Capital market supply and REITs’ financing and investment decisions

2014 ◽  
Vol 10 (2) ◽  
pp. 146-167 ◽  
Author(s):  
Qing Bai ◽  
Qingqing Chang ◽  
Avis Devine
Keyword(s):  
Capital Structure ◽  
Capital Market ◽  
Investment Decision ◽  
Content Type ◽  
Supply Shock ◽  
Firm Financing ◽  
Debt Market ◽  
Survey Results ◽  
Recent Financial Crisis ◽  
Financing And Investment

Purpose – In the wake of the recent financial crisis, there has been extensive commentary regarding the rise and fall of REIT leverage, how much debt REITs should use, and the trendy “deleveraging” practice among REIT managers. The paper aims to discuss these issues. Design/methodology/approach – Identifying the late 2000s credit crunch as a supply shock, the paper uses difference-in-difference methodology to isolate alternative firm financing strategies and investment decision responses to the shock. Findings – Consistent with corporate survey results, this empirical analysis suggests that changes in capital structure are largely supply driven, and REIT managers “time” the debt market in response to credit conditions. Originality/value – This research clarifies the causes of the documented leverage pattern and provides fresh insights about REIT capital structure.

Interest on equity and capital structure in the Brazilian context

2014 ◽  
Vol 10 (1) ◽  
pp. 39-53 ◽  
Author(s):  
João Zani ◽  
Eduardo Tomedi Leites ◽  
Clea Beatriz Macagnan ◽  
Márcio Telles Portal
Keyword(s):  
Capital Structure ◽  
Capital Market ◽  
Empirical Literature ◽  
Published Data ◽  
Net Income ◽  
Initial Sample ◽  
Content Type ◽  
Tax Benefits ◽  
Main Determinants ◽  
The Impact

Purpose – The interest paid on own capital can benefit companies in the Brazilian capital market as it can be considered a business expense and is, therefore, deductible as a corporate tax. The purpose of this paper is to assess the impact of interest on equity (IOE) on capital structure decisions. Design/methodology/approach – The initial sample consisted of 524 publicly traded companies from different industries in the Brazilian capital market that were listed on Bovespa. Companies in the finance, insurance and funds industries were excluded from the sample due to the unique features of these financial intermediaries. Some companies in the initial sample were excluded due to a lack of published data, inactivity during the sample period, etc. Thus, the paper excluded those companies that did not have valid observations or failed to publish them. The final sample included 370 companies and covered the nine-year period from 1998 through 2006. Findings – To this end, the authors identified the main determinants of capital structure and analyzed, through panel data, the relationship of IOE in addition to other determinants of capital structure, such as size, profitability, investment opportunities, risk, sales growth, real interest rate and real exchange rate, in corporate debt. The novel contribution of this study is the inclusion and analysis of the IOE in studies on the determination of capital structure of Brazilian companies. A new capital structure scenario was created when Law No. 9.249/95 required changes in legislation, ceasing the restatement of balance sheets and allowing companies to compensate their stockholders through IOE. Before this change, companies could only benefit from the tax benefits of debt, using debt capital. Now, they can also benefit from the use of equity because, by requiting equity through the IOE, deductions of income tax and social contributions on net income are allowed by tax law because the IOE may be considered a financial expense. Originality/value : The authors were not able to find any other publication of a similar study in a review of the extant empirical literature.

scholarly journals Investment and Financing Policies of Nepalese Enterprises

2017 ◽  
Vol 8 ◽  
pp. 47-55
Author(s):  
Kapil Deb Subedi
Keyword(s):  
Capital Market ◽  
Data Set ◽  
Investment Policies ◽  
Financing Policies ◽  
Firm Financing ◽  
Investment And Financing ◽  
Internal Funds ◽  
Financing And Investment ◽  
World Bank Enterprise Survey ◽  
Enterprise Survey

Firm financing and investment policies are central to the study of corporate finance. In imperfect capital market, financing and investment policies of enterprises are dependent to each other. Firm’s investment decisions depend upon the access and availability of finance in capital market. But various capital market frictions like information and incentives wedge the efficient allocation of fund to each of marginally profitable project. Consequently, in asymmetric informational theoretic framework, firms change their strategies in raising their capital. Firms' first best choice for financing their investment in severity of information problem, rests on their internal funds since it is the cheapest and more unrestricted source of finance to the managers. To this milieu, this paper focuses on investigating whether the Nepalese enterprises depend on their internal funds to finance their investment or not? World Bank Enterprise Survey data set are employed to examine the investment and financing policies of Nepalese enterprises. The data set consist of financial information of 968 firms across multiple size, sector and age category. We employ simple measures of descriptive statistics like frequencies, percentage and arithmetic mean viz; the average of a set of numerical values to analyze the data by sorting the observations to various portfolios. The study result confirms that the firms heavily depend on their internal funds to finance their investment. These results are consistent with prior literatures for example; Fazzari, Hubbard, & Peterson (1988), Gilchrist & Himmelberg (1995), Hu & Schiantarelli (1998) etc when observed in cross section of size, sector, age and ownership pattern of enterprises.The Saptagandaki Journal Vol.8 2017: 47-55

Capital structure and earnings quality in microfinance institutions

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Naima Lassoued
Keyword(s):  
Capital Structure ◽  
Earnings Management ◽  
Information Quality ◽  
Management Practice ◽  
Investment Decision ◽  
External Financing ◽  
Microfinance Institutions ◽  
Content Type ◽  
External Finance ◽  
Negative Effect

PurposeThe purpose of this paper is to examine whether capital structure matters for earnings management of microfinance institutions.Design/methodology/approachThe empirical study is conducted using a sample of 575 MFIs over 2007 to 2015, we determined in the first step the discretionary part of provision for loan impairment. In the second step, we examine the effect of debt and donated equity on discretionary provision for loan impairment.FindingsWe found robust evidence that MFIs manage their earnings for external finance purposes. Debt exhibits a negative effect on earnings management for both profit and nonprofit MFIs. However, donated equity incites managers of MFIs to engage this practice in nonprofit MFIs.Practical implicationsFindings could be valuable to fund providers and investors who should consider accounting information quality in order to reach a better investment decision.Originality/valueThis paper is among the few to explore earnings management motivation of MFIs and to determine the role of external financing on earnings management practice.

scholarly journals Financial Decision, Innovation, Profitability and Company Value: Study on Manufacturing Company Listed in Indonesian Stock Exchange

2015 ◽  
Vol 7 (2) ◽  
pp. 72-78
Author(s):  
Mursalim Mursalim ◽  
Nur Alamzah . ◽  
Abdullah Sanusi .
Keyword(s):  
Capital Structure ◽  
Capital Market ◽  
Dividend Policy ◽  
Stock Exchange ◽  
Investment Decision ◽  
Secondary Data ◽  
Financial Decisions ◽  
Company Value ◽  
Financial Decision ◽  
The Relationship

This study aims to describe the relationship between financial decisions, innovation, enterprise profitability and the value of the company. Based on the research objectives, this research is a causality research. The data used are secondary data for a 5-years period, obtained through several sources such as Indonesian Capital Market Directory (ICMD) and the websites of 22 companies. The results show that (1) Investment decision affects company profitability positively and significantly, (2) Investment decision affects company value positively and significantly, (3) Capital structure affects company profitability positively and significantly, (4) Capital structure affects company value positively and significantly, (5) Dividend policy affects company profitability positively and significantly, (6) Dividend policy does not affect company value, (7) Innovation affects company profitability positively and significantly, (8) Innovation affects company value positively and significantly, and (9) Profitability affects company value positively and significantly.

Capital structure of family firms: the effect of debt and equity market timing

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mushtaq Muhammad ◽  
Chu Ei Yet ◽  
Muhammad Tahir ◽  
Abdul Majid Nasir
Keyword(s):  
Financial Crisis ◽  
Capital Structure ◽  
South Asian ◽  
Family Firms ◽  
Market Timing ◽  
Content Type ◽  
The Family ◽  
Debt Market ◽  
The Impact ◽  
The Capital Structure

PurposeThis study aims to investigate how the timing behavior affects the capital structure decisions of South Asian family firms. A strand of literature is available based on the capital structure of firms in general but inconsistent with family businesses framework and not from market timing outlook. This study looks at the issues from the market timing perspectives of both equity and debt market timing.Design/methodology/approachThe sample of the study is the listed family firms of India, Pakistan and Bangladesh. The firm-level data are collected from Thomson Reuters' DataStream and the ownership data collected from the countries' stock exchanges and financial statements of the family firms.FindingsThe results show that there is strong support for the market timing in the family firms' capital structure. Moreover, the financial crisis of 2007–2009 surprisingly had a positive effect on the capital structure of South Asian family business.Originality/valueThis study looks at the issues from the market timing perspectives of both equity and debt market timing. It provides evidence for supporting the equity and debt market timing effect on the capital structure and financing decision of family firms. It also addresses the impact of the 2007–2009 financial crisis on the capital structure of family firms.

Influence of financial architecture, intangible assets on financial performance and corporate value in the Indonesian capital market

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
I. Wayan Widnyana ◽  
I. Gusti Bagus Wiksuana ◽  
Luh Gede Sri Artini ◽  
Ida Bagus Panji Sedana
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Financial Performance ◽  
Ownership Structure ◽  
Capital Market ◽  
Intangible Assets ◽  
Corporate Value ◽  
Content Type ◽  
Financial Architecture ◽  
Company Value

PurposeThis study aims to analyze and explain the effect of financial architecture (with three dimensions: ownership structure, capital structure and corporate governance) and intangible assets on performance financial and corporate value in the Indonesian capital market.Design/methodology/approachThis research was conducted on nonfinancial sector companies that were registered in the Indonesian capital market, namely Indonesia Stock Exchange (IDX) in 2015. This study used quantitative data and used secondary data sources, meaning that data were obtained, collected and processed from other parties. In this study, the hypothesis testing of the effect of financial architecture (included the dimensions of ownership structure, capital structure and corporate governance) and intangible assets on financial performance and corporate value using path analysis was performed.FindingsThe results of this study have provided findings that follow the research model that has been built (1) This research has been able to provide a theoretical model of the influence of financial architecture (with dimensions of ownership structure, capital structure and corporate governance), intangible assets, board processes on financial performance and company value in the Indonesian capital market. (2) To develop a theoretical model about the effect of corporate governance on financial performance in accordance with the two-tier system adopted by Indonesia. (3) An empirical study of the concept of financial architecture put forward by Myers (1999).Originality/valueThis research update lies in the research variable, which determines one value of the financial architecture variable comprehensively, combines the financial architecture variable and intangible assets to then be tested for its effect on company value and the use of the financial process variable as a board process as an intervening variable.

Do banks propagate debt market shocks?

2014 ◽  
Vol 6 (3) ◽  
pp. 270-310 ◽  
Author(s):  
Galina Hale ◽  
João A.C. Santos
Keyword(s):  
Banking System ◽  
Bond Market ◽  
Bank Loans ◽  
Content Type ◽  
Panel Regressions ◽  
Debt Market ◽  
Recent Financial Crisis ◽  
Market Shocks ◽  
Treat All

Purpose – This paper aims to analyze how banks transmit shocks that hit the debt market to their borrowers. Recent financial crisis demonstrated that the banking system can be a pathway for shock transmission. Design/methodology/approach – Bank-level panel regressions. Findings – This paper shows that when banks experience a shock to the cost of their bond financing, they pass a portion of their extra costs or savings to their corporate borrowers. While banks do not offer special protection from bond market shocks to their relationship borrowers, they also do not treat all of them equally. Relationship borrowers that are not bank-dependent are the least exposed to bond market shocks via their bank loans. In contrast, banks pass the highest portion of the increase in their cost of bond financing to their relationship borrowers that rely exclusively on banks for external funding. Research limitations/implications – These findings show that banks put more weight on the informational advantage they have over their relationship borrowers than on the prospects of future business with these borrowers. They also show a potential side effect of the recent proposals to require banks to use CoCos or other long-term funding. Originality/value – The findings are timely, given the ongoing debates on the proposals to introduce bail-in programs and proposals to require banks to use CoCos or other long-term funding.

Capital structure, ownership and crisis: evidence from Middle East and North African banks

2018 ◽  
Vol 31 (2) ◽  
pp. 284-300
Author(s):  
Saibal Ghosh
Keyword(s):  
Financial Crisis ◽  
Middle East ◽  
Capital Structure ◽  
Bank Failures ◽  
Bank Capital ◽  
Economic Costs ◽  
North African ◽  
Content Type ◽  
Recent Financial Crisis ◽  
Shed Light

Purpose Although understanding the capital structure of firms has been quite commonplace in the empirical literature, there is admittedly limited evidence with regard to the determinants of capital structure for banks. In this context, using data for the period 2000-2012, this paper aims to examine the factors affecting the capital structure of Middle East and North African (MENA) banks. Design/methodology/approach The data span the period 2000-2012 and comprise of over 100 banks from 12 MENA countries. Given the longitudinal nature of the data, the panel uses panel data techniques and controls for unobserved bank characteristics that might affect capital structure. Findings The findings indicate that the factors driving book leverage are similar to those influencing market leverage. These findings refute the conventional wisdom that bank capital structure is purely a response to the regulatory requirements, as otherwise, regulatory concerns would have driven a wedge between these two leverage measures. Second, the crisis appears to have exerted a perceptible impact on bank capital. Third, in terms of ownership, it appears that the crisis-support measures had a salutary effect on Islamic banks, in turn improving their growth opportunities. Research/limitations/implications This is the first study to examine the determinants of capital structure for MENA banks and how it evolved during the crisis. By using both book- and market-related measures of capital structure, the study is able to shed light whether regulatory concerns are a major driven of bank capital. As the recent financial crisis indicates, bank failures impose enormous social and economic costs, which are protracted and significant. Practical implications From a practical standpoint, the study seeks to inform the policy debate on the role of regulation in impacting bank capital, especially in the light of the envisaged Basel III reforms. In addition, the study suggests that classroom teaching on bank capital needs to be suitably refined to take on board country-specific requirements and, in addition, focus on how such behavior evolved during the crisis. Originality/value This is the first study to examine the determinants of capital structure for MENA banks and how it evolved during the crisis. By using both book- and market-related measures of capital structure, the study is able to shed light whether regulatory concerns are a major driven of bank capital. As the recent financial crisis indicates, bank failures impose enormous social and economic costs, which are protracted and significant.

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