profitability, and financial constraints

2019 ◽  
Vol 15 (5) ◽  
pp. 744-770 ◽  
Author(s):  
Huan Cong Hoang ◽  
Qin Xiao ◽  
Saeed Akbar
Keyword(s):  
Design Methodology ◽  
Financial Constraints ◽  
Trade Credit ◽  
Optimal Level ◽  
Empirical Literature ◽  
Costs And Benefits ◽  
Optimal Point ◽  
Content Type ◽  
Firm Profitability ◽  
The Relationship

Purpose The purpose of this paper is to investigate the non-linear association between trade credit and profitability of small and medium-sized enterprises (SMEs). Moreover, this paper analyses whether the above relationship varies according to financial constraints of SMEs. Design/methodology/approach The authors use panel data methodology to conduct investigations for a sample of 1,509 non-financial listed SMEs from nine countries or territories located in the East Asia and Pacific region, namely, China, Vietnam, Malaysia, Thailand, Japan, South Korea, Taiwan, Singapore and Hong Kong, over the period from 2010 to 2016. Findings This study indicates that trade credit receivable (TCR) and trade credit payable (TCP) have an inverted U-shaped relationship with SMEs’ profitability, which implies the existence of an optimal trade credit level that balances between costs and benefits to maximize their profitability. This result suggests that managers should try to keep the level of trade credit investment as close to the optimal point as possible to avoid the case that their profitability reduces when they move away from this point. Moreover, this study also finds that the optimal trade credit level is sensitive to the financial constraints of SMEs. In particular, optimal level of more financially constrained firms is lower than that of less financially constrained firms. Originality/value A number of contributions that this study makes to the existing literature are presented as follows. First, the paper takes account of the possible presence of a concave relationship between trade credit and SMEs’ profitability, largely ignored by the existing empirical literature. Second, it demonstrates this association in terms of both aspects of trade credit, including TCR and TCP. Third, the study investigates the effect of the different level of financial constraints faced by SMEs on the relationship between trade credit and their profitability.

scholarly journals Foreign direct investment and institutional stability: who drives whom?

2019 ◽  
Vol 24 (47) ◽  
pp. 145-156 ◽  
Author(s):  
Nihal Mahmood ◽  
Mohammad Hassan Shakil ◽  
Ishaq Mustapha Akinlaso ◽  
Mashiyat Tasnia
Keyword(s):  
Foreign Direct Investment ◽  
Financial Stability ◽  
Direct Investment ◽  
Global Financial Crisis ◽  
Institutional Development ◽  
Optimal Level ◽  
Empirical Literature ◽  
Content Type ◽  
Institutional Stability ◽  
The Relationship

Purpose The purpose of this paper is to examine the relationship between foreign direct investment (FDI) flows and institutional stability. The focus country is Canada. It is one of the few countries where the economy remained relatively stable compared to other economies during the Global Financial Crisis. It is crucial for Canada to determine the optimal level of institutional development to attract more FDI and sustain the sound financial stability in future. Design/methodology/approach This study uses the auto-regressive distributive lag (ARDL) approach to understand the relationship between FDI and institutional stability along with other controlled variables, for instance, gross national product, inflation and exports. Findings The key finding of this work is that FDI and institutional stability are cointegrated in the long run. The error correction model of ARDL shed light on institutional stability being an exogenous variable, and FDI is an endogenous variable. Institutional stability affects FDI, as it is exogenous. The findings will help policymakers to implement policies to strengthen the institution’s settings, and this, in turn, will attract more investment. Originality/value Based on previous theoretical and empirical literature, most of the research points to FDI positively affect institutional stability. In some cases, the relationship does not always hold true. This study will fix the gap in the literature by investigating the relationship between FDI and institutional stability of Canada.

Do financial constraints moderate the relationship between innovation subsidies and firms' R&D investment?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Enrique Acebo ◽  
José-Ángel Miguel-Dávila ◽  
Mariano Nieto
Keyword(s):  
Theoretical Model ◽  
Design Methodology ◽  
Financial Constraints ◽  
Point Of View ◽  
Economic Data ◽  
Content Type ◽  
Marginal Effects ◽  
The Relationship ◽  
D Investment ◽  
Innovation Policies

PurposeThe purpose of this paper is to analyse whether the effect of innovation subsidies on firms' R&D investment varies depending on whether the firm is suffering from financial constraints.Design/methodology/approachTo address this analysis, the authors provide a theoretical model and test their hypothesis using an econometric analysis of an unbalanced panel of 3,865 innovative Spanish firms during 2010–2017. They employ the SABI database to obtain firms' financial and economic data and incorporate firms' MORE financial rating. Specifically, the authors use the GMM-SYS technique to regress and measure the marginal effects of innovation subsidies size on firms' R&D investment and the influence of firms' financial constraints.FindingsThe results of this work indicate that financial constraints negatively moderate the effect of subsidies on R&D investment; that is, those firms that receive a subsidy and suffer financial constraints invest less in R&D projects than those which also receive the subsidy and do not suffer financial constraints. Besides, this work found that innovation subsidies alone do not significantly increase firms' R&D investment.Originality/valueFrom a neoclassical point of view, the existence of financial constraints is the justification of public innovation policies. However, due to the difficulty of measuring financial constraints, innovation literature has abandoned the analysis of this crucial variable. This work reintroduces this vital variable and analyses how it interacts with innovation subsidies on firms' R&D investment.

How does working capital management affect the profitability of Indian companies?

2018 ◽  
Vol 15 (3) ◽  
pp. 347-366 ◽  
Author(s):  
Nufazil Altaf ◽  
Farooq Ahmad Shah
Keyword(s):  
Method Of Moments ◽  
Design Methodology ◽  
Generalized Method Of Moments ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Content Type ◽  
Firm Profitability ◽  
Potential Problems ◽  
The Relationship

Purpose The purpose of this paper is to examine the relationship between working capital management (WCM) and firm profitability for a sample of 437 non-financial Indian companies. Design/methodology/approach The study is based on secondary financial data obtained from Capitaline database, pertaining to a period of ten years. This study employs two-step generalized method of moments (GMM) techniques to arrive at results. Findings The results of the study confirm the inverted U-shape relationship between WCM and firm profitability. In addition, the authors also found that the firms should complete its CCC on an average by 63 days. Originality/value Unlike prior studies that found a linear relationship between WCM and firm profitability. This study provides newer evidence for an inverted U-shaped relation between investment in working capital and firm profitability in India. In addition, this study uses GMM to control the potential problems of endogeneity.

Entrepreneurial orientation and market orientation

2018 ◽  
Vol 20 (2) ◽  
pp. 292-322 ◽  
Author(s):  
Héctor Montiel-Campos
Keyword(s):  
Market Orientation ◽  
Entrepreneurial Orientation ◽  
Design Methodology ◽  
Empirical Literature ◽  
Future Research ◽  
Content Type ◽  
The Core ◽  
Final Sample ◽  
Study Results ◽  
The Relationship

Purpose The purpose of this study is to provide a comprehensive qualitative review of the empirical accumulated knowledge on the relationship between entrepreneurial orientation (EO) and market orientation (MO). Design/methodology/approach To systematically review the empirical literature that simultaneously tests the core tenets of EO and MO, this study followed a multi-step approach, which has served as a replicable literature review method in previous studies. A final sample of 121 papers published between 1987 and 2016 was developed. Findings The results show that EO–MO relationship research has made considerable strides in recent years and is accelerating and broadening. This interest is manifested in the 83 journals and 266 authors that were identified. Additionally, the results confirm that the Anglo region contributed the majority of EO–MO relationships in the study sample. Finally, the 121 papers in the sample were organized into six different approaches, which in turn represent 53 research models where the unidimensional conceptualizations of EO and MO were predominant. Originality/value This study has shown that the EO–MO relationship has been studied from different approaches, which revealed several research models that advance the knowledge on relationships between EO and MO. EO and MO are, in turn, also positively associated with firm performance. Thus, the study results highlight numerous and varied fertile areas for future research that may offer a more detailed understanding of the EO–MO relationship.

Linking international experience and cultural intelligence development

2018 ◽  
Vol 6 (1) ◽  
pp. 59-78 ◽  
Author(s):  
Snejina Michailova ◽  
Dana L. Ott
Keyword(s):  
Social Learning Theory ◽  
Design Methodology ◽  
Cultural Intelligence ◽  
International Experience ◽  
Empirical Literature ◽  
Future Research ◽  
Content Type ◽  
Fine Grained ◽  
Intelligence Development ◽  
The Relationship

Purpose The purpose of this paper is to critically examine the literature on the relationship between international experience (IE) and cultural intelligence (CQ) development, and advocate for the utilization of theory to explain this relationship. Design/methodology/approach On the basis of the premise that CQ can be developed through IE, the authors review existing empirical research in regards to this relationship. The authors conducted a search of the main business, education, and psychology databases for articles published from 2003, the year when the CQ construct was introduced, through 2017. The search focused on studies where CQ was tested as a dependent variable or as a mediator between IE and a dependent variable, and resulted in 15 empirical articles and three book chapters. Findings A critical analysis of the relationship between IE and CQ reveals considerable variation and inconsistencies among findings within the extant empirical literature. The authors argue that this is mainly because most studies fail to apply a theory to explain the link between these two constructs. The authors draw from social learning theory (SLT) to illustrate how it can be utilized to detail the relationship between IE and CQ development. The authors also suggest how future research can advance the understanding of this relationship, and outline the implications of such examinations for practice. Originality/value While substantive knowledge has been generated to understand CQ as an antecedent, the authors investigate CQ development as the dependent variable. The critical review of this literature identifies a specific weakness within previous research and the authors offer a way to resolve it. SLT, which views learning as being affected by both observation and experience, and includes attention, retention, and participative reproduction, is one potentially powerful tool that can explain why and how IE can lead to CQ development. This is a far more fine- grained and detailed approach to understanding and explaining the relationship between the two constructs than provided by previous studies.

scholarly journals Working capital management, company performance, and funding barriers on Indonesian Firms

2020 ◽  
Vol 5 (1) ◽  
pp. 49
Author(s):  
Liza Handoko ◽  
Chessia Violeta
Keyword(s):  
Financial Constraints ◽  
Trade Credit ◽  
Corporate Performance ◽  
Company Performance ◽  
Financial Constraint ◽  
Working Capital ◽  
Optimal Point ◽  
Investment Level ◽  
The Impact ◽  
The Relationship

<p>The purpose of this study is to examine the relationship between investment in working capital measured by trade credit and corporate performance in 463 companies in Indonesia between 2007 and 2017. This research confirms the non-linearity inverted U shape of the link between working capital and corporate performance. It suggests that there is an optimal point of investment that is beneficial for the company. This research also examines the impact of financial constraint and investment level on working capital. Our finding shows that companies that experience financial constraints have lower investment levels than those without financial constraints. </p>

Firm value and optimal cash level: evidence from Pakistan

2014 ◽  
Vol 9 (4) ◽  
pp. 488-504 ◽  
Author(s):  
Qurat-ul-ann Azmat
Keyword(s):  
Firm Value ◽  
Firm Heterogeneity ◽  
Generalized Method Of Moments ◽  
Cash Holdings ◽  
Optimal Level ◽  
Costs And Benefits ◽  
Optimal Point ◽  
Content Type ◽  
Financing Decisions ◽  
Governance Practices

Purpose – The purpose of this paper is to investigate the relationship between firm value and cash holdings for the period 2003-2008. This study seeks to find if there are costs and benefits associated with holding too much or too little cash, then an optimal cash level exists where marginal benefits are offset by their costs. If this optimal point exists, then firm value will be maximized at that point and deviation from it will affect the firm value negatively. Design/methodology/approach – Optimal cash level between firm value and cash holding is determined by investigating the concave relationship. If concave relationship exists then a residual term is included in the equation to see how deviations from the optimal level affect firm value. A two-step generalized method of moments (GMM) estimator is used in estimating all results. GMM controls for unobserved firm heterogeneity and endogeneity problems. Findings – Results showed that a concave relationship exists between firm value and cash holdings, which confirmed that there is an optimal cash level that maximizes firm value. It was also found that deviations from the optimal level affect firm value negatively. Practical implications – The paper provides the existence of an optimal point of cash between costs and benefits wherein firm value is maximized. It has implications for firms’ investment and financing decisions when there is limited access to external finance. At higher level of cash the study has implications for agency theory and governance practices. Originality/value – The study establishes a conclusive relationship between firm value and cash holdings within the context of the Pakistani market.

scholarly journals How does directors’ remuneration affect SMEs’ performance?

2018 ◽  
Vol 17 (2) ◽  
pp. 238-258 ◽  
Author(s):  
Godfred Adjappong Afrifa ◽  
Oluseyi Oluseun Adesina
Keyword(s):  
Firm Performance ◽  
Optimal Level ◽  
Optimal Point ◽  
Content Type ◽  
Panel Data Regression ◽  
Data Regression ◽  
Medium Enterprise ◽  
And Performance ◽  
The Relationship ◽  
Benefits And Costs

Purpose The purpose of this paper is to empirically explain the relationship between the remuneration levels of a sample of listed small and medium enterprise (SME) directors and firm performance. The paper also investigates whether deviations from the optimal directors’ remuneration level reduces firm performance. Design/methodology/approach The study uses a panel data regression analysis of 802 AIM-listed SMEs over an eight-year period (2005-2012). Findings Using a non-linear approach, the results show that an optimum director’s remuneration level is calculated by comparing the benefits and costs of director’s remuneration. Hence, the paper not only shows how directors’ remuneration level affects firm performance but it also extends the stream of knowledge by indicating how a deviation from the optimal point influences UK-listed SME performances. Moreover, the results show that the effect of directors’ remuneration on firm performance is greater during a financial crisis period. Originality/value Compared with previous literature on directors’ remuneration, this paper focuses on AIM-listed SMEs, and the author’s finding of a concave relationship between directors’ remuneration level and performance of leads them to recommend that firms, especially SMEs, should endeavour to determine the optimal level of directors’ remuneration to maximise performance.

Perceptions of time at work

2016 ◽  
Vol 45 (1) ◽  
pp. 29-50 ◽  
Author(s):  
Aristides Isidoro Ferreira ◽  
Joana Diniz Esteves
Keyword(s):  
Gender Differences ◽  
Design Methodology ◽  
Internet Use ◽  
The Internet ◽  
Content Type ◽  
Future Studies ◽  
Work Related ◽  
Phone Calls ◽  
Working Day ◽  
The Relationship

Purpose – Activities such as making personal phone calls, surfing on the internet, booking personal appointments or chatting with colleagues may or may not deviate attentions from work. With this in mind, the purpose of this paper is to examine gender differences and motivations behind personal activities employees do at work, as well as individuals’ perception of the time they spend doing these activities. Design/methodology/approach – Data were obtained from 35 individuals (M age=37.06 years; SD=7.80) from a Portuguese information technology company through an ethnographic method including a five-day non-participant direct observation (n=175 observations) and a questionnaire with open-ended questions. Findings – Results revealed that during a five-working-day period of eight hours per day, individuals spent around 58 minutes doing personal activities. During this time, individuals engaged mainly in socializing through conversation, internet use, smoking and taking coffee breaks. Results revealed that employees did not perceive the time they spent on non-work realted activities accurately, as the values of these perceptions were lower than the actual time. Moreover, through HLM, the findings showed that the time spent on conversation and internet use was moderated by the relationship between gender and the leisure vs home-related motivations associated with each personal activity developed at work. Originality/value – This study contributes to the literature on human resource management because it reveals how employees often perceive the time they spend on non-work related activities performed at work inaccurately. This study highlights the importance of including individual motivations when studying gender differences and personal activities performed at work. The current research discusses implications for practitioners and outlines suggestions for future studies.

Learning from intelligent conversation

IMP Journal ◽  
2016 ◽  
Vol 10 (3) ◽  
pp. 512-539 ◽  
Author(s):  
Luitzen De Boer ◽  
Poul Houman Andersen
Keyword(s):  
System Theory ◽  
Design Methodology ◽  
Historical Analysis ◽  
Research Field ◽  
Literature Study ◽  
Content Type ◽  
Narrative Literature ◽  
The Relationship ◽  
Conceptual Research

Purpose The purpose of the paper is to contribute to further advancing of IMP as a research field by setting up and starting a theoretical conversation between system theory and the IMP. Design/methodology/approach The approach is based on a narrative literature study and conceptual research. Findings The authors find that system theory and cybernetics can be regarded as important sources of inspiration for early IMP research. The authors identify three specific theoretical “puzzles” in system theory that may serve as useful topics for discussion between system theorists and IMP researchers. Originality/value Only a handful of papers have touched upon the relationship between system theory and IMP before. This paper combines a narrative, historical analysis of this relationship with developing specific suggestions for using system theory as a vehicle for further advancement of IMP research.

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