scholarly journals Financing costs and barriers to entry in Australia’s electricity market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Alan Rai ◽  
Tim Nelson
Keyword(s):  
Electricity Generation ◽  
Cost Of Capital ◽  
Weighted Average ◽  
Policy Implications ◽  
Free Text ◽  
Barriers To Entry ◽  
Content Type ◽  
Australian Context ◽  
Financing Costs ◽  
Nodal Pricing

Purpose This paper aims to provide investors’ views on financing costs and barriers to entry into the electricity generation sector, with a focus on investors’ views on potential impacts on cost of capital from adopting nodal pricing and financial transmission rights (FTRs). The implications for policymakers and policy reforms are also discussed in detail. Design/methodology/approach Survey-based data collection of investors and developers in electricity generation, consisting of multiple choice questions from a closed list of discrete choices, binary-choice questions, and questions with free-text/open-ended answers. Findings Across survey respondents, weighted-average cost of capital (WACCs) were broadly unchanged over 2019, with increases for undiversified/non-integrated participants offset by decreases for horizontally integrated participants. Cost of equity has risen, whereas cost of debt has fallen. Nodal pricing-cum-FTRs were estimated to increase WACCs by 150–200 basis points p.a. (15–20%), reflecting concerns around the firmness of FTRs and ability to automatically access intraregional settlement residues. Research limitations/implications These findings have energy policy implications, namely, the need to consider the interaction between economic theory and real-world financing models when designing and implementing fundamental energy sector reforms. Practical implications The need to consider implementation and transitional issues (e.g. grandfathering of existing rights, focusing on reducing the largest barriers to entry) is associated with implementing nodal pricing. Originality/value Unique set of survey questions and insights that have not previously been addressed in an Australian context; what-if analysis not previously done in an Australian context

How do financial constraints and financing costs affect inventories? An empirical supply chain perspective

2017 ◽  
Vol 47 (6) ◽  
pp. 516-535 ◽  
Author(s):  
Kai Hoberg ◽  
Margarita Protopappa-Sieke ◽  
Sebastian Steinker
Keyword(s):  
Supply Chain ◽  
Inventory Management ◽  
Financial Constraints ◽  
Cost Of Capital ◽  
Secondary Data ◽  
Supplier Relationships ◽  
Financial Situation ◽  
Content Type ◽  
Financial Perspective ◽  
Financing Costs

Purpose The purpose of this paper is to identify the interplay between a firm’s financial situation and its inventory ownership in a single-firm and a two-firm perspective. Design/methodology/approach The analysis uses different secondary data sources to quantify the effect of both financial constraints and cost of capital on inventory holdings of public US firms. The authors first adopt a single-firm perspective and analyze whether financial constraints and cost of capital do generally affect the amount of inventory held. Next, the authors adopt a two-firm perspective and analyze the inventory ownership in customer-supplier relationships. Findings Inventory levels are affected by financial constraints and cost of capital. Results indicate that higher costs of capital are weakly associated with lower inventories. However, contrary to the authors’ expectations, firms that are less financially constrained hold less inventories than firms that are more financially constrained. Finally, the authors find that customers hold the larger fraction of supply chain inventory in supplier-customer dyads. Practical implications The authors’ results indicate that financial considerations generally play a role in inventory management. However, inventory holdings seem to be influenced only slightly by financing costs and inventory holdings between supplier and customer seem to be less than optimal from a financial perspective. Considering those financial aspects can lead to relevant financial advantages. Originality/value In contrast to other recent research, the authors study how the financial situation of a firm affects its inventory levels (not vice versa) and also consider inventories from a two-firm perspective.

The relation between excess control and cost of capital

2014 ◽  
Vol 10 (1) ◽  
pp. 93-114 ◽  
Author(s):  
Yves Bozec ◽  
Claude Laurin ◽  
Iwan Meier
Keyword(s):  
Firm Value ◽  
Design Methodology ◽  
Cost Of Capital ◽  
Weighted Average ◽  
Equity Capital ◽  
Content Type ◽  
The Common ◽  
Cash Flow Rights ◽  
The Cost ◽  
The Relationship

Purpose – The purpose of this study is to investigate the relationship between dominant shareholders, whose voting rights exceed cash flow rights (excess control), and firms’ cost of capital, including both equity capital and debt. Design/methodology/approach – This research is conducted in Canada over a four-year period from 2002 to 2005 and uses panel data of 155 S&P/TSX firms. The weighted average cost of capital is regressed on excess control using fixed-effect regressions in a two-stage least squares framework. Findings – The paper finds evidence that the cost of capital increases with excess control. The paper also confirms that for firms incorporated under the less protective Quebec incorporation law the excess control and, therefore, cost of capital is higher than for firms incorporated in the other provinces under the common law regime. Originality value – Prior work examined the relationship between excess control and firm value, mostly Tobin's Q. By using cost of capital, the study explores another channel through witch excess control may affect firm value.

scholarly journals A study on capital budgeting practices of some selected companies in Bangladesh

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Md. Anhar Sharif Mollah ◽  
Md. Abdur Rouf ◽  
S.M. Sohel Rana
Keyword(s):  
Net Present Value ◽  
Cost Of Capital ◽  
Stock Exchange ◽  
Weighted Average ◽  
Capital Budgeting ◽  
Chief Financial Officers ◽  
Content Type ◽  
Investment Projects ◽  
Body Of Knowledge ◽  
Wise Decision

Purpose The purpose of this paper is to investigate the current capital budgeting practices in Bangladeshi listed companies and provide a normative framework (guidelines) for practitioners. Design/methodology/approach Data were collected with a structured questionnaire survey taking from the chief financial officers (CFOs) of companies listed in the Dhaka Stock Exchange in Bangladesh. Garnered data were then analyzed using descriptive and inferential statistical techniques. Findings The results found that net present value was the most prevalent capital budgeting method, followed closely by internal rate of return and payback period. Similarly, the weighted average cost of capital was found to be the widely used method for calculating cost of capital. Further, results also revealed that CFOs adjust their risk factor using discount rate. Originality/value The findings of this study might help the firms, policymakers and practitioners to take a wise decision while evaluating investment projects. Additionally, this study’s findings enrich the existing body of knowledge in the field of capital budgeting practices by providing more reliable and comprehensive analysis taking samples from a developing economy.

The impact of leverage on the cost of capital and market value

2020 ◽  
Vol 43 (9) ◽  
pp. 1081-1096 ◽  
Author(s):  
Enrico Battisti ◽  
Luigi Bollani ◽  
Nicola Miglietta ◽  
Antonio Salvi
Keyword(s):  
Cost Of Capital ◽  
Stock Exchange ◽  
Weighted Average ◽  
Principal Component ◽  
Market Value ◽  
Listed Companies ◽  
Content Type ◽  
Operating Profit ◽  
The Cost ◽  
The Impact

Purpose This paper aims to investigate the impact of leverage on the cost of capital and market value in the Indonesia Stock Exchange (IDX), where there are Sharīʿah and non-Sharīʿah compliant firms. Design/methodology/approach This study uses a mixed methods sequential exploratory design and is based on an empirical analysis undertaken with a sample of firms listed on the IDX. In particular, a qualitative analysis was conducted to identify the Sharīʿah-compliant firms and the qualitative study was designed to compare some financial elements in Sharīʿah and non-Sharīʿah compliant listed companies. The correlations among the main elements observed are considered and a principal component analysis describes the framework. Findings First, the results of the analysis show that for the Sharīʿah-compliant companies, identified as those that apply Islamic principles, the lower level of leverage that it is typical of these type of firms implies a higher cost of capital [cost of equity and weighted average cost of capital (WACC)] than non-Sharīʿah ones. Secondly, for the Sharīʿah-compliant companies, the lower level of leverage entails a higher market value measured by the multiples method (price/earning and enterprise value/operating profit) than for non-Sharīʿah ones. Originality/value This paper sheds new light on how leverage can affect the cost of capital and market value in the case of Sharīʿah and non-Sharīʿah compliant listed companies in the IDX. In particular, this research highlights the fact that Sharīʿah-compliant firms, despite having a higher WACC, create more market value compared to non-Sharīʿah compliant ones.

CSR and cost of capital: evidence from Japan

2017 ◽  
Vol 13 (4) ◽  
pp. 798-816 ◽  
Author(s):  
Megumi Suto ◽  
Hitoshi Takehara
Keyword(s):  
Ownership Structure ◽  
Capital Market ◽  
Cost Of Capital ◽  
Corporate Social Performance ◽  
Weighted Average ◽  
Cost Of Debt ◽  
Cost Of Equity ◽  
Content Type ◽  
Stakeholder Relationships ◽  
The Cost

Purpose This study aims to examine the link between corporate social performance (CSP) and the cost of capital of Japanese firms in 2008-2013, considering the influences of banking relationships and ownership structure. Design/methodology/approach It examines the relation between CSP and the cost of capital in terms of the cost of debt, cost of equity and weighted average cost of capital, using a composite CSP measure based on stakeholder relationships. A regression model is adopted, controlling for bank dependency, ownership structure and firm-specific attributes. Findings Institutional ownership influences the CSP–cost of equity relation and reduces the cost of equity, while CSP is perceived by debtors as not information-mitigating for the observed period. For 2008-2010, the relation between CSP and bank dependency increases the cost of debt; however, the positive influence of bank dependency on the cost of debt dilutes during 2010-2013 as the shift to a more market-oriented financial market in Japan occurs. Practical implications Although bank borrowing is important, especially for small firms, non-financial disclosure makes external financing more flexible. Institutional investors concerned about the non-financial aspects of business, therefore, play an important role in mitigating the information asymmetry that exists in the capital market. Originality/value This study extends research on the CSP–cost of capital link by considering structural changes in financial systems (e.g. capital market perception of CSP and banks as delegated monitors).

Capital budgeting practices: evidence from Sri Lanka

2015 ◽  
Vol 12 (1) ◽  
pp. 55-82 ◽  
Author(s):  
Mohamed Nurullah ◽  
Lingesiya Kengatharan
Keyword(s):  
Sensitivity Analysis ◽  
Sri Lanka ◽  
Net Present Value ◽  
Cost Of Capital ◽  
Weighted Average ◽  
Capital Budgeting ◽  
Rate Of Return ◽  
Chief Financial Officers ◽  
Sri Lankan ◽  
Content Type

Purpose – The purpose of this paper is to investigate prevailing capital budgeting practices in Sri Lankan listed companies. Design/methodology/approach – A comprehensive primary survey was conducted of 32 out of 46 chief financial officers (CFOs) of manufacturing and trading companies listed on the Colombo Stock Exchange in Sri Lanka. Garnered data were then analyzed using appropriate statistical techniques. Findings – The results revealed that net present value (NPV) was the most preferred capital budgeting method, followed closely by payback (PB) and internal rate of return (IRR). Similarly, sensitivity analysis was regarded as the dominant capital budgeting tool for incorporating risk and the widely used method for calculating cost of capital was the weighted average cost of capital. Moreover, results revealed that size of the capital budget affects the use of the capital budgeting methods (NPV, IRR and PB) and incorporating risk tool (sensitivity analysis and simulation). Further, results revealed that CFOs had higher educational qualification were preferred to use sophisticated capital budgeting practices dominantly NPV, IRR and incorporating risk tool of sensitivity analysis although they were found to be reluctant in use of accounting rate of return. In a similar vein CFOs with higher experience were preferred using IRR and sensitivity analysis. Originality/value – This study contributed to academics, practitioners, policy makers and stakeholders of the company. Moreover, this research has proffered a more reliable and comprehensive analysis of capital budgeting practices in Sri Lankan listed manufacturing and trading firms. Since Sri Lanka is an unexplored country on capital budgeting practices, this research was originally contributed to the extant literature per se.

Exploring the antecedents of industry globalization: a longitudinal investigation

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rakesh B. Sambharya ◽  
Abdul A. Rasheed ◽  
Farok J. Contractor
Keyword(s):  
Structural Characteristics ◽  
Capital Intensity ◽  
Life Cycle Stage ◽  
Manufacturing Industries ◽  
Policy Implications ◽  
Industry Concentration ◽  
Barriers To Entry ◽  
Content Type ◽  
Industry Regulation ◽  
Industry Level

PurposeThere is considerable variation in the extent of globalization across industries. The authors attempt to identify the structural conditions of the industry that lead to these variations.Design/methodology/approachBased on a sample of 33 manufacturing industries over the nine-year period from 2007 to 2016, the authors test for antecedents of industry globalization.FindingsThe authors find that industry globalization is positively affected by medium levels of barriers to entry, industry competition, industry assistance, low and mediums levels of capital intensity, industry concentration and industry regulation and negatively affected by low levels of technological change and industry assistance. In addition, the life cycle stage of the industry has an impact on the level of globalization with the growth stage having the highest level of globalization.Research limitations/implicationsFirst, the major limitation of the paper is that the authors rely entirely on trade data to measure the level of industry globalization. The authors did not have a choice because foreign direct investment (FDI) data are available only at the country level. Second, given that globalization can occur at the country, industry and firm levels, the focus on industry-level structural characteristics alone may be seen as a limitation.Practical implicationsThe results of the study can provide guidance to practicing managers to apply industry analysis for predicting the potential for and direction of globalization of their industries. This will enable them to formulate appropriate strategies to cope with global competition.Social implicationsThe study has important public policy implications. National governments have many levers at their command that can be used to influence the structural characteristics of industries, such as industry regulation, industry assistance and industry concentration. They can selectively use these levers to either facilitate or impede globalization.Originality/valueMuch of the empirical focus of prior research on globalization has been on countries, rather than industries, as the unit of analysis. There is clearly variation in the extent of globalization across industries with some industries highly integrated while others remain primarily local or regional. Based on a novel approach to measure the extent of globalization at the industry level, the authors identify its antecedents. The value of the paper lies in the fact that the analysis of 33 manufacturing industries over a ten-year period shows that the structural characteristics of the industries drive their extent of globalization.

The impact of earnings quality on the association between readability and cost of capital

2019 ◽  
Vol 9 (3) ◽  
pp. 366-385
Author(s):  
Amr Nazieh Ezat
Keyword(s):  
Cost Of Capital ◽  
Emerging Market ◽  
Earnings Quality ◽  
Weighted Average ◽  
Least Square ◽  
Annual Reports ◽  
Content Type ◽  
Board Of Director ◽  
The Impact ◽  
The Relationship

PurposeThe purpose of this paper is to explore the relationship between disclosure quality, measured by the readability of the board of directors’ report and cost of capital (CoC), and, second, attempt to investigate the moderating effect of earnings quality on the relationship between readability and CoC.Design/methodology/approachThe sample includes the Egyptian EGX 100 companies, listed from 2013 to 2015, and the study runs two ordinary least square models to test the two main hypotheses. The study applies the LIX formula to calculate the readability level of board of director’ reports and uses the weighted average CoC to calculate CoC. Moreover, the performance-adjusted modified Jones model is used to measure earnings quality.FindingsThe results indicate that in the Egyptian context the readability of board of director’ reports does not impact on CoC. In addition, after moderating by earnings quality, there is a significant association between readability and CoC. The interaction between earnings quality and readability has a significant impact on CoC. This finding is consistent with the notion that, conditional on earnings quality, the benefits of easy writing style in the annual reports, prepared by the company’s managers, are reflected in the reduction of CoC.Originality/valueBased on the limited literature relating to developing countries’ capital markets, this study contributes to the accounting literature by providing empirical evidence on the conditional effect of earnings quality and of the consequences of linguistics style in the emerging market.

Shari’ah compliance in Islamic banking

2014 ◽  
Vol 7 (2) ◽  
pp. 182-199 ◽  
Author(s):  
Hafij Ullah
Keyword(s):  
Supervisory Board ◽  
Weighted Average ◽  
Policy Implications ◽  
Annual Reports ◽  
Primary Data ◽  
Islamic Banking ◽  
Full Time ◽  
Islamic Banks ◽  
Content Type ◽  
Average Percentage

Purpose – The purpose of this paper is to evaluate the Shari’ah compliance status of the Islamic banks in Bangladesh. Design/methodology/approach – The research was based on both primary and secondary materials. The primary data were gathered through sample questionnaire survey and personal interviews by the researcher; the secondary data were obtained from Qur’an, Hadiths, different circulars/letters, manuals, research books and journals, annual reports, Web sites of the sample banks. Statistical tools and techniques like weighted average, percentage, SD, variance and correlation between Shari’ah violation score and bank-specific attributes were used applying statistical software Statistical Package for Social Science (version 17.0). Findings – Shari’ah compliance status of the Islamic banks in Bangladesh is in a vulnerable condition, Shari’ah compliance status highly varies among the Islamic banks, and Shari’ah violation is high in investing activities because of lack of knowledge, lack of sincerity in complying Shari’ah, poor attention in Shari’ah audit and Shari’ah research and lack of strong Shari’ah supervisory board comprising full-time skillful members. Practical implications – Among others, the major policy implications of this study are as follows: regulatory bodies and Shari’ah board members are expected to have guidelines from this study to find their limitations and to determine their future responsibilities; executives and Employees are expected to get the idea of present state of Shari’ah compliance and to identify their weaknesses in this regard; clients and other stakeholders are expected to have guidelines to choose the better Islamic banks to perform banking transactions; and the researchers in Islamic banking may usefully use the issues raised in this article for more comprehensive studies in Islamic banking and Shari’ah compliance. Originality/value – The paper opens a new avenue in justifying the status of Shari’ah compliance with a new dataset and correlating Shari’ah violation score with bank-specific attributes.

The impacts of environmental, social, and governance factors on firm performance

2018 ◽  
Vol 29 (2) ◽  
pp. 182-194 ◽  
Author(s):  
Ruhaya Atan ◽  
Md. Mahmudul Alam ◽  
Jamaliah Said ◽  
Mohamed Zamri
Keyword(s):  
Firm Value ◽  
Cost Of Capital ◽  
Random Effect ◽  
Weighted Average ◽  
Content Type ◽  
Responsible Investment ◽  
The Cost ◽  
Environmental Agencies ◽  
The Impact ◽  
A Company

Purpose The ESG factor, which consists of environmental, social, and governance factors, represents the non-financial performance of a company. United Nations Principles for Responsible Investment invites investors to consider ESG issues when evaluating the performance of any company. Moreover, nowadays, the contribution of corporations towards sustainable development is a major concern of investors, creditors, government, and other environmental agencies. Therefore, the purpose of this paper is to examine the impact of ESG factors on the performance of Malaysian public-limited companies (PLC) in terms of profitability, firm value, and cost of capital. Design/methodology/approach A total of 54 companies are selected from Bloomberg’s ESG database that has complete ESG and financial data from 2010 to 2013. This study conducted panel data regressions such as the pooled OLS, fixed effect, and random effect. Findings Based on the regression results, there is no significant relationship between individual and combined factors of ESG and firm profitability (i.e. ROE) as well as firm value (i.e. Tobin’s Q). Moreover, individually, none of the factors of ESG is significant with the cost of capital (weighted average cost of capital, WACC), but the combined score of ESG positively and significantly influences the cost of capital (WACC) of a company. Practical implications As this is a new study on Malaysia, the findings of this study will be useful to investors, SRI analysts, policy makers, and other related agencies. Originality/value To the best of the authors’ knowledge, this study is among the first empirical study to examine the impact of ESG factors on the performance of Malaysian PLC in terms of profitability, firm value, and cost of capital.

Sign in / Sign up

Export Citation Format

Share Document