scholarly journals Interrelation between payout and financing decisions: evidence from emerging markets

2016 ◽  
Vol 10 (2) ◽  
pp. 38-50
Author(s):  
Nikita Pirogov ◽  
Artem Anilov
Keyword(s):  
Emerging Markets ◽  
Capital Structure ◽  
Payout Policy ◽  
Free Cash Flow ◽  
Optimal Capital Structure ◽  
Financing Decisions ◽  
Developed Markets ◽  
Optimal Capital ◽  
E Mail

Nikita Konstantinovich Pirogov - HSE. E-mail: [email protected] Artem Eduardovich Anilov - HSE. E-mail: [email protected] Financing and payout decisions generally affect company’s economic performance: they have impact (both directly and indirectly) on the free cash flow and, thus, on company’s and shareholders’ value. Search for optimal capital structure and optimal payout policy strategy that are likely to maximize shareholders’ utility resulted in the papers, dedicated to determinants of capital structure and payout policy. In such papers, one of the policies is usually treated as a determinant for another one. This bound does not let researchers to make some conclusions about existence or absence of interrelation between payout and financing choices. To capture this interrelation, simultaneous regression analysis should be performed. Researchers, though, cannot come up with unified conclusion about the existence and direction of such interrelation.The absence of certain results as well as low level of research done on emerging markets make this topic rather relevant.The results of recent research on the interrelation between payout and financing decisions are discussed in this paper. We also develop an econometric model that allows us to check the existence of interrelation in emerging markets and to compare the results to those obtained from developed markets.The article contributes to the existed literature in the following directions: first, two debt variables are taken into account (total and long-term debt) as well as two payout policy variables (total payout and dividend payout). Second, macroeconomic variables are controlled. Third, the results obtained from the companies from emerging countries are compared to those obtained from developed markets. 

Financing Decisions and Performance of Italian SMEs in the Hotel Industry

2018 ◽  
Vol 60 (4) ◽  
pp. 335-354 ◽  
Author(s):  
Marco Botta
Keyword(s):  
Capital Structure ◽  
Financial Performance ◽  
Optimal Level ◽  
Pecking Order ◽  
Optimal Capital Structure ◽  
Financing Decisions ◽  
Medium Enterprise ◽  
Optimal Capital ◽  
And Performance ◽  
The Relationship

This study investigates the existence of an optimal capital structure for small and medium enterprise (SME) hotels through the analysis of the relationship between financing decisions and financial performance in a large sample of Italian hotel SMEs. The results show that hotel SMEs face an optimal capital structure that allows them to maximize returns to investors, while instead having both too little and too much debt reduces their financial performance. This notwithstanding, we show that hotel SMEs are not particularly concerned with optimizing their capital structure, and their funding behavior is deeply connected with the availability of internally available funds, a typical pecking order behavior, and they result extremely slow in converging toward their optimal level of leverage so that they could improve their performance by adopting a more sophisticated financial strategy.

scholarly journals Análisis empírico en México de estructuras de capital y su relación con las inversiones significativas (Empirical analysis of capital structures in Mexico and its relation with major investing decisions)

2018 ◽  
Vol 14 (28) ◽  
Author(s):  
Miguel Calzada Mezura
Keyword(s):  
Capital Structure ◽  
Corporate Finance ◽  
Equity Financing ◽  
Pecking Order ◽  
Optimal Capital Structure ◽  
Financing Decisions ◽  
Funding Sources ◽  
External Sources ◽  
Study Support ◽  
Optimal Capital

Las Teorías del Pecking Order (Financiamiento Selectivo) y la Estructura Óptima deCapital, mencionan diferentes teoremas para las decisiones de financiamiento. El estudio busca comprender cómo las empresas en México consideran las diferentes fuentes de financiamiento para realizar inversiones significativas. La técnica de estudio de eventos es utilizada para analizar estas decisiones en empresas mexicanas. Las conclusiones del presente estudio apoyan la Teoría del Pecking Order, estableciendo que las inversiones significativas, en el corto plazo, se financian principalmente por fuentes externas y que el financiamiento de capital sólo se observa en las empresas que están limitadas financieramente. Esta postura conlleva a la búsqueda dediferentes contextos para la aplicación o rechazo de la Teoría de la Estructura Óptima de Capital.Palabras clave: estructura de capital, financiamiento, finanzas corporativas, inversiones. Abstract. This study focuses on the Theories of Pecking Order and the Optimal Capital Structure (Also known as Tradeoff Theory). In relation with the theories mentioned above, previous studies described different hypothesis on financing decisions. This study, seeks to understand how companies in Mexico consider the different funding sources to invest in significant investments.The Event Study consideration is used to understand such financing decisions. The findings of this study support the Theory of Pecking Order, showing that significant investments in the shortterm are funded mainly by external sources and equity financing decisions are observed among companies that are financial constrained. This position leads to the search for different contexts in order to test the Optimal Capital Theory.Keywords: capital structure, corporate finance, financing, investments.

Cost of Capital, Optimal Capital Structure, and Value of Firm: An Empirical Study of Indian Companies

1996 ◽  
Vol 21 (3) ◽  
pp. 29-36 ◽  
Author(s):  
Raj S Dhankar ◽  
Ajit S Boora
Keyword(s):  
Empirical Study ◽  
Capital Structure ◽  
Capital Markets ◽  
Cost Of Capital ◽  
The West ◽  
Optimal Capital Structure ◽  
Financing Decisions ◽  
Value Of Firm ◽  
Imperfect Capital Markets ◽  
Optimal Capital

Academicians and practitioners alike have found it difficult to resolve the issue of optimal capital structure in the perfect capital markets of the West as well as in the imperfect capital markets, as in India. This paper examines whether there exists an optimal capital structure in Indian companies, both at the micro and the macro level and whether financing decisions affect the value of a firm.

scholarly journals A Note on Corporate Capital Structure Theories

2013 ◽  
Vol 1 (2) ◽  
pp. 117-124
Author(s):  
Mawal Sara Saeed
Keyword(s):  
Asymmetric Information ◽  
Capital Structure ◽  
Efficient Market ◽  
Optimal Capital Structure ◽  
Financing Decisions ◽  
Corporate Capital ◽  
Bankruptcy Costs ◽  
Corporate Capital Structure ◽  
Capital Financing ◽  
Optimal Capital

Financial theory revolves around rational participants who want to maximize their utility or wealth for a given level of risk. This maximization, in the first place, calls for the optimality of available resources, making capital financing decisions critical for corporations. Any discussion on optimal capital structure leads back to Modigliani and Miller’s classical capital structure irrelevance hypothesis (1958), according to which, in an efficient market, the value of the firm is unaffected by its choice of capital structure in the absence of taxes, bankruptcy costs, and asymmetric information. This irrelevance makes the firm’s managers indifferent to opting for debt or equity in the firm’s capital structure.

scholarly journals The Determinants of Capital Structure: A Comparative Study between Sharia and Non-Sharia Manufacturing Companies in Indonesia Stock Exchange (IDX)

2020 ◽  
Vol 2 (01) ◽  
pp. 73-85
Author(s):  
Imam Akbar Ilham Arif ◽  
Muhammad Umar Mai
Keyword(s):  
Capital Structure ◽  
Capital Market ◽  
Stock Exchange ◽  
Company Performance ◽  
Manufacturing Companies ◽  
Optimal Capital Structure ◽  
Specific Rule ◽  
Optimal Capital ◽  
Almost All

Every company has a long-term goal to maximize the value of the company, which also means to maximize  the prosperity of its shareholders. One of the ways to achieve this goal is to determine the optimal capital structure. The optimal capital structure allows the company to bear the low average cost of the capital. Therefore, the decision of capital structure is one of the most important decisions.Go public manufacturing companies in Indonesia Stock Exchange are divided into two groups; the sharia and non-sharia companies. Sharia companies, including the sharia manufacturing ones, have specific rule in the use of funds as the company capital. The rule states that the maximum use of usury-based debt is by 45%. At the same time, the theories about capital structure and research results support the use of debt as the main source of funds. This study used data obtained from the Indonesian Capital Market Directory and Summary of Company Performance for the period of 2011-2017. They were analyzed by using panel data for multiple regression analysis and difference tests. The results show significant differences between sharia and non-sharia manufacturing companies with a probability of 0,000. Moreover, almost all determinant factors such as Size, Tangibility, Profitability, and Gross Domestic Product have significant effects on Book Leverage as an indicator of Capital Structure for both groups of companies.

scholarly journals Penentuan Struktur Modal Optimal Pada Perusahaan Sektor Properti, Real Estate, dan Kontruksi yang Terdaftar di Bursa Efek Indonesia

2015 ◽  
Vol 4 (1) ◽  
pp. 94
Author(s):  
M. Rustam
Keyword(s):  
Real Estate ◽  
Capital Structure ◽  
Stock Exchange ◽  
Simulation Method ◽  
Data Set ◽  
Optimal Capital Structure ◽  
Construction Companies ◽  
Minimum Capital ◽  
Optimal Capital

The purpose of this study is to determine the optimal capital structure of property, real estate, and construction companies listed in Indonesia Stock Exchange. The motivation of this study is due to the current research results are still not able to answer whether the optimal capital structure exists. Based on trade-off theory, the optimal capital structure occurs when a company has a minimum capital cost. However,  it is not explained how much capital structure needed to achieve the company maximum value. In addition, this sample business sector is chosen because there are a numeours firms with an adequate long-term debt which make it possible to examine their capital structure. The method used are the nonlinear regression and Monte Carlo simulation method. These methods were chosen because the formulation of optimal capital structure is arguably complex. There are 47 samples from all property, real estate, and construction companies. The data set covered 11 years ie (2000-2010). The results showed that the optimal capital structure of properties, real estate and construction companies which are measured by the ratio between the long-term debt and equity is 0.99. Most companies of these sectors have not reached the optimal capital structure yet because the average results from these companies are 0.31.

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