The Relevance of External Credit Ratings in the Capital Structure Decision-Making Process

2011 ◽  
Author(s):  
Marc Michelsen ◽  
Christian Klein
Keyword(s):  
Decision Making ◽  
Capital Structure ◽  
Credit Ratings ◽  
Decision Making Process ◽  
The Capital Structure

scholarly journals THE EFFECT OF COGNITIVE AND EMOTIONAL BIASES ON THE CAPITAL STRUCTURE DECISIONS: A LITERATURE REVIEW

2014 ◽  
Vol 8 (2) ◽  
Author(s):  
Tekin Bilgehan ◽  
Gor Yusuf
Keyword(s):  
Decision Making ◽  
Capital Structure ◽  
Behavioral Finance ◽  
Point Of View ◽  
Decision Makers ◽  
Empirical Literature ◽  
Behavioral Characteristics ◽  
Strategic Choices ◽  
Emotional Process ◽  
The Capital Structure

Each decision-making process is an important cognitive and emotional process which is open to the emotional effect. Individuals make a decision about a future uncertainty either to feel good or maximizing gain by minimizing the loss ratio. Recently, researches in finance have criticized that the capital structure decisions and firms’ funding and strategic choices deviate from the traditional neoclassical paradigm. Furthermore there is a nascent empirical literature that has exposed interesting evidence of the effects of managerial behavioral biases. Managers’ decisions, that to create the capital structure, have a vital importance for the company. The behavioral finance (BF) approach may be revealed useful results in the process of solving decision-makers’ behaviors and thoughts. In this context the purpose of this study is to reveal if the managers are affected by their behavioral characteristics in the process of the financing decision-making, based on the findings of studies in the literature. From this point of view behavioral finance literature, which is about the financing and capital structure decisions, is investigated. As a result, theoretical and empirical analyses, which discussed in the literature, show that managers’ biases play an important role in explaining the capital structure choice.

scholarly journals Análise Multicritério Nebulosa de Empresas

2018 ◽  
Vol 16 (2) ◽  
pp. 221
Author(s):  
Antonio Marcos Duarte Junior ◽  
Hugo Ghiaroni Albuquerque e Silva
Keyword(s):  
Decision Making ◽  
Risk Measures ◽  
Credit Ratings ◽  
Fuzzy Mathematics ◽  
Decision Making Process ◽  
Balance Sheets ◽  
Numerical Examples ◽  
Equity Analysts ◽  
Expected Performance ◽  
Portfolio Managers

We consider the problem of equity valuation. The use of fuzzy multicriteria decision analysis is proposed to solve the problem. The resulting methodology allows the use of the multiples most often calculated by equity analysts from audited balance sheets, with the addition of qualitative criteria, such as corporate governance, sustainability indicators and credit ratings, as well as risk measures (liquidity and market) based on trading prices and volumes. Also, the proposal facilitates incorporating uncertainty into the problem with the use of fuzzy mathematics. The resulting methodology proved to be robust and offered detailed information about expected performance under adverse scenarios, enhancing the decision-making process faced by equity analysts and portfolio managers. Numerical examples obtained with data from the Brazilian stock market are exhibited for illustrative purposes.

scholarly journals Seleção de financiamento para aquisição de aeronaves: Uma aplicação do método de análise hierárquica (AHP)

TRANSPORTES ◽  
1998 ◽  
Vol 6 (1) ◽  
Author(s):  
Sergio Ronaldo Granemann ◽  
Ivan Ricardo Gartner
Keyword(s):  
Decision Making ◽  
Capital Structure ◽  
Analytic Hierarchy Process ◽  
Complex Problem ◽  
Decision Making Process ◽  
Analytic Hierarchy ◽  
Model Stability ◽  
Multicriteria Methods ◽  
Qualitative Variables ◽  
Hierarchy Process

<p>A escolha do financiamento para aquisição de aeronaves nas companhias aéreas brasileiras é um problema crucial e complexo. É crucial, pois exerce grande influência na estrutura de capitais da empresa. E é complexo por envolver a analise de uma ampla gama de variáveis quantitativas e qualitativas. Este tipo de problema requer o uso de métodos multicritérios que conjuguem as diferentes variáveis que interagem no processo decisório. Neste estudo foi aplicado o método AHP (Analytic Hierarchy Process) na classificação das alternativas de financiamento disponíveis para a aquisição de aeronaves. Ao final do trabalho, foi realizada uma ampla análise de sensibilidade dos resultados alcançados, visando a determinação da estabilidade do modelo a variações nos julgamentos dos decisores.</p><p>ABSTRACT</p><p>The choice of the finaancing system for aircraft acquisition for Brazilian airlines companies is a fundamental and complex problem. It is fundamental for Brazilian companies because it affects their capital structure and it is complex because it involves a large number of quantitative and qualitative variables. The solution of this problem requires the use of multicriteria methods that are able to combine variables of distinct nature for supporting the decision making process. In this paper, the Analytic Hierarchy Process (AHP) is adopted for rating the £inancing alternatives for aircraft acquisition. In order to veri£y the model stability, a sentitivity analysis was then carried out based on the model results.</p>

scholarly journals ANALISIS STRUKTUR MODAL YANG OPTIMAL PADA PT. TELEKOMUNIKASI INDONESIA, Tbk PERIODE 2004-2008

2017 ◽  
Vol 6 (2) ◽  
Author(s):  
Arnold Japutra ◽  
Winda Wijaya
Keyword(s):  
Decision Making ◽  
Capital Structure ◽  
Average Cost ◽  
Cost Of Capital ◽  
Weighted Average ◽  
Return On Equity ◽  
Optimal Capital Structure ◽  
Optimal Capital ◽  
A Company ◽  
The Capital Structure

<p>Capital structure is one of the most important elements in a company. Decision-making errors in the capital structure may cause a very big impact and it can force the company into bankruptcy. Therefore, in order to continue operating, a company should have an optimal capital structure. Optimal capital structure is achieved at the lowest cost level and the highest level return on equity. The research objective is to measure the financial performance of PT Telekomunikasi Indonesia, Tbk by analyzing the composition of capital structure, ACC, ROE, and whether the capital structure by the years 2004-2008 were optimal or not. From the results of the research, capital structure of PT Telekomonikasi Indonesia, Tbk during the years 2004 -2008 showed an optimal capital structure. The result can be seen as the ROE produced by the company is bigger compared to Weighted Average Cost of Capital (WACC) for each period.</p><p>Key words : Capital structure, return on equity, Weighted Average Cost of Capital</p>

scholarly journals The impact of the capital structure on the decision-making of the company's management

Vojno delo ◽  
2019 ◽  
Vol 71 (4) ◽  
pp. 289-304
Author(s):  
Milan Mihajlović ◽  
Saša Stepanov ◽  
Zoran Šunjka
Keyword(s):  
Decision Making ◽  
Capital Structure ◽  
The Impact ◽  
The Capital Structure

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.

Cognitive Bias and Capital Structure in Emerging Markets: Evidence from Chinese Listed Companies

2015 ◽  
Vol 16 (1) ◽  
pp. 57-81
Author(s):  
Kejing Chen ◽  
Yanxi Li ◽  
Kung'unde Marco ◽  
Wenzhang Sun
Keyword(s):  
Decision Making ◽  
Capital Structure ◽  
Cognitive Bias ◽  
Decision Making Process ◽  
Structure Model ◽  
Tax Rate ◽  
Debt Level ◽  
Chinese Listed Companies ◽  
Tax Benefits ◽  
Debt Policy

We study the influence of managerial cognitive bias on corporate debt policy in China. We develop a theoretical model of capital structure that incorporates tax benefits of debt and predicts how managerial cognitive bias can lead to suboptimal capital structure choices. We find that when managerial cognitive bias is severe, the firm tends to choose overly-conservative or overly-aggressive debt levels, and the debt level is unrelated to the tax rate. In contrast, when managerial cognitive bias is mild, the firm responds to the tax benefit of debt and tends to choose a debt level that is positively related to the tax rate. We contribute to the literature by introducing managerial cognitive bias into the decision making process. We study how cognitive bias can affect capital structure decisions by incorporating the prospect theory in developing a capital structure model.

AAC Decision-Making and Mobile Technology: Points to Ponder

2014 ◽  
Vol 23 (2) ◽  
pp. 104-111 ◽  
Author(s):  
Mary Ann Abbott ◽  
Debby McBride
Keyword(s):  
Decision Making ◽  
Mobile Technology ◽  
Communication System ◽  
Augmentative And Alternative Communication ◽  
Evaluation Process ◽  
Decision Making Process ◽  
Alternative Communication ◽  
Ipod Touch ◽  
Feature Match

The purpose of this article is to outline a decision-making process and highlight which portions of the augmentative and alternative communication (AAC) evaluation process deserve special attention when deciding which features are required for a communication system in order to provide optimal benefit for the user. The clinician then will be able to use a feature-match approach as part of the decision-making process to determine whether mobile technology or a dedicated device is the best choice for communication. The term mobile technology will be used to describe off-the-shelf, commercially available, tablet-style devices like an iPhone®, iPod Touch®, iPad®, and Android® or Windows® tablet.

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