scholarly journals Does Financial Leverage Influence Investment Decisions? The Case Of Mauritian Firms

2011 ◽  
Vol 4 (9) ◽  
pp. 49 ◽  
Author(s):  
Mohun Prasadsing Odit ◽  
Hemant B. Chittoo
Keyword(s):  
Panel Data ◽  
Stock Exchange ◽  
Negative Relationship ◽  
Investment Decisions ◽  
High Growth ◽  
Financial Leverage ◽  
Firm Level ◽  
Data Set ◽  
Growth Firms ◽  
The Impact

This paper primarily focuses on the impact of financial leverage on investment decisions of firms and it is an attempt to explore the impact of financial leverage on investment levels using firm-level panel data in Mauritius. We expect to contribute to the existing literature by bringing evidence from a panel data set, which comprises 27firms, all listed on the Stock Exchange of Mauritius (SEM), sampled over a 15 year-period (i.e. from 1990 to 2004). In addition, we demarcate between two types of firms, namely: (i) high-growth firms; and (ii) low-growth firms. The results reveal a significant negative relationship between leverage and investment. More interestingly, while we found a negative relationship between leverage and investment for low growth firm, our econometric results reveal an insignificant relationship between the two variables for high growth firm.

scholarly journals The impact of leverage on investment decisions for South African firms with different growth opportunities

2018 ◽  
Vol 11 (1) ◽  
Author(s):  
Miriam Mondosha ◽  
Akios Majoni
Keyword(s):  
Stock Exchange ◽  
Negative Relationship ◽  
Investment Decisions ◽  
High Growth ◽  
Industrial Sector ◽  
Financial Leverage ◽  
Growth Opportunities ◽  
Johannesburg Stock Exchange ◽  
The Impact ◽  
The Relationship

Research has documented a significant relationship between financial leverage and investment decisions, however divergent views exist about whether this relationship is explained by the underinvestment hypothesis or the overinvestment hypothesis. This study examines the relationship between financial leverage and investment decisions for firms with different growth opportunities, it is based on a sample of 51 industrial sector firms listed on the Johannesburg Stock Exchange (JSE), South Africa, over the period from 2008 to 2014. Using panel data and after controlling for heterogeneity across firms, we report a negative relationship between leverage and investment. However, the relationship is significant for firms with high growth opportunities and insignificant for firms in the low growth category. The results support the underinvestment theory that debt overhang reduces the incentives of firms exploiting valuable opportunities.

scholarly journals Leverage and firm investment: the role of information asymmetry and growth

2019 ◽  
Vol 27 (1) ◽  
pp. 56-73 ◽  
Author(s):  
Albert Danso ◽  
Theophilus Lartey ◽  
Samuel Fosu ◽  
Samuel Owusu-Agyei ◽  
Moshfique Uddin
Keyword(s):  
Information Asymmetry ◽  
High Growth ◽  
Firm Investment ◽  
Financial Leverage ◽  
Content Type ◽  
Growth Firms ◽  
The Impact ◽  
The Relationship ◽  
Role Of Information

PurposeThis paper aims to demonstrate how financial leverage impacts firm investment and the extent to which this relationship is conditional on the level of information asymmetry as well as growth.Design/methodology/approachThe paper relies on data from 2,403 Indian firms during the period 1995-2014, generating a total of 19,544 firm-year observations. Analysis is conducted by using various panel econometric techniques.FindingsDrawing insights from agency theories, the paper uncovers that financial leverage is negatively and significantly related to firm investment. It is also observed that the impact of financial leverage on firm investment is significant for high information asymmetric firms. Finally, the paper shows that the relationship between leverage and firm investment is significant for low-growth firms. However, no significant relationship is found between leverage and investment for high-growth firms.Originality/valueThis paper provides fresh evidence on the leverage–investment nexus and, to the authors’ knowledge, it the first paper to examine the extent to which this leverage–investment relationship is driven by the level of information asymmetry.

Using the eurostat-OECD definition of high-growth firms: a cautionary note

2015 ◽  
Vol 4 (1) ◽  
pp. 50-56 ◽  
Author(s):  
Sven-Olov Daunfeldt ◽  
Dan Johansson ◽  
Daniel Halvarsson
Keyword(s):  
Small Firms ◽  
High Growth ◽  
Growth Patterns ◽  
Firm Level ◽  
Data Set ◽  
Content Type ◽  
Level Data ◽  
Growth Firms ◽  
Definition Of ◽  
Practical Implications

Purpose – High-growth firms (HGFs) have attracted an increasing amount of attention from researchers and policymakers, and the Eurostat-Organisation for Economic Co-operation and Development (OECD) definition of HGFs has become increasingly popular. The paper aims to discuss this issue. Design/methodology/approach – The authors use a longitudinal firm-level data set to analyze the implications of using the Eurostat-OECD definition. Findings – The results indicate that this definition excluded almost 95 percent of surviving firms in Sweden, and about 40 percent of new private jobs during 2005-2008. Research limitations/implications – The proportion of small firms and their growth patterns differ across countries, and the authors therefore advise caution in using this definition in future studies. Practical implications – Policy based on the Eurostat-OECD definition of HGFs might be misleading or even counterproductive. Originality/value – No previous studies have analyzed the implications of using the Eurostat-OECD definition of HGFs.

scholarly journals Exploring the Relationship between Financial Distress, Financial Flexibility, and Firm Performance: Empirical Evidence from Pakistan Stock Exchange

2018 ◽  
pp. 1-16
Author(s):  
Yasin Mahmood ◽  
Muhammad Faisal Rizwan ◽  
Abdul Rashid
Keyword(s):  
Firm Performance ◽  
Panel Data ◽  
Financial Distress ◽  
Stock Exchange ◽  
Z Score ◽  
Firm Level ◽  
Financial Flexibility ◽  
Corporate Managers ◽  
And Performance ◽  
The Impact

Purpose– This main purpose of this paper is to empirically investigate the impact of corporate financial flexibility (FF) on financial distress and performance of firms listed on the Pakistan Stock Exchange (PSX). It enables to know how financial flexibility affects the firm financial strength, financial distress, and corporate performance. Design/methodology/approach –This study focuses on a firm level data of 192 non-financial firms covering the period 1992 - 2014. The fixed effect model logistic regression is applied by using unbalanced panel data to examine the impact of financial flexibility on financial distress, and performance of sample firms. Findings – The results reveal that financially flexible firms are less likely to face financial distress. As firms have more financial flexibility, the probability of financial distress decreases as well. It is also found that financially flexible firms are more likely to perform well than counterpart firms. By using the Altman z score as a measure of financial distress it is revealed that as the Altman z score increases, the chances of financial distress reduce as well. These findings also suggest the existence of pecking order in Pakistani firms; because firms rely on internal sources first, second go to external sources of financing. Practical implications – the findings of this study enable the corporate managers to avoid financial distress by obtaining and maintaining financial flexibility by keeping the leverage level lower than industry level. By attaining and maintaining financial flexibility, corporate managers can also raise the performance of the firm as well. It can also enable to make appropriate capital structure decision to finance managers of corporate firms. The creditors may provide the loan to sound firms who have no or least chances of financial distress. The lenders may also get benefit from it by requiring the interest rate as per risk of financial distress of the firm. Investors may avoid investing in firms having very little or no financial flexibility. JEL Classification– G33, L25 Keywords: Altman z score, financial flexibility, firm performance, return on asset, panel data, financial distress, modified z score.

The effect of components of tax saving on tax disclosure

2019 ◽  
Vol 31 (4) ◽  
pp. 574-601
Author(s):  
Mahfoudh Hussein Mgammal
Keyword(s):  
Practical Knowledge ◽  
Stock Exchange ◽  
Negative Relationship ◽  
Positive Association ◽  
Effective Tax Rate ◽  
Significant Positive Association ◽  
Data Set ◽  
Content Type ◽  
Academic Field ◽  
The Impact

Purpose The purpose of this study is to examine the impact of tax planning (TP), which measured by the component of tax saving (TS), namely, permanent differences (PDs), temporary differences (TDF), foreign tax rates (FTRs) differentials and tax losses (TLOS) on tax disclosure (TD). Design/methodology/approach This study uses panel data set from sample consisted of 286 non-financial listed companies in the main market of Bursa Malaysia (formerly known as Kuala Lumpur stock exchange) for three years 2010-2012. The empirical understanding of TD depends on publicly source of data in the financial statement, characterized in the aggregated note of tax expenses. TD was measured using modified effective tax rate reconciling items, as it is appropriate in the Malaysian environment. The paper uses multivariate statistical analyses on this sample. Findings The empirical results of the multivariate regressions indicated that TD exhibits significant positive association with the TLOS component of TS but has significant negative relationship related to the PDs component of TS and TDFs component of TS. Research limitations/implications This study extends the prior-related literature by examining the relation between TD and component of TS. This study depends on both the signaling theory and the Scholes–Wolfson framework. These are the main theories concerned with TD and TP (TSs), respectively. Therefore, from a theoretical side, the authors adds to the current theories by verifying that users are the party influenced whether positively or negatively, by the extent of TD or the extent of activities of TP through Malaysian organizations. Practical implications The evidence found by this study has important policy and practical knowledge implications for a minimum of three parties, namely, authorities, researchers in academic field and decision-makers and firm managers. The findings can provide them some relevant insights on the importance of TS actions from companies’ perspective and contribute to the discussion of who verifies and deduces from TD directed by companies. Originality/value This study is regarded as the first attempt to examine the impact of the component of TS, namely: PDs, TDFs, FTRs differentials and TLOS on TD in a developing nation such as Malaysia. In spite of this paper focuses on a single country, it contributes significant insights to the debate about TD.

scholarly journals Corporate dividend decisions and dividend smoothing

2017 ◽  
Vol 13 (3) ◽  
pp. 304-331 ◽  
Author(s):  
Basil Al-Najjar ◽  
Erhan Kilincarslan
Keyword(s):  
Stock Exchange ◽  
Institutional Setting ◽  
Cash Dividend ◽  
Firm Level ◽  
Data Set ◽  
Content Type ◽  
Listed Firms ◽  
Dividend Smoothing ◽  
Financial Characteristics ◽  
The Impact

Purpose The purpose of this paper is to investigate the impact of regulations, reforms and legal environment on dividend policy in a different institutional setting. Particularly, it examines the firm-level cash dividend behaviour of publicly listed firms in Turkey in the post-2003 period, since there were major economic and structural reforms as well as significant regulatory changes of dividend payout rules imposed by the supervisory bodies. Design/methodology/approach The paper focuses on a recent large panel data set of 264 Istanbul Stock Exchange (ISE)-listed firms over a ten-year period 2003-2012. First, it employs a modified specification of Lintner’s (1956) partial adjustment model for analysis regarding target payout ratio and dividend smoothing. Second, it performs a logit model for analysis in identifying the link between financial characteristics and the likelihood of paying dividends. Findings The results show that ISE firms now follow the same determinants as suggested by Lintner. They, indeed, have long-term payout ratios and adjust their cash dividends by a moderate level of smoothing, and therefore adopt stable dividend policies (although less stable policies compared to their counterparts in the developed US market) as a signalling mechanism over the period 2003-2012. Moreover, the results also report that ownership structure concentration affects the target payout ratio and dividend smoothing in the Turkish market. In addition, the results further show that more profitable, more mature and larger sized ISE firms are more likely to pay cash dividends, whereas ISE firms with higher investment opportunities and more debt are less likely to distribute cash dividends in the post-2003 period. Originality/value To the best of authors’ knowledge, this paper is the first major research that examines the implications of reforms and regulations on cash dividend payments and dividend smoothing over time in Turkey during its market integration process in the post-2003 period.

scholarly journals IMPACT OF JUDICIAL EFFICIENCY ON FINANCIAL LEVERAGE

2016 ◽  
Vol 4 (2) ◽  
pp. 38-49
Author(s):  
Arooj Mashkoor ◽  
◽  
Hassan Hassan Raza ◽  
Keyword(s):  
Stock Exchange ◽  
Balance Sheet ◽  
Negative Relationship ◽  
Order Theory ◽  
Policy Implications ◽  
Financial Leverage ◽  
Pecking Order Theory ◽  
Explanatory Variables ◽  
Judicial Efficiency ◽  
The Impact

The objective of this study was to investigate the impact of judicial efficiency on financial leverage of 100 firms, listed on Karachi Stock Exchange (KSE), over the period of 2010- 2012. Data were collected from Balance Sheet Analysis issued by State Bank of Pakistan (SBP) and reports of Lahore High Court, based on 36 districts. The study also uses explanatory variables including profitability of firms, size of firms, tangibility of assets and growth opportunities that support the judicial efficiency to measure the financial leverage of firms. The results indicate that in worsening judicial system the size of firm, tangibility of assets, and profitability, all have a significant impact but negative relationship with leverage ratios. These results demonstrate in the light of pecking order theory. Only growth has positive significant impact on financial leverage of firms. Finally, result also indicates that the judicial efficiency has a negative relationship but non-significant with financial leverage. The study concludes by discussing policy implications.

scholarly journals Effect of regional skill gaps and skill shortages on firm productivity

2019 ◽  
Vol 52 (5) ◽  
pp. 933-952 ◽  
Author(s):  
David Morris ◽  
Enrico Vanino ◽  
Carlo Corradini
Keyword(s):  
Spillover Effects ◽  
Firm Productivity ◽  
Negative Effects ◽  
Firm Level ◽  
Regional Productivity ◽  
Data Set ◽  
Industrial Sectors ◽  
Skill Gaps ◽  
The Impact ◽  
Skill Shortages

This paper contributes to the literature on regional productivity, complementing previous education and skill-level perspectives with a novel approach analysing the impact of regional skill gaps and skill shortages. This allows us to reflect the idiosyncratic needs of the regional economic structure better, considering both the demand and supply side of the skills equation in localised labour markets. Controlling for unobserved time-invariant firm-level heterogeneity and other region–industry effects across a longitudinal data set for the period 2008–2014, our analysis reveals a negative direct effect of skill shortages on firm productivity. We further find negative spillover effects for both skill gaps and skill shortages in related industries and proximate regions. Results are also shown to be heterogeneous with respect to agglomeration levels and industrial sectors. Stronger negative effects are found in industries defined by a knowledge-intensive skill base, pointing to the loss of learning effects in the presence of skill deficiencies. Conversely, agglomeration effects appear to moderate the impact of skill deficiencies through more efficient matching in the local labour market. The findings presented thus suggest that policies aimed at improving productivity and addressing the increasing regional productivity divide cannot be reduced to a simple space-neutral support for higher education and skill levels but need to recognise explicitly the presence and characteristics of place-specific skills gaps and shortages.

scholarly journals Impact of Population Aging on Carbon Emission in China: A Panel Data Analysis

2018 ◽  
Vol 10 (7) ◽  
pp. 2458 ◽  
Author(s):  
Weidong Li ◽  
Xin Qi ◽  
Xiaojun Zhao
Keyword(s):  
Panel Data ◽  
Carbon Emission ◽  
Population Aging ◽  
Panel Data Analysis ◽  
Negative Relationship ◽  
Modern Society ◽  
Eastern Region ◽  
Low Carbon ◽  
Stirpat Model ◽  
The Impact

The impact of population structure on carbon emission has always been a key area of research in modern society. In this paper, we propose a new expanded STIRPAT model and panel co-integration method to analyze the relationship between population aging and carbon emission, based on the provincial panel data in China from 1999 to 2014. Empirical results show that there exists a significant inverted U-shaped curve between the population aging and carbon emission. There also exist regional discrepancies, where the impact of the population aging on carbon emission in the eastern region is significantly positive. By contrast, a negative relationship arises in the central and western regions. Finally, several suggestions for low carbon development are provided.

The Impact of ICT Investment on Establishment Productivity

2003 ◽  
Vol 184 ◽  
pp. 99-110 ◽  
Author(s):  
Thomas Zwick
Keyword(s):  
Panel Data ◽  
Unobserved Heterogeneity ◽  
Data Set ◽  
Omitted Variable Bias ◽  
Lagged Effects ◽  
Variable Bias ◽  
Employee Characteristics ◽  
The Impact ◽  
Establishment Panel Data

This paper finds substantial effects of ICT investments on productivity for a large and representative German establishment panel data set. In contrast to the bulk of the literature also establishments without ICT capital are included and lagged effects of ICT investments are analysed. In addition, a broad range of establishment and employee characteristics are taken account of in order to avoid omitted variable bias. It is shown that taking into account unobserved heterogeneity of the establishments and endogeneity of ICT investments increases the estimated lagged productivity impact of ICT investments.

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