scholarly journals Testing the partial adjustment model of optimal cash holding: Evidence from Amman stock exchange

2015 ◽  
Vol 13 (1) ◽  
pp. 15-23
Author(s):  
Ziad Mohammad Zurigat ◽  
Nadia Jawdat
Keyword(s):  
Stock Exchange ◽  
Panel Data Analysis ◽  
Cash Holdings ◽  
Cash Flows ◽  
Cash Holding ◽  
Industrial Firms ◽  
Partial Adjustment ◽  
Adjustment Model ◽  
Partial Adjustment Model ◽  
Amman Stock Exchange

This study aims at testing the partial adjustment model of cash holdings to investigate whether Jordanian industrial firms have a target cash holdings and how fast they move toward that target when any target deviation exists. A sample of 57 industrial firms listed in the Amman Stock Exchange (ASE) over the period 2001-2013 is used. The study uses the estimated fitted values from the conventional cash equation as a proxy for the target cash holding. Using pooled and panel data analysis, the study provides evidence suggesting that cash flows, net working capital, leverage and firm size significantly affect the cash holdings of Jordanian firms. Moreover, it reveals that Jordanian industrial firms have a target cash level and make a target reversion whenever needed. However, Jordanian industrial firms adjust their actual cash holdings to its target level too slowly.

scholarly journals Comparison of Determinants of Capital Structure in Lippo Group and Bakrie Group Companies Listed on the Indonesia Stock Exchange (Partial Adjustment Model Approach)

2021 ◽  
Vol 8 (2) ◽  
pp. 83-88
Author(s):  
Fildzah Fitria ◽  
Khaira Amalia Fachrudin ◽  
Amlys Syahputra Silalahi
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Company Size ◽  
Group Company ◽  
Partial Adjustment ◽  
Insignificant Effect ◽  
Adjustment Model ◽  
Growth Opportunity ◽  
Partial Adjustment Model ◽  
Model Approach

This study aims to determine the determinants of the capital structure of the Lippo Group and the Bakrie Group listed on the Indonesia Stock Exchange using the partial adjustment model approach. The population in the Lippo Group company is 12 and the population at the Bakrie Group company is 9. The sample of this study is that all companies listed on the Indonesia Stock Exchange are 21 companies. Data analysis used panel data regression method with partial adjustment model approach. The results of the research in the t test at the Lippo Group company show that the lag leverage has a positive and insignificant effect on leverage, profitability has a positive and significant effect on leverage, company size has a positive and insignificant effect on leverage, earning volatility has a positive and significant effect on leverage, assets tangibility has a positive and significant effect on leverage and growth opportunity has a positive and insignificant effect on leverage. The results of the research in the t test at the Bakrie Group company show that the lag leverage has a positive and insignificant effect on leverage, profitability has a positive and insignificant effect on leverage, company size has a positive and insignificant effect on leverage, earning volatility has a positive and insignificant effect on leverage, assets tangibility has a negative and insignificant effect on leverage, growth opportunity has a negative and insignificant effect on leverage. The partial adjustment model test results show that only Lippo Group company on the variables of profitability, earning volatility and assets tangibility have a significant positive effect on leverage. The results of the comparison of the optimal capital structure show that the Bakrie Group has a higher level of optimal capital structure by 83% than the Lippo Group at 55%. Keywords: Lag Leverage, Profitability, Company Size, Earning Volatility, Assets Tangibility, Growth Opportunity, Leverage.

Cash and Financial Constraints: An Empirical Analysis of Non-Financial Firms Listed in Indonesian Stock Exchange 2005-2014

2016 ◽  
Vol 1 (1) ◽  
Author(s):  
Sigit S. Wibowo ◽  
Stefany Lolyta
Keyword(s):  
Financial Constraints ◽  
Stock Exchange ◽  
Cash Holdings ◽  
Cash Flows ◽  
Cash Holding ◽  
External Financing ◽  
Dividend Payment ◽  
Public Firms ◽  
Financial Firms ◽  
Strong Motivation

This study examines corporate motives to hold cash and its equivalents as forms of financing, by using non-financial public firms listed in Indonesian Stock Exchange (IDX) between 2005 and 2014. Three criteria are employed to distinguish constrained and non-constrained firms namely: KZ index, dividend payment, and firm size. Based on the results of PLS, this study finds that the amount of cash holding is increasing along with the increase of cash flows. This result is consistent for both firm categories based on the previous criteria. However, based on the 2SLS method, cash flow does not affect the cash holdings of the firms with financial constraints. The result of this research shows that firms with financial constraints have strong motivation to hold cash due to lack of access to external financing.

scholarly journals Targeting Behavior among Indonesian Firms: Two-Step Partial Adjustment Model Analysis

2019 ◽  
Vol 10 (1) ◽  
pp. 92-101
Author(s):  
Dwi Cahyaningdyah
Keyword(s):  
Stock Exchange ◽  
Financial Industry ◽  
Partial Adjustment ◽  
Financial Decisions ◽  
Speed Of Adjustment ◽  
Current Period ◽  
Adjustment Model ◽  
Partial Adjustment Model ◽  
Target Firms ◽  
Target Leverage

In this research, we tested the heterogeneity of speed of adjustment toward target leverage among industries on the Indonesian stock exchange by using two-step partial adjustment model. The sample collected from 2007-2016 and consisted of firms in eight sectors, i.e. agriculture, mining, basic industries, miscellaneous, consumer goods, property and real estate, infrastructure, utilities and transportation as well as trade, services and investment sectors. Firms in the financial industry are excluded because the capital structure of firms in the financial industry reflects specific regulations and are not independent firms’ policies. The results showed that speed of adjustment ranged from 61% - 45% for book leverage and 67% - 43% for market leverage. This significant speed of adjustment is consistent with trade-off theory, which states that firms have target leverage and when firms are deviated from the target, firms will make financial decisions that will close the gap between previous year’s leverage and the target leverage of current period.

scholarly journals Dividend policies of travel and leisure firms in the UK

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Erhan Kilincarslan ◽  
Sercan Demiralay
Keyword(s):  
Stock Exchange ◽  
Data Set ◽  
Partial Adjustment ◽  
Content Type ◽  
Dividend Policies ◽  
Adjustment Model ◽  
Partial Adjustment Model ◽  
Dividend Smoothing ◽  
Financial Characteristics ◽  
The Uk

Purpose This study aims to examine cash dividend practices of travel and leisure (T&L) companies listed on the London Stock Exchange (LSE). Design/methodology/approach The study uses a panel data set of 524 firm-year observations of 55 unique publicly listed UK T&L companies between 2007 and 2019. First, it uses a modified version of Lintner’s (1956) partial adjustment model for analysis regarding the target payout ratio and dividend smoothing. Second, it performs logit and Tobit models in ascertaining the association between financial characteristics and divided decisions of T&L firms. Finally, it applies the modified specification of the partial adjustment model on different sub-samples that are partitioned based on various financial factors to determine how the financial characteristics of T&L companies affect their dividend behavior. Findings The results show that UK T&L companies have long-term payout ratios and adjust their cash dividends by moving gradually to their target at a serious degree of smoothing. The findings also detect that financial characteristics of T&L firms (i.e. profitability, debt and size) have significant effects on their dividend payments decisions. In particular, more profitable and larger T&L corporations are more likely to pay cash dividends, whereas T&L companies with more debt are less likely to pay cash dividends in the UK. The results further reveal that although such financial characteristics also have important impacts on the target payout ratios and dividend smoothing levels, UK T&L companies generally adopt stable dividend policies over the period 2007-2019. Originality/value This is thought to be the first study to provide insights on dividend policy practices of UK travel and leisure corporation listed on the LSE.

scholarly journals Determinants of Corporate Cash Holdings: Evidence from MNCs in Pakistan

2018 ◽  
Vol 4 (1) ◽  
pp. 71-78
Author(s):  
Nadeem Ahmed Sheikh ◽  
Khawaja Khalid Mehmood ◽  
Mujtaba Kamal
Keyword(s):  
Fixed Effects ◽  
Stock Exchange ◽  
Cash Holdings ◽  
Cash Flows ◽  
Ordinary Least Squares ◽  
Capital Expenditures ◽  
Cash Holding ◽  
Working Capital ◽  
Growth Opportunities ◽  
Corporate Cash Holdings

The purpose of this article is to investigate whether firm-specific variables (i.e. size, growth opportunities, profitability, capital expenditures, leverage, dividends, cash flow and working capital) affect the cash holdings of MNCs. Moreover, to investigate whether theories relevant to cash holdings provide any justification to narrate the cash holding behavior of listed MNCs on Pakistan Stock Exchange (PSX) for the period 2006-2016. Results indicate that profitability positively impacts cash holdings. Firm size positively impacts cash holdings in pooled Ordinary Least Squares, while it negatively impacts cash holdings in the fixed effects method; however the relationship is insignificant. Leverage, growth opportunities, dividends, working capital ratio and capital expenditures are significant and negatively related to corporate cash holdings. Finally, cash flows are unrelated to cash holdings. In short, results indicate that firm-specific variables significantly affect the cash holdings of MNCs. Moreover, (+/-) coefficients of different explanatory variables indicate that theories relevant to cash holdings provide some support to explain the cash holding behavior of MNCs in an emerging economy - Pakistan.

scholarly journals Dynamic Capital Structure Adjustment: Which estimator yields consistent and efficient estimates?

2017 ◽  
Vol 9 (1) ◽  
pp. 209-227 ◽  
Author(s):  
Vusani Moyo
Keyword(s):  
Stock Exchange ◽  
Partial Adjustment ◽  
Gmm Estimator ◽  
Distributed Lag ◽  
Research Areas ◽  
Distributed Lag Model ◽  
Adjustment Model ◽  
Partial Adjustment Model ◽  
Study Results ◽  
Lagged Dependent Variable

The partial adjustment model is key to a number of corporate finance research areas. The model is by its nature an autoregressive-distributed lag model that is characterised by heterogeneity among individuals and autocorrelation due to the presence of the lagged dependent variable. Finding a suitable estimator to fit the model can be challenging, as the existing estimators differ significantly in their consistency and bias. This study used data drawn from 143 non-financial firms listed on the Johannesburg Stock Exchange (JSE) to test for the consistency and efficiency of the leading partial adjustment model estimators. The study results confirm the bias-corrected least squares dummy variable (LSDVC) initialised by the system generalised method of moments (GMM) estimator, the random effects Tobit estimator and the system GMM estimator as the most suitable estimators for the partial adjustment model. The difference GMM estimator and the Anderson-Hsiao instrumental variables estimator are inconsistent and biased in the context of the partial adjustment model.

Do Financially Constrained Firms Earn Higher Returns than the Unconstrained Firms? A Comprehensive Evidence from Pakistan Stock Exchange

2020 ◽  
Keyword(s):  
Time Series ◽  
Asset Pricing ◽  
Capital Structure ◽  
Stock Returns ◽  
Financial Constraints ◽  
Stock Exchange ◽  
Cash Flows ◽  
Total Asset ◽  
Cash Holding ◽  
The Relationship

This paper examines the relationship between financial constraints and the stock returns explaining the pricing of stock through financially constrained and unconstrained firms in Pakistan. Three proxies; total assets, tangible to total assets and cash holding to total assets ratios) have been used for financial constraints and the study tried to investigate that either the investors are compensated for taking the extra risk or not in Pakistan Stock Exchange (PSX). We find that the financially constrained firms don’t earn higher returns when their capital structure is heavy with liquid assets and their cash flows are more than the unconstrained firms in PSX. Moreover, the time series results showed that the risk-adjusted returns of the most constrained firms give the mix and somewhat negative and significant and insignificant results for the Pakistani firms listed in PSX sorted based on tangible to total assets and Cash holding to total asset ratios. Keywords: Asset Pricing, Financial constraints, risk-adjusted performance of portfolios

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