The Resilience of Central Bank Interest Rate on the Association of Financial Leverage and Firm Performance

2019 ◽  
Vol 12 (1) ◽  
Author(s):  
Adnan Ahmad ◽  
Pir Bilal ◽  
Ihtesham Khan
Keyword(s):  
Firm Performance ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Stock Exchange ◽  
Moderating Effect ◽  
Financial Leverage ◽  
Composite Effect ◽  
Firm Profitability ◽  
Lending Decisions

This study investigates the moderating effect of the Central Bank's interest rate on the relationship between financial leverage and firm profitability. The study uses panel data of Pakistani firms listed on Pakistan Stock Exchange for the period 2009-2016 with fixed effect regression analysis. Firm profitability is used as a dependent variable and is measured by EBIT and ROE while leverage andCentral Bank's Interest Rate (SBIR) are used as Independent variables. Results show that leverage isnegatively associated and statistically significant with firm performance (FP) while SBIR is negativelyrelated but this relation is statistically not significant. This imply that SBIR has no direct effect on firm performance. The important factor is the composite effect of leverage and SBIR on FP, which isnegative and statistically significant. These results imply that the central bank's policy of discountrates has an indirect effect on FP as this policy affects lending decisions of the firm. All these findings are consistent with previous studies. The study adds to the existing literature of banks interest rates and leverage in the sense that when government increases interest rates, it indirectly affects the firm performance as a firm may or may not be able to get credit from these financial institutions. Thus,government and policy makers are to take into account firms' performances and overall capitalmarket while changing he interest rates of the country. Keywords: Financial leverage; Central bank interest rate; Profitability; Moderating effect

Financial Leverage, International Orientation, And Firm Performance

2016 ◽  
Vol 1 (1) ◽  
Author(s):  
Hanin Rialsa
Keyword(s):  
Firm Performance ◽  
Stock Exchange ◽  
Moderating Effect ◽  
Financial Leverage ◽  
International Orientation ◽  
And Performance ◽  
The Relationship ◽  
Second International

This paper re-examines the effect of leverage on firm performance by looking at the moderating effect of international orientation. This study uses data of<br />manufacturing 93 firms listed in the Indonesian Stock Exchange over the period of 2011 – 2014 resulting in 372 observations. Results show that financial leverage has negative and significant effect on firm performance. Second, international orientation does not significantly moderate the relationship between financial leverage and performance. The more internationally oriented the firms; it does not imply that the effect of leverage on performance should be stronger.

scholarly journals PENGARUH TINGKAT SUKU BUNGA, BOND RATING, UKURAN PERUSAHAAN, DEBT TO EQUITY RATIO (DER) TERHADAP YIELD TO MATURITY OBLIGASI KORPORASI DI BEI PERIODE TAHUN 2010-2012.

2019 ◽  
Vol 6 (3) ◽  
pp. 295
Author(s):  
Hendaryadi , ◽  
Meina Wulansari Yusniar ◽  
Abdul Hadi
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Stock Exchange ◽  
Corporate Bonds ◽  
Market Price ◽  
Financial Statements ◽  
Company Size ◽  
Bond Ratings ◽  
Bond Rating ◽  
Equity Ratio

<p><em>This study aimed to analyze the effects of interest rates, bond rating, company size, and debt to equity ratio (DER) of the yield to maturity (YTM) of corporate bonds in Indonesia Stock Exchange. Previous researches showed different results, therefore, it is necessary to re- study by testing the four variables on the yield to maturity.</em></p><p><em>The population in this study was all corporate bonds listed and traded on the Stock Exchange in the period of 2010-2012. There were 324 bonds. Based on the Purposive sampling criteria, 66 bonds were obtained. The research hypothesis was tested by multiple linear regression (multiple regression) and the analysis tools were company's financial statements, market price of the bond, SBI interest rate and bond ratings.</em></p><p><em>The results showed that the variable interest rates and the debt to equity ratio did not significantly affect the yield to maturity of the bonds. Variable bond rating and company size gave     significant</em><em> </em><em>n</em><em>e</em><em>g</em><em>a</em><em>ti</em><em>ve</em><em> </em><em>ef</em><em>f</em><em>ec</em><em>t</em><em>s</em><em> </em><em>ontheyield</em><em> </em><em>t</em><em>omaturity</em><em> </em><em>of</em><em> </em><em>t</em><em>he</em><em> </em><em>bonds.</em><em></em></p>

scholarly journals Pengaruh Tingkat Suku Bunga, Inflasi Dan Nilai Kurs Terhadap Harga Saham Perusahaan Perhotelan Yang Terdaftar Di Bursa Efek Indonesia Per Triwulannya Periode 2016-2018

2021 ◽  
Vol 4 (2) ◽  
pp. 871-877
Author(s):  
Rahmat Dewa Bagas Nugraha ◽  
H.M Nursito
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Exchange Rates ◽  
Interest Rates ◽  
Quantitative Study ◽  
Stock Prices ◽  
Stock Exchange ◽  
Secondary Data ◽  
Ratio Analysis ◽  
The Interest Rate

This study aims to determine and analyze the factors that affect stock prices through appropriate ratio analysis. As for the ratio of interest rates, inflation and exchange rates. Researchers want to know and analyze the effect partially or simultaneously between interest rates, inflation, and exchange rates on stock prices. This research is a quantitative study using secondary data. The object of this research is hotel companies listed on the Indonesia Stock Exchange for the period 2016-2018. The sample used in this study were 3 hotel with certain characteristics. The results of research simultaneously using the F test show that there is no influence between interest rates, inflation and exchange rates on stock prices because the calculated value is smaller than the table. Partially with the t test it can be concluded that there is no influence between interest rates on stock prices because the tcount value in the interest rate variable is smaller than the t table. Likewise, the t calculation of inflation and the exchange rate is smaller than the t table, so that there is no partial effect of the two variables on stock prices. Keywords: Stock Prices, Interest Rates, Inflation and Exchange Rates

scholarly journals Pengaruh Ukuran Bank, Struktur Modal, Suku Bunga Dan Loan To Deposit Ratio Terhadap Profitabilitas Pada Perusahaan Perbankan Yang Terdaftar Di Bursa Efek Indonesia

2021 ◽  
Vol 4 (2) ◽  
pp. 575-579
Author(s):  
Evonella Nainggolan ◽  
Jessy Safitri Sitorus
Keyword(s):  
Data Analysis ◽  
Interest Rate ◽  
Linear Regression ◽  
Capital Structure ◽  
Interest Rates ◽  
Stock Exchange ◽  
Research Data ◽  
Analysis Method ◽  
Regression Test ◽  
Operational Activities

Banking in carrying out its operational activities is always required to achieve high profitability. This study aims to examine the effect of Bank Size, Capital Structure, Interest Rates and Loan to Deposit Ratio on the Profitability of Banking Companies Listed on the Indonesia Stock Exchange 2016-2019 Period. The approach that processes the research data is a quantitative approach. The population in this study were 43 companies with 25 samples of banking companies listed on the Indonesia Stock Exchange for the 2016-2019 period. The data analysis method used is multiple linear regression test. The results of this study are that Bank Size has an effect on Profitability, Capital Structure has an effect on Profitability, Interest Rates have no effect on Profitability, and Loan to Deposit Ratio has no effect on Profitability in Banking Companies Listed on the Indonesia Stock Exchange Period 2016-2019. Simultaneously, Bank Size, Capital Structure, Interest Rate and Loan to Deposit Ratio affect the Profitability of Banking Companies Listed on the Indonesia Stock Exchange 2016-2019 Period. Keywords: Bank Size, Capital Structure, Interest Rates, Loan to Deposit Ratio and Profitability. Keywords : Bank Size, Capital Structure, Interest Rates, Loan to Deposit Ratio and Profitability.

Central bank transparency, inflation targeting and monetary policy: a panel data approach

2018 ◽  
Vol 45 (6) ◽  
pp. 1159-1174 ◽  
Author(s):  
Gabriel Caldas Montes ◽  
Cristiane Gea
Keyword(s):  
Developing Countries ◽  
Monetary Policy ◽  
Panel Data ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Content Type ◽  
Central Bank Transparency ◽  
Policy Interest

Purpose The evidence concerning the effects of the inflation targeting (IT) regime as well as greater central bank transparency on monetary policy interest rates is not conclusive, and the following questions remain open. What is the effect of adopting IT on both the level and volatility of monetary policy interest rate? Does central bank transparency affect the level of the monetary policy interest rate and its volatility? Are these effects greater in developing countries? The purpose of this paper is to contribute to the literature by answering these questions. Hence, the paper analyzes the effects of IT and central bank transparency on monetary policy. Design/methodology/approach The analysis uses a sample of 48 countries (31 developing) comprising the period between 1998 and 2014. Based on panel data methodology, estimates are made for the full sample, and then for the sample of developing countries. Findings Countries that adopt the IT regime tend to have lower levels of monetary policy interest rates, as well as lower interest rate volatility. The effect of adopting IT on both the level and volatility of the basic interest rate is smaller in developing countries. Besides, countries with more transparent central banks have lower levels of monetary policy interest rates, as well as lower interest rate volatility. In turn, the effect of central bank transparency on both the level and volatility of the basic interest rate is greater in developing countries. Practical implications The study brings important practical implications regarding the influence of both the IT regime and central bank transparency on monetary policy. Originality/value Studies have sought to analyze whether IT and central bank transparency are effective to control inflation. However, few studies analyze the influence of IT and central bank transparency on interest rates. This study differs from the few existing studies since: the analysis is done not only for the effect of transparency on the level of the monetary policy interest rate, but also on its volatility; the central bank transparency index that is used has never been utilized in this sort of analysis; and the study uses panel data methodology, and compares the results between different samples.

Does the slope of the yield curve of the interbank market influence prices on the Warsaw Stock Exchange? A sectoral perspective

2021 ◽  
Vol 67 (4) ◽  
pp. 294-307
Author(s):  
Ewa Majerowska ◽  
Jacek Bednarz
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Term Structure ◽  
Yield Curve ◽  
Stock Exchange ◽  
Rate Curve ◽  
Daily Data ◽  
Warsaw Stock Exchange ◽  
The Interest Rate ◽  
Relationship Of

The interest rate curve is often viewed as the leading indicator of economic prosperity in a broad sense. This paper studies the ability of the slope of the yield curve in the term structure of interest rates to impact the sectoral indices on the Warsaw Stock Exchange, using daily data covering the period from 1 January 2001 to 30 September 2020. The results of the research indicate an ambiguous dependence of the logarithmic rates of return of sub-indices on the change of the interbank interest rate curve. The only sectors showing a clear relationship of this type is energy and pharmaceuticals.

CEO Overconfidence and Firm Performance: The Moderating Effect of Restaurant Franchising

2020 ◽  
pp. 193896551989992
Author(s):  
Hong Soon Kim ◽  
SooCheong (Shawn) Jang
Keyword(s):  
Firm Performance ◽  
Financial Risk ◽  
Firm Growth ◽  
Moderating Effect ◽  
Restaurant Industry ◽  
For Profit ◽  
Firm Profitability ◽  
Restaurant Firms ◽  
The Relationship

This study examined the effect of CEO overconfidence on restaurant performance and how franchising, a key business format in the restaurant industry, affects the relationship. Based on the notion that overconfident individuals take more risks than non-overconfident people, this study hypothesized that CEO overconfidence positively (negatively) influences restaurant growth (profitability). Furthermore, since franchising reduces operational and financial risk, this study hypothesized that franchising moderates the relationship between CEO overconfidence and firm performance. The results of this study confirmed that CEO overconfidence positively influences firm growth but negatively affects firm profitability in the restaurant industry. This study also found that franchising negatively (positively) influences the effect of CEO overconfidence on restaurant firm growth (profitability). The results suggest that overconfident CEOs are more suitable for growth-seeking restaurant firms but less desirable for profit-seeking firms. The results also highlight that franchising mitigates the risk associated with CEO overconfidence. More detailed results and implications are discussed in this article.

Inside the Bank Box

2019 ◽  
pp. 368-405
Author(s):  
Leonardo Gambacorta ◽  
Paul Mizen
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Adjustment Costs ◽  
Bank Lending ◽  
Bank Capital ◽  
Bank Lending Channel ◽  
Lending Channel ◽  
Pass Through ◽  
The Interest Rate

Central bank policy operates first through financial markets and then through banks as they adjust their interest rates. This chapter discusses the transmission of policy in this first step of the monetary transmission mechanism, known as interest-rate pass-through. Historically, the focus of attention has been the interest-rate channel. We show the origins of this channel via a microfounded model of interest-rate setting by deposit-taking institutions that are Cournot oligopolists facing adjustment costs. We then examine other channels such as the bank lending channel and the bank capital channel and the role of central bank communications, signaling, and forward guidance over future interest rates. Each is shown to influence the setting of current short-term interest rates. The chapter closes with some issues for the future of pass-through in the transmission process.

scholarly journals The term structure of interest rates and inflation forecast targeting

2011 ◽  
Vol 12 (2) ◽  
pp. 162-179
Author(s):  
Eric Schaling ◽  
Willem Verhagen ◽  
Sylvester Eiffinger
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Term Structure ◽  
Inflation Targeting ◽  
Nominal Interest Rate ◽  
Term Spread ◽  
State Of The Economy ◽  
Output Persistence

This paper examines the implications of the expectations theory of the term structure of interest rates for the implementation of inflation targeting. We show that the responsiveness of the central bank’s instrument to the underlying state of the economy is increasing in the duration of the long-term bond.  On the other hand, an increase in duration will make long-term inflationary expectations - and therefore also the long-term nominal interest rate - less responsive to the state of the economy. The extent to which the central bank is concerned with output stabilisation will exert a moderating influence on the central bank’s response to leading indicators of future inflation. However, the effect of an increase in this parameter on the long-term nominal interest rate turns out to be ambiguous. Next, we show that both the sensitivity of the nominal term spread to economic fundamentals and the extent to which the spread predicts future output, are increasing in the duration of the long bond and the degree of structural output persistence. However, if the central bank becomes relatively less concerned about inflation stabilisation the term spread will be less successful in predicting real economic activity.

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