Intellectual capital and institutional governance as capital structure determinants in the tourism sector

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tamanna Dalwai ◽  
Navitha Singh Sewpersadh
Keyword(s):  
Middle East ◽  
Capital Structure ◽  
Intellectual Capital ◽  
Middle Eastern ◽  
Ordinary Least Squares ◽  
Institutional Governance ◽  
Content Type ◽  
Gcc Countries ◽  
Tourism Sector ◽  
The Capital Structure

PurposeThis study investigates the capital structure determinants of the Middle East tourism sector by examining intellectual capital (IC) efficiency and institutional governance along with firm-specific and macroeconomic variables. This research also identifies the determinants of capital structure for tourism companies in the Gulf Cooperation Council (GCC) and non-GCC countries.Design/methodology/approachData were collected from 45 listed tourism companies of nine Middle Eastern countries over five years from 2014 to 2018. The data were analysed using ordinary least squares (OLS) regression and checked for robustness using the generalised methods of moment (GMM) estimation.FindingsOverall, the results indicate that tourism companies rely more on short-term debt (STD) than long-term debt (LTD), thus decreasing liquidity and increasing financial risk. Furthermore, tourism companies in non-GCC countries have higher IC efficiency compared to those in GCC countries. The aggregate institutional index is much higher for GCC countries compared to non-GCC countries. The OLS estimations suggest IC efficiency and institutional governance index provide inconclusive evidence as a determinant of capital structure proxy. High capital employed efficiency (CEE) is associated with more leverage for tourism firms. Theoretically, the results support pecking order and trade-off theories due to the relationships between firm-specific indicators and debt.Originality/valueThis study closes the gap in the capital structure debate by providing valuable insights into IC efficiency and institutional governance. These two factors serve as capital structure determinants in the Middle East and the GCC and non-GCC regions.

The impact of environmental performance on capital structure and firm performance: the case of Turkey

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ismail Kalash
Keyword(s):  
Capital Structure ◽  
Financial Performance ◽  
Stock Returns ◽  
Environmental Performance ◽  
Positive Impact ◽  
Stock Exchange ◽  
Ordinary Least Squares ◽  
Content Type ◽  
The Impact ◽  
The Capital Structure

Purpose The purpose of this study is to investigate the effect of environmental performance on the capital structure and financial performance of Turkish listed firms. Design/methodology/approach This study used data of 49 firms listed on Istanbul Stock Exchange during the period between 2014 and 2019, resulting in 205 firm-year observations. The environmental performance data were drawn from the carbon disclosure project Turkey climate change reports. Ordinary least squares and binary logistic regression models were used to examine whether environmental performance impacts the capital structure and financial performance. Findings The findings of this research revealed that environmental performance significantly positively affects the firm leverage. Findings also showed that environmental performance has a significantly positive impact on return on assets, operating profitability and return on equity, but no significant impact on stock returns. Practical implications Given the increased borrowing costs for Turkish firms after the 2018 currency crisis in Turkey, the findings of this study are very important as they enable managers of Turkish firms to make better decisions related to capital structure and to understand the role of environmental performance in reducing the cost of debt and enhancing financial performance. Originality/value To the author’s knowledge, this research is the first to investigate the effect of environmental performance on capital structure in the Turkish context, and is one of few that explained how environmental performance affects the financial performance of Turkish firms.

Determinants of capital structure of Islamic and conventional commercial banks

2017 ◽  
Vol 10 (1) ◽  
pp. 24-41 ◽  
Author(s):  
Nadeem Ahmed Sheikh ◽  
Muhammad Azeem Qureshi
Keyword(s):  
Capital Structure ◽  
Commercial Banks ◽  
Fixed Effects ◽  
Stock Exchange ◽  
Ordinary Least Squares ◽  
Annual Reports ◽  
Content Type ◽  
Earnings Volatility ◽  
Financial Firms ◽  
The Capital Structure

Purpose The purpose of this paper is to investigate how conventional and Islamic commercial banks in Pakistan choose their capital structure and what are the most significant factors that affect their choice of capital structure. Design/methodology/approach The authors collected the data from the annual reports of commercial banks listed on Karachi Stock Exchange Pakistan during 2004-2014. Panel data techniques, namely, pooled ordinary least squares, fixed effects and random effects, were used to estimate the relationship between book leverage and bank-specific variables such as profitability, size, growth, tangibility and earnings volatility. Findings Descriptive statistics indicate that conventional commercial banks are more levered than Islamic commercial banks. Moreover, conventional commercial banks are larger, profitable and have relatively safe earnings than Islamic commercial banks. In contrast, Islamic commercial banks have relatively more fixed operating assets and growth in total assets compared to the conventional commercial banks. Regression results indicate that profitability, growth and tangibility are negatively, whereas bank size and earnings volatility are positively, related to book leverage of conventional commercial banks. On the other hand, only three variables, namely, profitability, bank size and tangibility, have material effects on capital structure choice of Islamic commercial banks. Profitability and tangibility are negatively while bank size is positively related to book leverage of the Islamic banks. In sum, results of the study indicate that Islamic and conventional commercial banks have their own way to choose the capital structure than the non-financial firms; however, their choice is affected by the similar variables as identified for non-financial firms in Pakistan. Practical implications Results of this study provide support to bank managers to understand the effects of bank-specific variables on capital structure and make them able to determine a balanced capital structure considering the regulations framed by the central bank of the country. Originality/value This is the first study that investigates the factors that affect the capital structure of conventional and Islamic commercial banks in Pakistan. Moreover, findings of this study lay some foundation upon which a more detail analysis of capital structure of banks could be based.

Factors influencing Islamic banks’ capital structure in developing economies

2019 ◽  
Vol 10 (1) ◽  
pp. 2-20 ◽  
Author(s):  
Abdullah Awadh Abdullah Bukair
Keyword(s):  
Capital Structure ◽  
Developing Economies ◽  
Future Research ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Trade Off ◽  
Content Type ◽  
Leverage Ratio ◽  
Gcc Countries ◽  
The Capital Structure

PurposeThis paper aims to investigate the influence of company-specific attributes on capital structure decisions of Islamic banks (IBs) in Gulf Cooperation council (GCC) countries during the period 2009-2011.Design/methodology/approachTo improve the econometric estimates’ efficiency, the paper uses the generalized least square (GLS) regression model to increase the levels of freedom and reduce collinearity.FindingsThe empirical results indicate that bank size, liquidity and corporate age are positively associated with the leverage ratio of GCC IBs, supporting the trade-off theory. Inconsistent with theoretical predictions, it is found that the profitability, tangibility and growth have positive insignificant relationship with the level of leverage, suggesting these determinants are not important in capital structure decisions. Furthermore, gross domestic product (GDP) and non-debt tax shield have negative effects on the leverage ratio and significant for GDP.Research limitations/implicationsOverall, the evidence provided in the study highlights the significance of company-specific characteristics in determining and affecting the capital structure decisions of IBs in GCC countries. It is useful to use these variables in the analysis of IBs’ capital structure in the GCC region before the financial crisis in 2007. One limitation for this study is that the sample is restricted to only the Islamic banking sector. Future research could include all Islamic financial institutions (IFIs) operating within the Gulf region. Second, the study only concentrates on GCC countries to the neglect of other countries. Finally, the study controls for the country level only and does not account for firm factors. Future research could consider all these limitations. Another possible avenue is by examining other variables, such as corporate governance mechanisms.Originality/valueDespite that most previous studies investigated the determinants of the capital structure of financial conventional industries, research on Islamic banking is almost non-existent. Moreover, the extant literature on Islamic finance has been theoretically explored, and the empirical research regarding capital structure is still in the infancy stage. Accordingly, it is evident that based on the Islamic trade-off perspective, theoretical hypotheses and empirical findings provide a novel addition to the capital structure theory for IFIs.

Testing the pecking order theory of capital structure in an Islamic legal system: the case of Saudi Arabia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Moncef Guizani ◽  
Ahdi Noomen Ajmi
Keyword(s):  
Stock Market ◽  
Capital Structure ◽  
Order Theory ◽  
Ordinary Least Squares ◽  
Financial Instruments ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Content Type ◽  
The Impact ◽  
The Capital Structure

Purpose The purpose of this paper is to examine whether the basic premises according to the pecking order theory (POT) provide an explanation for the capital structure mix of firms operating under Islamic principles. Design/methodology/approach Pooled ordinary least squares, fixed and random effects regressions were performed to test the POT applying data from a sample of 66 Islamic-compliant firms listed on Saudi Stock Market over the period 2006–2016. Findings The results show that sale-based instruments (Murabahah, Ijara) track the financial deficit quite closely followed by equity financing and as a last alternative to finance deficit, Islamic-compliant firms issue Sukuk. In the crisis period, these firms seem more reliant on equity, then on sale-based instruments and on Sukuk as last option. The study findings also indicate that the cumulative financing deficit does not wipe out the effects of conventional variables, although it is empirically significant. This provides no support for the POT attempts by Saudi Islamic-compliant firms Research limitations/implications This research contributes to the theory of capital structure in re-validating the findings of a previous theoretical and empirical study. It helps understand the capital structure of Islamic-compliant firms in comparison with conventional firms. It highlights some areas where further research on topics related to capital structure of Islamic-compliant firms is needed. The failure of the POT to explain Saudi firms’ financing choices strongly pushed researchers to test the market timing theory for the Saudi Stock Market. Further research studies could re-examine the trade-off theory in the absence of interest tax shield as in an Islamic economy. Practical implications From a managerial perspective, this research can serve firm executive managers in their financing decisions to add value to the companies. Furthermore, policymakers, bankers and standard-setting organizations should undertake more collective work to simplify the process of issuing Islamic financial instruments including Sukuk. Moreover, the Saudi Government has to encourage the private sector to be more innovative in developing products and services that are in line with Sharia principles. Finally, to attract investors, the Capital Market Authority has to encourage transaction, efficiency and liquidity of Islamic financial instruments. Originality/value The proposed study presents several originalities. First, it explores the implications of relevant Islamic principles on financing preferences of Saudi firms. Second, the present study enables us to investigate what the sudden abundance of liquidity, generated by the record levels of oil prices, implied for the firms’ financing behavior. Finally, it provides further evidence on the impact of financial crisis on the firms’ capital structure choice in a period of considerable slowdown in the world.

Cross-country comparison of intellectual capital performance and its impact on financial performance of commercial banks in GCC countries

2016 ◽  
Vol 9 (4) ◽  
pp. 512-531 ◽  
Author(s):  
Mahfoudh Abdulkarem Al-Musali ◽  
Ku Nor Izah Ku Ismail
Keyword(s):  
Financial Performance ◽  
Intellectual Capital ◽  
Performance Indicators ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Value Added ◽  
Ordinary Least Squares ◽  
Ease Of Use ◽  
Content Type ◽  
Gcc Countries

Purpose The purpose of this paper is to explore the intellectual capital (IC) performance of banks in Gulf Cooperation Council (GCC) countries and to empirically investigate if IC has an impact on financial performance as well as to identify the IC components that may be the drivers of the traditional indicators of bank success. Design/methodology/approach The empirical data are drawn from banks’ annual reports over the three-year period of 2008 to 2010. Ordinary least squares regression analysis is constructed to examine the relationships between IC and the banks’ financial performance indicators. Pulic’s value-added intellectual coefficient method (VAIC) is applied to measure IC performance. Findings Empirical findings, after controlling for bank size and global financial crisis, indicate that IC is positively associated with bank financial performance indicators in all GCC countries. However, when VAIC is split into its three components, the relationships between these components and bank financial performance indicators are varied. Research limitations/implications The main limitation of this study is the use of IC measurement model. Its basic advantage (simplicity and ease of use) is also its main limitation. The main problem is measuring the contribution of something which is not physical and cannot be easily quantified. The key issue is that the value created by IC is indirect. However, at present, no perfect solution is available for intellectual capital measurement, as the area is still exploring the best possible solutions. Practical implications The results may extend the understanding of the role of IC in banking sector in GCC region and may give inputs to managers of GCC banks to structure relevant strategies to obtain, utilize, develop and retain IC. The findings also could help policy makers in GCC to formulate and implement policies for establishing a resilient banking sector. Originality/value This study adds to the literature by extending the knowledge of IC performance and its utilization for increasing the financial performance of GCC banks. There has only been one previous empirical study that explores the IC and its relationship with the traditional measures of bank performance in GCC region (only in Bahrain). It is the first comparative study across GCC countries.

Middle East luxury retail sector – opportunities or uncertainties in the future?

2016 ◽  
Vol 6 (3) ◽  
pp. 1-39
Author(s):  
Roger Moser ◽  
Gopalakrishnan Narayanamurthy
Keyword(s):  
Middle East ◽  
Multinational Corporations ◽  
International Business ◽  
Market Entry ◽  
Middle Eastern ◽  
Subject Area ◽  
Retail Sector ◽  
Senior Executive ◽  
Content Type ◽  
The Future

Subject area The subject area is international business and global operations. Study level/applicability The study includes BSc, MSc and MBA students and management trainees who are interested in learning how an industry can be assessed to make a decision on market entry/expansion. Even senior management teams could be targeted in executive education programs, as this case provides a detailed procedure and methodology that is also used by companies (multinational corporations and small- and medium-sized enterprises) to develop strategies on corporate and functional levels. Case overview A group of five senior executive teams of different Swiss luxury and lifestyle companies wanted to enter the Middle East market. To figure out the optimal market entry and operating strategies, the senior executive team approached the Head of the Swiss Business Hub Middle East of Switzerland Global Enterprise, Thomas Meier, in December 2012. Although being marked with great potential and an over-proportional growth, the Middle Eastern luxury market contained impediments that international firms had to take into consideration. Therefore, Thomas had to analyze the future outlook for this segment of the Middle East retail sector to develop potential strategies for the five different Swiss luxury and lifestyle companies to potentially operate successfully in the Middle East luxury and lifestyle market. Expected learning outcomes The study identifies barriers and operations challenges especially for Swiss and other foreign luxury and lifestyle retailers in the Middle East, understands the future (2017) institutional environment of the luxury and lifestyle retail sector in the Middle East and applies the institutions-resources matrix in the context of a Swiss company to evaluate the uncertainties prevailing in the Middle East luxury and lifestyle retail sector. It helps in turning insights about future developments in an industry (segment) into consequences for the corporate and functional strategies of a company. Supplementary materials Teaching notes are available for educators only. Please contact your library to gain login details or e-mail [email protected] to request teaching notes. Subject code CSS 5: International Business.

Comparative CSR decision-making in the Middle East: an exploratory study

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Pierre El Haddad ◽  
Alexandre Anatolievich Bachkirov ◽  
Olga Grishina
Keyword(s):  
Decision Making ◽  
Middle East ◽  
Middle Eastern ◽  
Structured Interviews ◽  
Managerial Decision ◽  
Content Type ◽  
Nodal Model ◽  
Comparative Csr ◽  
High Level ◽  
Corporate Social

Purpose This study aims to explore the commonalities and differences of corporate social responsibility (CSR) perceptions among business leaders in Oman and Lebanon, two Middle Eastern countries forming a comparative dyad with a high level of cultural variance within the Arab cluster. Design/methodology/approach Semi-structured interviews were used to elicit qualitative data that were analyzed by means of multilevel analysis. Findings The findings provide empirical evidence that CSR is a powerful factor in managerial decision-making in the Middle East with the national cultures of Oman and Lebanon exerting partially differing effects on CSR decision-making. Practical implications The study enlightens practicing managers and policymakers in terms of the salience of multiple actors’ influence on CSR decision-making processes and the responses they may receive when developing and implementing CSR initiatives in the Middle East. Originality/value The study proposes a seven nodal model, which captures the flow of CSR decision-making in the research contexts.

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.

Sign in / Sign up

Export Citation Format

Share Document