Debt Financing and Agency Cost on Profitability: Are Real Estate Firms’ Performance in India Getting Affected?

2021 ◽  
Vol 17 (1-2) ◽  
pp. 43-56
Author(s):  
Pradip Kumar Mitra ◽  
Omkar Naik
Keyword(s):  
Real Estate ◽  
Phase I ◽  
Financial Performance ◽  
Phase Ii ◽  
Negative Relationship ◽  
Agency Cost ◽  
Debt Financing ◽  
Leverage Ratio ◽  
The Impact ◽  
The Relationship

This article tries to understand the relationship between agency cost, debt financing and Indian real estate companies’ performance. The study attempts to document the effect of debt on the firm’s profitability and then explores the reason behind such an impact by introducing the agency cost as a parameter. The study is conducted in two phases. Phase I is carried out to establish the relationship between debt financing and the firm’s financial performance. In Phase II, the study is conducted to understand the impact of agency cost on debt financing. Firms from the BSE Realty Index were selected for the period 2011–2018. Profitability is measured through return on equity (ROE), whereas debt financing is measured through the firm’s leverage ratio. The agency cost is measured through the asset utilisation ratio and general expense to sales ratio. Panel regression method is used to understand the impact of debt financing and agency cost on the firms’ profitability. The result of Phase I suggests a significant negative relationship between debt financing and the ROE and the result of Phase II suggests a positive relationship between the agency cost and debt financing. This means that reduction in agency cost will lead to lesser amount of debt financing thereby improving the firm’s financial performance.

Empirical Analysis of Dependence on Capital Structure with Respect to Its Impact on the Financial Performance of Domestic Non Financial Listed Stock Exchange Companies Operating in the Public Sector of Pakistan

2016 ◽  
Vol 3 (2) ◽  
pp. 58-76
Author(s):  
Syed Jawad Hussain Shahzad ◽  
Memoona Kanwal
Keyword(s):  
Capital Structure ◽  
Financial Performance ◽  
Stock Exchange ◽  
Random Effect ◽  
Random Effect Model ◽  
Research Work ◽  
Debt Financing ◽  
The Impact ◽  
The Relationship

This research work is based on the relationship that exists between the capital structure and performance of different sector's firms currently operating in the Pakistan. Capital structure decisions can be considered as the most important financial performance and risk management tools which are available to the companies' management. Capital structure can also play an important role in performance assessment, in performance management and in effective handling of ownership claims. The extensive use and heavy dependence on debt has exposed many companies to potential risk of declined performance and also to the risk of insolvency. This study analyzes the relationship between various capital structure indicators and dependence of financial performance of companies on these indicators using a broad sample covering 202 non-financial firms listed on Karachi Stock Exchange (KSE) over the period of 1999-2012. The sample firms are divided into five sectors i.e. Textile, Chemical, Cement, Food and Fuel & Energy. Financial performance of firms is quantified by Return on Assets (ROE), Return on Equity (ROE), Price-Earnings ratio (PE) and Tobin's Q (TQ). The relationship between financial performance measures and capital structure measures i.e. total debt, short term debt and long term debt is estimated using GLS fixed and random effect model. Sector wise comparison shows that majority of the sectors have similar capital structure. The impact of capital structure on the financial performance is also similar across sectors with few variations. Overall the relationship is found to be negative among capital structure and firm performance measured by ROA, ROE and PE except TQ which is positively related to Long Term Debt to total Assets (LTDA). The result of industry wise comparison contributes significantly to the existing stream of knowledge. The results indicate that lower reliance on the debt financing improves the performance of the firm whereas dependence and exposure of debt financing reduce performance. The research can be useful for the management of companies in different sectors that want to improve their performance.

Impact of Merger and Acquisition on Financial Performance: Evidence from Construction and Real Estate Industry of India

2021 ◽  
pp. 231971452110534
Author(s):  
Isha Gupta ◽  
T. V. Raman ◽  
Naliniprava Tripathy
Keyword(s):  
Real Estate ◽  
Financial Performance ◽  
Real Estate Industry ◽  
Leverage Ratio ◽  
Turnover Ratio ◽  
Test Methodology ◽  
Significant Difference ◽  
Current Asset ◽  
Asset Turnover ◽  
The Impact

This article aims to examine the impact of mergers and acquisitions (M&A) on the financial performance of the construction and real estate industry, using the broad spectrum of financial ratios. The period of study is from 2011 to 2020, and paired t-test methodology has been used. It is hypothesized that there is a significant difference in the pre-M&A period and post-M&A period. The study findings conclude that profitability ratio and liquidity ratio have improved significantly, whereas leverage ratio exhibits no change in performance. In the efficiency ratio, the fixed-assets turnover ratio substantially improves, but the total asset turnover ratio and current asset turnover ratio show a slight improvement. The study concludes that the Indian construction and real estate company’s financial performance has improved overall for the acquiring firms during the post-M&A period. The study implies that the construction sector supports the synergy hypothesis, stating that M&A will improve synergy during the post-M&A period because of the consolidation of two firms’ resources.

scholarly journals A Study of the Relationship between Corporate Governance and Non-business Real Estate

2021 ◽  
Vol 50 (3) ◽  
pp. 279-313
Author(s):  
Changu Jeon ◽  
Hyangmi Choi
Keyword(s):  
Corporate Governance ◽  
Real Estate ◽  
Firm Value ◽  
Positive Relationship ◽  
Negative Relationship ◽  
Shareholder Wealth ◽  
Private Benefits ◽  
Controlling Shareholders ◽  
The Impact ◽  
The Relationship

Corporate non-business real estate can be used for the private benefits of controlling shareholders, but is also likely to enhance shareholder wealth. This study explores the impact of corporate governance to address this contradiction, particularly the ownership-control disparity on non-business real estate. We further examine the moderating effect of foreign blockholders on the relationship, then conduct additional analyses on the relationship between non-business real estate and firm value. The results are as follows. First, the disparity has a consistently positive relationship with non-business real estate, which implies that corporate non-business real estate can be utilized for expropriation for the benefit of controlling shareholders. Second, the relationship between the disparity and non-business real estate is mitigated by foreign blockholders. Third, we find that non-business real estate has a negative relationship with firm value. This result implicates the inefficiency of non-business real estate and the possibility of agency problem. Forth, investment in non-business real estate is likely to decrease firm value, compared with investment in core business. This study revisits and extends corporate governance research in terms of non-business real estate by identifying the presence of agency problems and monitoring effects of outside blockholders.

scholarly journals The factors affect financial performance of companies listed on Hanoi stock exchange

2020 ◽  
Vol 4 (3) ◽  
pp. First
Author(s):  
Hồ Xuân Thủy ◽  
Đinh Lê Minh Hiếu ◽  
Dzoãn Khoa Danh ◽  
Phạm Phú Thành Đạt ◽  
Nguyễn Hồng Ngọc ◽  
...  
Keyword(s):  
Financial Performance ◽  
Income Tax ◽  
Stock Exchange ◽  
Negative Relationship ◽  
Corporate Income Tax ◽  
Firm Age ◽  
Return On Assets ◽  
Business Entities ◽  
The Impact ◽  
The Relationship

Profit maximization is an important goal of any business entities, lead to big concern about how to improve financial performance so as to run businesses in a stability and sustainability. Furthermore, in measuring financial performance, several profitability indicators are widely in use as return on assets (ROA), return on equity (ROE)... We did conduct literature reviews and conclude: evaluating the impact of factors on entity financial performance is such an essential topic which has drawn the attention of researchers all over the world and yet Vietnam. However, many studies gave dissimilar results, which indicates there might be differences in nature of the relationship, or factors affiliation in enterprises of different sectors or different countries. This study aims to determine the effect of factors on the financial performance of companies listed on the Hanoi Stock Exchange (HNX) from 2013-2017. The factors include corporate income tax, firms’size, growth of the firm, age of the firm and liquidity. The study used panel data methodology, the FEM model was found to be consistent with data. In this study, variables of return on assets (ROA) used to measure the financial performance of companies. The research revealed that corporate income tax, firms’size and growth of the firm show a significant negative relationship with financial performance. On the other hand, there is a significant positive relationship between liquidity and financial performance. But, the relationship between ROA with the firm age is not significant. Firms’ size and corporate income tax have the greatest influence on financial of companies. The findings of the study will improve the financial performance of companies listed on the HNX.

The Role of Financial Performance in Motivating Polish Municipal Employees

2017 ◽  
Vol 39 (1) ◽  
pp. 75-105 ◽  
Author(s):  
Palina Prysmakova ◽  
Michele Tantardini ◽  
Tomasz Potkański
Keyword(s):  
Financial Performance ◽  
Negative Relationship ◽  
Work Conditions ◽  
Work Attitudes ◽  
Financial Indicators ◽  
Individual Level ◽  
Municipal Employees ◽  
The Impact ◽  
The Relationship

This article explores the relationship between employees’ public service motivation (PSM) and public administrations’ financial performance from the perspective of human resource management (HRM). The purpose of this article is twofold: first, we seek to understand the relationship between organizational financial performance and individual-level PSM by focusing on how financial performance is associated with PSM. Second, while acknowledging previous findings on the impact of employees’ work attitudes on performance, we explore the possibility of an opposite causality. After assessing several theoretical and empirical propositions that support an additional direction of causality, we use a sample of municipal employees from Poland to test how financial performance affects individual PSM. By analyzing five financial indicators, we find that financial performance might predict individuals’ PSM. We also propose that a negative relationship occurs when organizations achieve financial goals through HRM practices that negatively affect employees, such as worsening of work conditions, increased workload, and inadequate remuneration.

scholarly journals Does CMMI Implementation affect the Performance of the Firm? An Evaluation from a Dynamic Capabilities Approach

2018 ◽  
Vol 6 (2) ◽  
pp. 57 ◽  
Author(s):  
Eduardo Agenjo ◽  
Natalia Martín-Cruz ◽  
Cristina Ruiz-Martin ◽  
Adolfo López-Paredes
Keyword(s):  
Financial Performance ◽  
Dynamic Capabilities ◽  
Negative Relationship ◽  
Capabilities Approach ◽  
Financial Data ◽  
Model Integration ◽  
Maturity Model ◽  
Capability Maturity ◽  
The Impact ◽  
The Relationship

<p>In this paper, we study the impact of the Capability Maturity Model Integration (CMMI) on firm performance both during and after its implementation. The literature pointed out that CMMI is theoretically related to the generation of dynamic capabilities. To give an empirical view of these theories, we built a database of economic and financial data from Spanish firms involved in programming, consultancy or another computer-related sector. This data allowed us to study the relationship between the use of CMMI and the firm economic and financial performance in an empirical way. The main finding of the analysis is a negative relationship between the use of CMMI and profitability in the firms during the analyzed period and sector.</p>

Risk Attitude and Corporate Investment under Output Market Uncertainty: Evidence from The Mekong River Delta, Vietnam

2016 ◽  
pp. 59-70
Author(s):  
Ninh Le Khuong ◽  
Nghiem Le Tan ◽  
Tho Huynh Huu
Keyword(s):  
Negative Relationship ◽  
Risk Attitude ◽  
Business Strategies ◽  
Risk Averse ◽  
Market Uncertainty ◽  
Firm Investment ◽  
Output Market ◽  
The Impact ◽  
The Relationship

This paper aims to detect the impact of firm managers’ risk attitude on the relationship between the degree of output market uncertainty and firm investment. The findings show that there is a negative relationship between these two aspects for risk-averse managers while there is a positive relationship for risk-loving ones, since they have different utility functions. Based on the findings, this paper proposes recommendations for firm managers to take into account when making investment decisions and long-term business strategies as well.

scholarly journals The Relationship between Person Organization Fit, Person-Job-Fit and Turnover Intention in Banking Sector of Pakistan: The Mediating Role of Psychological Climate

2012 ◽  
Vol 2 (3) ◽  
pp. 172 ◽  
Author(s):  
Masoodul Hassan ◽  
Ammara Akram ◽  
Sana Naz
Keyword(s):  
Organizational Behavior ◽  
Turnover Intention ◽  
Banking Sector ◽  
Negative Relationship ◽  
Psychological Climate ◽  
Job Fit ◽  
Mediating Role ◽  
Person Organization Fit ◽  
The Impact ◽  
The Relationship

In last few decades, employees’ job related attitudes and behaviors have remained topics of considerable interest in the fields of organizational behavior and human resource management. This study aims to explore the impact of person-organization-fit and person-job-fit on employee turnover intention while considering psychological climate as a mediating variable. Sample for this research is consisted of 260 employees from top five commercial banks of large cities of Pakistan. SPSS 17 is used for analyzing the data. Correlation and regression analysis is used to test the direct and mediating relationship between key variables. Results indicate that both person-organization-fit and person-job-fit have negative relationship with turnover intention. Psychological climate partially mediates the relationship between person-organization-fit and turnover intention while fully mediates the relationship between person-job-fit and turnover intention.

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