A qualitative inquiry into the capital structure decisions of overconfident finance managers of family-owned businesses in India

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hardeep Singh Mundi ◽  
Parmjit Kaur ◽  
R.L.N. Murty
Keyword(s):  
Decision Making ◽  
Capital Structure ◽  
Quantitative Research ◽  
Qualitative Approach ◽  
Debt Financing ◽  
Content Type ◽  
Overconfidence Bias ◽  
The Impact ◽  
Practical Implications ◽  
The Capital Structure

Purpose The purpose of this study is to understand the impact of the overconfidence of finance managers on the capital structure decisions of family-run businesses in the Indian scenario. Furthermore, this study aims to demonstrate that measurable managerial characteristics explain the capital structure decisions of managers. Design/methodology/approach The qualitative approach to research, which aims at understanding a given phenomenon among the experts, is followed. Semi-structured interviews are conducted with 21 overconfident finance managers of family-owned businesses. Content analysis is used to analyse the collected data regarding capital structure decisions into several themes to fully explore the issue in the Indian scenario. Findings In terms of preference for cash or debt, most of the responding overconfident finance managers of family-run businesses agreed that cash is the preferred source of financing over debt financing. This is due to the biased behaviour of overconfident managers, who consider lower availability of debt as a reason to prefer cash over debt financing. The present study reports that overconfident finance managers prefer short- to long-term debt financing. These managers raise certain practical issues, such as stringent debt terms and inflexible repayment schedules, that arise in relation to the long-term debt market. The study also finds that overconfident finance managers do not fully use tax savings. Respondents reported a lack of access to the debt market and a lack of expertise in capital structure decisions as factors in these capital structure decisions. In addition, the study explores various factors, such as the role of government, the Central Bank of India and industry practices, in relation to capital structure decisions. The study finds that the capital structure decisions of these overconfident finance managers are suboptimal because of the presence of overconfidence bias. Research limitations/implications This study gathers information from respondents who are finance managers, not top-level managers, of family businesses; the decision not to interview the higher-ranking managers is a potential limitation of the present study. Another limitation is the small number of respondents in a specific firm size. Because of these factors, the generalisability of the findings of this study will obviously be restricted. Practical implications The present study has several practical implications. The first is the recognition of overconfidence bias as it affects the decision-making of finance managers. Executives, especially finance executives, will benefit from the recognition of overconfidence bias and will understand how the presence of such bias impacts corporate decision-making. Managers will understand that bias leads to faulty decision-making. The study will provide indirect feedback to policymakers and regulators in terms of understanding the role of macroeconomic variables in economic decisions. The qualitative approach followed in the present study may enhance the understanding of capital structure decisions from a psychological perspective. The majority of studies in the review of literature adopt quantitative approaches; so the qualitative approach adopted here represents a methodological innovation, and it may provide a deeper understanding of the matter. Originality/value The existing literature includes quantitative research aimed at understanding the impact of CEO overconfidence on various corporate policies such as capital budgeting, mergers and acquisitions, dividend policy and capital structure decisions. Quantitative research into the presence of overconfidence bias among executives and its impact on corporate policies returns mixed results. To fulfil the need for studies of overconfidence bias among executives with practical implications, this study explores the presence of overconfidence bias among finance managers in family-run businesses and investigates the impact of overconfidence on capital structure decisions.

scholarly journals The Impact of CSR on the Capital Structure of High-Tech Companies in Poland

2021 ◽  
Vol 13 (10) ◽  
pp. 5467
Author(s):  
Barbara Grabinska ◽  
Dorota Kedzior ◽  
Marcin Kedzior ◽  
Konrad Grabinski
Keyword(s):  
Capital Structure ◽  
Financial Reporting ◽  
Academic Research ◽  
Debt Financing ◽  
High Tech ◽  
High Tech Industry ◽  
Reporting Practices ◽  
Csr Reporting ◽  
The Impact ◽  
The Capital Structure

So far, CSR’s role in the high-tech industry is not fully explained by academic research, especially concerning the most burdensome obstacle to firms’ growth: acquiring debt financing. The paper aims to solve this puzzle and investigate whether young high-tech companies can attract more debt by engaging in CSR activity. To address the high-tech industry specificity, we divided CSR-reporting practice into three broad categories: employee, social, and environmental and analyzed their impact on the capital structure. Our sample consists of 92 firm-year observations covering the period 2014–2018. Using a regression method, we found out that only employee CSR plays a statistically significant role in shaping capital structure. We did not find evidence for the influence of the other types of CSR-reporting practices. The results suggest that employees are the key resource of high-tech companies, and, for this reason, they are at the management’s focus. This fact is visible at the financial reporting level and, as we interpret results, is also considered by credit providers. In a more general way, our results suggest that firms tend to choose CSR based on the importance of crucial resources.

Understanding how the contextual variables influence political behaviour in strategic decision-making

2014 ◽  
Vol 7 (3) ◽  
pp. 226-250 ◽  
Author(s):  
Said Elbanna ◽  
Ioannis C. Thanos ◽  
Vassilis M. Papadakis
Keyword(s):  
Decision Making ◽  
Strategic Decision ◽  
Strategic Decision Making ◽  
Strategic Decisions ◽  
Empirical Examination ◽  
Content Type ◽  
Political Behaviour ◽  
Practitioner Education ◽  
The Impact ◽  
Practical Implications

Purpose – The purpose of this paper is to enhance the knowledge of the antecedents of political behaviour. Whereas political behaviour in strategic decision-making (SDM) has received sustained interest in the literature, empirical examination of its antecedents has been meagre. Design/methodology/approach – The authors conducted a constructive replication to examine the impact of three layers of context, namely, decision, firm and environment, on political behaviour. In Study 1, Greece, we gathered data on 143 strategic decisions, while in Study 2, Egypt, we collected data on 169 strategic decisions. Findings – The evidence suggests that both decision-specific and firm factors act as antecedents to political behaviour, while environmental factors do not. Practical implications – The findings support enhanced practitioner education regarding political behaviour and provide practitioners with a place from which to start by identifying the factors which might influence the occurrence of political behaviour in SDM. Originality/value – The paper fills important gaps in the existing research on the influence of context on political behaviour and delineates interesting areas for further research.

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.

Capital structure decisions in a period of economic intervention

2020 ◽  
Vol 28 (3) ◽  
pp. 465-495 ◽  
Author(s):  
Maria Elisabete Neves ◽  
Zélia Serrasqueiro ◽  
António Dias ◽  
Cristina Hermano
Keyword(s):  
Capital Structure ◽  
Debt Crisis ◽  
Dynamic Panel Data ◽  
Debt Maturity ◽  
Economic Adjustment ◽  
Adjustment Programme ◽  
Content Type ◽  
Two Samples ◽  
The Impact ◽  
The Capital Structure

Purpose This paper aims to analyse the Portuguese companies’ determinants of capital structure. To reach this objective, the authors used data from 37 non-financial Portuguese large enterprises and from 4,233 non-financial small and medium enterprises for the period 2010-2016. Additionally, the authors selected a sub-period from 2010 to 2014 for a deeper understanding of the impact of the sovereign debt crisis and the Economic Adjustment Programme of Troika on the capital structure of those companies. Design/methodology/approach Three dependent variables were tested according to debt maturity, and a dynamic panel data model, namely, the generalised method of moments system estimator, was used to test the formulated research hypotheses following Arellano and Bover (1995) and Blundell and Bond (1998) to capture the dynamic nature of the firm’s capital structure decisions. Findings In general, the results point out that the capital structure decisions depend on a set of firm-specific factors, and that the effects of the determinants of the debt maturity ratios differ according to the type of firm, i.e. large/small firms, and the economic cycle. Originality/value To the best of the authors’ knowledge, this is the first study that has been carried out in Portugal by using two samples of large and small companies for analysing the effects of the Economic Adjustment Programme of Troika on the capital structure of companies. The authors seek to understand which type of companies suffered more because of the effects of the Economic Adjustment Programme of Troika during this period, and which are the capital structure determinants that present greater change. Contrary to what might be expected, large companies are the firms that suffer most from the Economic Adjustment Programme. Probably, because these companies are the most immediate, most scrutinised and those that must show abroad that the bank did not fund them in the long term, because of the imposition and limits to grant credit faced by the banks themselves.

Shared leadership in entrepreneurial teams: a qualitative study

2019 ◽  
Vol 12 (3) ◽  
pp. 427-441
Author(s):  
Shiji Lyndon ◽  
Ashish Pandey
Keyword(s):  
Decision Making ◽  
Shared Leadership ◽  
Design Methodology ◽  
Investment Decisions ◽  
Qualitative Approach ◽  
Content Type ◽  
Entrepreneurial Teams ◽  
Depth Interviews ◽  
Practical Implications ◽  
Answering Questions

Purpose The purpose of this paper is to unravel the underpinnings of the phenomenon of shared leadership. The study was carried out with the objective of answering questions such as what is shared in shared leadership, what are individual and team level factors which lead to sharing and what are the outcomes of shared leadership. Design/methodology/approach The study adopted a qualitative approach. Eighteen in-depth interviews were conducted. The data were analysed using Nvivo 11 software. Findings The study found that in entrepreneurial teams while sharing leadership, cofounders share competencies, roles, vision, stress and decision-making. The study also reveals various individual and team level factors which facilitate shared leadership and its outcomes. Practical implications The study offers critical insights regarding the characteristics of individuals and team where shared leadership would work and hence can be used to understand the factors to be considered while forming teams. The study also has important insights for the investors regarding what dynamics to look for in individuals and teams before making investment decisions. Originality/value The inductive approach adopted in the study helps in understanding some of the basic underpinnings of the phenomenon of shared leadership which were not adequately answered by previous studies.

The dynamics of capital structure in the presence of zakat and corporate tax

2014 ◽  
Vol 7 (1) ◽  
pp. 89-111 ◽  
Author(s):  
Nur Azura B.T. Sanusi
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Data Access ◽  
Series Data ◽  
Kuala Lumpur ◽  
Corporate Tax ◽  
Content Type ◽  
Wealth Tax ◽  
The Impact ◽  
The Capital Structure

Purpose – The purpose of this paper is to determine the impact of wealth tax (zakat) and corporate tax (CT) on the firm's capital structure. The pioneering works of capital structure were introduced by Modgliani and Miller (1958). Subsequently, these studies were extended by other authors such as Elton and Gruber (1970), Miller (1977), DeAngelo and Masulis (1980), Mackie-Mason (1990), Harris and Raviv (1991), Rajan and Zingales (1995) and Booth et al. (2001). The diversity of the study covers from the advantage of CT to the cost of debt financing. The empirical evidence has also been applied to different countries with a good data access and different legal and accounting environments. However, this study is still relevant especially on the advantages of wealth tax, and the utilization of Islamic debt and equity financing to the firm's capital structure. Design/methodology/approach – The study uses the sample of Malaysian firms that are listed in the Kuala Lumpur Stock Exchange. The cross-sectional and time-series data covering 422 companies from 1996 to 2000 are compiled from the database published by the Kuala Lumpur Stock Exchange. All the sample firms are listed as a syariah company that normally pays the wealth tax. These data, then, are used to examine the effects of several explanatory variables, i.e. wealth tax and CT, and several controlled variables on firm capital structure decisions. Findings – The results showed that, first, the significance of wealth tax is consistent with the argument that firms that pay high wealth tax should be financed with relatively more debt. Second, as the CT rate is raised, firms are subjected to lower CT rates which would lead them to utilize more debt in their capital structures. Third, a significant relationship exists between age, size, return on assets, volatility, industry classification, tangible assets and bankruptcy with the capital structure. Originality/value – This paper viewed the tax benefits and the zakat payments in isolation. However, the tax deductions and the zakat payments are both expected to influence the capital structure decisions. The paper will study this decision and reveal the determinants that influence the capital structure decisions in general and the specific choice of payments, i.e. tax and zakat payments.

The impact of co-structure of capital, profitability and corporate growth opportunities on stock exchange in Indonesia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Teddy Chandra ◽  
Achmad Tavip Junaedi ◽  
Evelyn Wijaya ◽  
Martha Ng
Keyword(s):  
Capital Structure ◽  
Structural Equation ◽  
Stock Exchange ◽  
Reciprocal Relationship ◽  
Growth Opportunities ◽  
Content Type ◽  
Reciprocal Influence ◽  
Growth Opportunity ◽  
The Impact ◽  
The Capital Structure

PurposeThe purpose of this paper is (1) to determine the factors that significantly influence the capital structure, (2) to determine the factors that significantly influence profitability, (3) to find the factors that significantly influence growth opportunities, (4) to find reciprocal influence between capital structure and profitability and (5) to find reciprocal influence between capital structure and growth opportunity.Design/methodology/approachThe population of this research is a manufacturing company listed on the Indonesia Stock Exchange during the period of 2010–2016. The number registered in the manufacturing sector is 144 companies. The sampling technique applied is purposive sampling. The fulfillment criteria are companies that have been approved before 2010. Another criterion is that the company is not delisting during the observation period. From that total of population, companies that meet the requirements are 117 companies. This observation was conducted for seven years since 2010–2016, so the center of the analysis of this research was a total of 819. The inferential statistics method used to analyze the research data is generalized structural component analysis (GSCA).FindingsThe results of this study indicate that (1) the factors that influence the capital structure include effective tax rate, financial flexibility, growth, uniqueness, asset Utilization, firm size and tangibility; (2) factors that affect profitability include liquidity, growth, firm age, uniqueness, tangibility, volatility, advertising and asset turnover; (3) growth opportunity have a negative and significant influence on capital structure. This means an increase in growth opportunity can be defined as an increase in depreciation that will not be used as collateral for managers to increase debt. This increase in debt will have an impact on reducing growth opportunities; (4) profitability and capital structure have a two-way causality relationship, which means they influence each other and (5) capital structure and growth opportunities have a negative reciprocal relationship.Originality/valueThe authenticity of the study is implied in the following explanation: The authors try to examine the reciprocal effect of capital structure on profitability and capital structure on growth opportunities and the factors that influence these two endogenous variables that have never been done by previous researchers. This research is motivated by research conducted by (Chathoth and Olsen, 2007; Jian-Shen Chen et al., 2009; Yang et al., 2010) using the structural equation model (SEM). However, this study uses GSCA as a method of research analysis.

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.

scholarly journals Gamification and entrepreneurial intentions

2019 ◽  
Vol 26 (5) ◽  
pp. 661-683 ◽  
Author(s):  
José L. Ruiz-Alba ◽  
Anabela Soares ◽  
Miguel Angel Rodríguez-Molina ◽  
Arnaud Banoun
Keyword(s):  
Quantitative Research ◽  
Self Determination Theory ◽  
Research Strategy ◽  
Entrepreneurial Intentions ◽  
Private Company ◽  
Content Type ◽  
Basic Assumptions ◽  
Before And After ◽  
The Impact ◽  
Practical Implications

Purpose The purpose of this paper is to investigate how gamification can influence entrepreneurial intentions (EI) of a group of users of an online platform provided by a private company. Design/methodology/approach A quantitative research strategy was used with a sample of 220 respondents. These respondents were tested before and after the gamification experience. Findings Main findings support literature suggesting a clear effect of attitudes towards behaviour and perceived behavioural control on EI, in line with the theory of planned behaviour (TPB). Once the basic assumptions of TPB were confirmed, the authors tested the effects of gamification comparing before and after results. Main findings highlight an increase of these effects after the gamification experience, aligned with the self-determination theory. Practical implications These findings suggest that gamification is able to influence entrepreneurial behaviours. This contributes to both companies and educators’ knowledge on training for EI with gamification and the use of online platforms to this effect. Recommendations are provided. Originality/value This is the first study that investigates the impact of gamification on EI and how gamification can influence the different relationships between the antecedents of EI.

The effects of the global financial crisis on the capital structure of EPRA/NAREIT Europe index companies

2015 ◽  
Vol 8 (1) ◽  
pp. 3-23 ◽  
Author(s):  
Giacomo Morri ◽  
Andrea Artegiani
Keyword(s):  
Financial Crisis ◽  
Real Estate ◽  
Capital Structure ◽  
Global Financial Crisis ◽  
Pecking Order ◽  
Trade Off ◽  
Content Type ◽  
The Global Financial Crisis ◽  
The Impact ◽  
The Capital Structure

Purpose – The purpose of this paper is to test whether the financial crisis has affected the capital structure of real estate companies in Europe and whether these impacts can be studied utilizing the variables traditionally used by the trade-off and pecking-order theories to explain the capital structure of companies. Design/methodology/approach – The study uses a fixed-effect panel regression analysis and a sample composed of companies included in the EPRA/NAREIT Europe Index. The effect of the financial crisis has been accounted for within the model by means of a dummy variable. Findings – The global financial crisis did have an impact on the capital structure of companies and the main variables traditionally used by the trade-off and pecking order theories proved to be suitable in explaining the capital structure of real estate companies. Real estate investment trusts are, on average, more leveraged than traditional real estate companies due to their special regulatory status. Research limitations/implications – The study is limited to the European market and UK companies in particular account for a large part of the sample. In addition, major regulatory differences between the various European countries are not taken into account in the model. Originality/value – Similar studies have been performed for the US and Australian market. However, the impact of the global financial crisis has not been traditionally considered in these studies.

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