Online Marketing Induced Performance Volatility

2017 ◽  
Vol 7 (1) ◽  
pp. 37-63 ◽  
Author(s):  
Manoj Kumar
Keyword(s):  
Cash Flow ◽  
Cash Holdings ◽  
Online Marketing ◽  
Bottom Line ◽  
Financing Costs ◽  
Cash Flow Volatility ◽  
Spending Volatility ◽  
Marketing Spending ◽  
Different Sources ◽  
Performance Volatility

This paper analyzes how revenue and cash-flow volatility are influenced by own and competitive online marketing spending volatility, by the level of online marketing spending, by the responsiveness of own online marketing spending, and by competitive reactivity. The author develops hypotheses about the influence of these variables on revenue and cash-flow volatility that are rooted in online market response theory. Based on a broad sample of 99 pharmaceutical brands in four clinical categories in India, the author tests these hypotheses and assess the magnitude of the different sources of online marketing-induced performance volatility. The results support our hypotheses and demonstrate that effective online marketing may incur negative financial side effects such as greater financing costs or higher opportunity costs of cash holdings. Thus, common volatility-increasing online marketing practices such as advertising pulsing are effective at the top-line, but may turn out to be ineffective at the bottom-line.

scholarly journals The Determinants of Corporate Cash Holdings: The Case of a Small Emerging Market

2016 ◽  
Vol 8 (1) ◽  
pp. 143
Author(s):  
Ghada Tayem
Keyword(s):  
Cash Flow ◽  
Emerging Market ◽  
Cash Holdings ◽  
Estimation Methods ◽  
Dynamic Effects ◽  
Growth Opportunities ◽  
Trade Off ◽  
Cash Flow Volatility ◽  
Cash Reserves ◽  
Corporate Cash Holdings

This study investigates the factors influencing the level of corporate cash holdings in the context of Jordan, a small emerging market characterized by large market frictions. This article employs the framework of the trade off, financing hierarchy, and managerial discretion theories to predict determinants of cash reserves. Then it examines these predictions using a sample of listed nonfinancial Jordanian firms over the period 2005-2013 using alternative estimation methods. Consistent with the trade-off theory, the results show that firm size and cash substitutes have negative and significant impact on cash holdings while growth opportunities and cash flow volatility have positive and significant impact. In addition, and consistent with the financing hierarchy view, the results show that cash flow and growth opportunities have positive and significant impact on cash holdings. Also, the study documents that leverage is negatively related to cash holdings while squared leverage is positively related to cash reserves. Finally, the results indicate that there are significant dynamic effects in determining cash holding targets.

scholarly journals Three Essays on Capital Structure

2021 ◽  
Author(s):  
◽  
Mona Yaghoubi
Keyword(s):  
Capital Structure ◽  
Cash Flow ◽  
Cash Holdings ◽  
Management Team ◽  
Leverage Ratio ◽  
Cash Flow Volatility ◽  
Target Leverage ◽  
The Relationship ◽  
Debt Levels

<p>This thesis consists of three self-contained essays about the relationship between cash flow and investment volatility and firm capital structure and cash holdings. Capital structure measures sources of financing that allow a firm to operate, invest, and grow.  The first essay reviews the theoretical relationship between firm capital structure and cash flow volatility, develops testable hypotheses, constructs a data set, and then tests the hypotheses using several measures of firm cash flow volatility and econometric methods that account for the non-linear relationship of proportional variables. Overall, the evidence indicates that ceteris paribus, a one standard deviation increase from the mean of cash flow volatility, implies approximately by 24% decrease in the long-term debt ratio, a 26% decrease in probability of holding debt with over 10 years to maturity, and a 39% increase in the probability of not holding either short or long term debt. These findings are novel in the empirical capital structure literature and show the importance of cash flow volatility in firm financial policies.  The second essay studies the financing behaviour of Hospital Corporation of America (HCA) from 1990 to 2013 and demonstrates variation in HCA’s market and book leverage ratios due to 1) mergers and acquisitions and divestitures that change the firm’s total assets, 2) share buybacks, and 3) leveraged buyouts and public offerings that change the firm’s ownership. The paper scrutinizes variation in HCA’s market and book leverage ratios independently as well as relative to each other. Our evidence shows that i) HCA’s management team used HCA’s excess cash from divestitures to repurchase HCA’s stock rather than pay off HCA’s debt, ii) HCA’s market leverage ratio tends to stay in a target leverage zone, and iii) in some years HCA’s management team used the book leverage ratio as a tool to keep the market leverage ratio inside a target leverage zone.  In the third essay, we investigate the influence of investment volatility on capital structure and cash holdings using a broad definition of investment. Despite theoretical motivation, the relationship between investment volatility and capital structure has not been studied in the empirical literature. All in all, our evidence suggests that i) firms with relatively high capital expenditure and acquisition investment volatility hold relatively higher levels of debt and lower levels of cash, ii) firms fund large capital expenditures and/or acquisition by increasing debt or decreasing cash, and iii) immediately after funding large investment firms reduce debt levels and increase cash holdings. Research and development investment volatility is related to lower debt levels and higher cash levels, and does not exhibit similar investment spike funding. Overall, our results are consistent with parts, but not all, of the DeAngelo, DeAngelo and Whited (2011) model.</p>

scholarly journals The determinants of corporate cash holdings levels: evidence from selected South African retail firms

2017 ◽  
Vol 14 (2) ◽  
pp. 79-93 ◽  
Author(s):  
Trust Chireka ◽  
Michael Bamidele Fakoya
Keyword(s):  
South African ◽  
Cash Flow ◽  
Capital Expenditure ◽  
Panel Data Analysis ◽  
Cash Holdings ◽  
Developed Countries ◽  
Liquid Asset ◽  
Dividend Payments ◽  
Cash Flow Volatility ◽  
Corporate Cash Holdings

With corporate cash holdings on the rise, stakeholders need to know, among other things, what informs the companies’ cash holding policies and whether there are any benefits to be derived from piling up these cash reserves. Studies conducted in developed countries have identified the following as determinants of corporate cash holdings: firm size, growth opportunities, liquid asset substitutes, capital expenditure, leverage, dividend payments, cash flows and cash flow volatility. Few studies have focused on what drives firms’ cash holdings behavior in emerging economies. This study, the first of its kind, investigated the determinants of corporate cash holdings in the South African retail industry. The paper used panel data analysis to test the relationships between cash holdings level and the identified determinant factors. The authors found evidence that liquid asset substitutes, capital expenditure, dividend payments and cash flow volatility significantly influence the cash holdings levels of retail firms listed on the Johannesburg Stock Exchange.

FINANCIAL CONSTRAINTS AND CORPORATE CASH HOLDINGS: AN EMPIRICAL ANALYSIS USING FIRM LEVEL DATA

2017 ◽  
Vol 12 (02) ◽  
pp. 1750009 ◽  
Author(s):  
ABDUL RASHID ◽  
MARYAM ASHFAQ
Keyword(s):  
Cash Flow ◽  
Firm Size ◽  
Financial Constraints ◽  
Cash Holdings ◽  
Firm Level ◽  
Book Value ◽  
Level Data ◽  
Alternative Measures ◽  
Cash Flow Volatility ◽  
Corporate Cash Holdings

This paper empirically investigates whether the sensitivity of cash to its firm-specific determinants differs across financially constrained and unconstrained firms. We sort out firm-year observations as financially constrained and unconstrained based on the median value of three alternative measures: the firm size, dividend payout ratio, and Whited and Wu (WW) index. In order to mitigate the problem of endogeneity and to take into account the dynamic nature of the panel dataset, we apply the robust two-step system-GMM estimator on unbalanced annual panel dataset covering the period 2001–2013. The results suggest that financially constrained firms (FCFs) decrease their cash holdings with size, leverage, and the payout ratio, while they increase their cash amounts with both the market-to-book value and the cash flow volatility. On the other hand, for financially unconstrained firms (FUCFs), we show that there is a positive relationship between cash holdings and firm size, the payout ratio, and the market-to-book value, while both the cash flow volatility and leverage are negatively related to cash holdings. These asymmetries in the sensitivity of cash to its determinants are robust across all the three measures of financial constraints used in the study.

scholarly journals Marketing Spending and Brand Performance Volatility

2018 ◽  
Vol 10 (1) ◽  
pp. 46-51
Author(s):  
Marc Fischer ◽  
Hyun Shin ◽  
Dominique M. Hanssens
Keyword(s):  
Side Effects ◽  
Competitive Advantage ◽  
Cash Flow ◽  
Financial Health ◽  
Brand Performance ◽  
Investor Confidence ◽  
Marketing Spending ◽  
Performance Volatility

Abstract If company revenues fluctuate, the resulting volatility makes it more difficult to project the company’s future revenues and earnings and ensure steady cash-flow. This lessens investor confidence and, as such, can harm the financial health of a brand. So, effective marketing can have undesired financial side effects. The optimal marketing behaviors derived with and without volatility calculations will be quite different. Analytically savvy companies will be able to gain competitive advantage from this realization.

scholarly journals Determinants of Corporate Cash Holdings in Hospitality Sector of France, Spain and United States of America

2020 ◽  
Vol V (III) ◽  
pp. 55-66
Author(s):  
Majid Mumtaz ◽  
Wisal Ahmad ◽  
Syed Arshad Ali Shah
Keyword(s):  
Cash Flow ◽  
Capital Expenditure ◽  
Stock Exchange ◽  
Generalized Method Of Moments ◽  
Cash Holdings ◽  
Dynamic Panel Data ◽  
Empirical Estimation ◽  
Expenditure Growth ◽  
Hospitality Sector ◽  
Cash Flow Volatility

This study determines the effect of parameters used for cash holding in hospitality sector (HS) of target countries i-e France, Spain and United State of America for the period of 14 years (2005-2018). The parameters consist of firm size, leverage, capital expenditure, growth opportunity, liquidity, cash flow, cash flow volatility, asset intangibility, dividend payments and stock exchange. Dynamic panel data is employed for empirical estimation i-e Generalized Method of Moments (GMM). System GMM model estimation reveals that leverage, cash flow volatility and asset intangibility influence cash holdings positively while size, capital expenditure, growth opportunities and cash flow affect cash holdings negatively.

scholarly journals Cash Management in Hospitality Sector of Western Europe

2020 ◽  
Vol 12 (2) ◽  
pp. 109-128
Author(s):  
Wisal Ahmad ◽  
Shahwali Khan ◽  
Mohammad Sohail Yunis
Keyword(s):  
Cash Flow ◽  
Western Europe ◽  
Stock Exchange ◽  
Cash Holdings ◽  
Cash Flows ◽  
Capital Expenditures ◽  
Trade Off ◽  
Dividend Payments ◽  
Hospitality Sector ◽  
Cash Flow Volatility

The study investigates the effect of factors explaining the cash holdings of hospitality sector in five countries of Western Europe, namely, France, Germany, Spain, Italy and United Kingdom for a period of 12 years (2005-2016). The effect of parameters i.e., size, leverage, capital expenditures, growth opportunities, liquidity, cash flow, asset intangibility, cash flow volatility, dividend payments and stock exchange on cash holdings has been empirically tested by employing dynamic estimation methodology i.e., Generalized Method of Moments (GMM). The findings reveal that growth opportunities and dividend payments have a positive effect on cash holdings, while size, leverage, liquidity, cash flow, asset intangibility, cash flow volatility and stock exchange pose a negative effect. Moreover, the subsectors such as airlines, gambling and restaurants and bars are holding more cash in comparison to the travel and tourism. The study empirically supports the trade-off, pecking order and free cash flow theories of cash holdings for the hospitality sector. The academic implications of the study reflect that larger companies in the hospitality sector of Western Europe are more diversified and hence amass more cash. Similarly, supporting the cash flow theory, larger hospitality sector companies hold more cash to bar the agency issues. Moreover, companies in the hospitality sector keep less cash as such companies face close monitoring and attain leverage cheaply. Supporting the trade off theory, companies in the hospitality sector hold considerable fund of cash to counter cash shortages for making investments. Furthermore, companies in the hospitality sector experiencing more cash flows keep less cash, as influx of cash flows serve as a source of liquidity. Furthermore, to be able to pay stable dividends, the hospitality sector companies amass more cash and hence support the trade off theory. The practical implications of the study shows that by utilizing the empirical findings in this study, an investor sensitive to empire-building traits of managers for their private benefits, can infer that large hospitality companies with more leverage and capital expenditures will hold less cash. However, holding excessive cash in such companies can create agency problems. On the other hand, large hospitality companies holding more cash would have an ease in practicing debt financing as holding more cash is an indication of diversification and expansion, making shareholders more heedful about their net earnings.

scholarly journals Three Essays on Capital Structure

2021 ◽  
Author(s):  
◽  
Mona Yaghoubi
Keyword(s):  
Capital Structure ◽  
Cash Flow ◽  
Cash Holdings ◽  
Management Team ◽  
Leverage Ratio ◽  
Cash Flow Volatility ◽  
Target Leverage ◽  
The Relationship ◽  
Debt Levels

<p>This thesis consists of three self-contained essays about the relationship between cash flow and investment volatility and firm capital structure and cash holdings. Capital structure measures sources of financing that allow a firm to operate, invest, and grow.  The first essay reviews the theoretical relationship between firm capital structure and cash flow volatility, develops testable hypotheses, constructs a data set, and then tests the hypotheses using several measures of firm cash flow volatility and econometric methods that account for the non-linear relationship of proportional variables. Overall, the evidence indicates that ceteris paribus, a one standard deviation increase from the mean of cash flow volatility, implies approximately by 24% decrease in the long-term debt ratio, a 26% decrease in probability of holding debt with over 10 years to maturity, and a 39% increase in the probability of not holding either short or long term debt. These findings are novel in the empirical capital structure literature and show the importance of cash flow volatility in firm financial policies.  The second essay studies the financing behaviour of Hospital Corporation of America (HCA) from 1990 to 2013 and demonstrates variation in HCA’s market and book leverage ratios due to 1) mergers and acquisitions and divestitures that change the firm’s total assets, 2) share buybacks, and 3) leveraged buyouts and public offerings that change the firm’s ownership. The paper scrutinizes variation in HCA’s market and book leverage ratios independently as well as relative to each other. Our evidence shows that i) HCA’s management team used HCA’s excess cash from divestitures to repurchase HCA’s stock rather than pay off HCA’s debt, ii) HCA’s market leverage ratio tends to stay in a target leverage zone, and iii) in some years HCA’s management team used the book leverage ratio as a tool to keep the market leverage ratio inside a target leverage zone.  In the third essay, we investigate the influence of investment volatility on capital structure and cash holdings using a broad definition of investment. Despite theoretical motivation, the relationship between investment volatility and capital structure has not been studied in the empirical literature. All in all, our evidence suggests that i) firms with relatively high capital expenditure and acquisition investment volatility hold relatively higher levels of debt and lower levels of cash, ii) firms fund large capital expenditures and/or acquisition by increasing debt or decreasing cash, and iii) immediately after funding large investment firms reduce debt levels and increase cash holdings. Research and development investment volatility is related to lower debt levels and higher cash levels, and does not exhibit similar investment spike funding. Overall, our results are consistent with parts, but not all, of the DeAngelo, DeAngelo and Whited (2011) model.</p>

scholarly journals Why do firms hold cash? Evidence from Korean stock listings

2016 ◽  
Vol 13 (3) ◽  
pp. 311-321
Author(s):  
Paul Moon Sub Choi ◽  
Joung Hwa Choi
Keyword(s):  
Corporate Governance ◽  
Cash Flow ◽  
Credit Rating ◽  
Cash Holdings ◽  
Jel Classification ◽  
External Financing ◽  
Firm Level ◽  
External Finance ◽  
Cash Flow Volatility ◽  
Corporate Cash Holdings

Corporate governance and the availability of external financing can be important determinants of corporate cash holdings. In this research, in line with Opler et al. (1999), the authors find that Korean firms’ cash holdings are affected by firm-level characteristics including firm size, leverage, market to book, cash flow ratio, net working capital, and cash flow volatility in addition to corporate governance. Rather than agency-prone, the authors can ascribe the increase in cash holdings to the precautionary corporate demand for cash (Campbell et al., 2001). The authors also report that operating risks stemming from cash flow volatility, unavailability of external finance, credit rating downgrades, etc., may be associated with precautionary corporate demand for cash. Lastly, it is documented that corporate governance proxied for by block and/or insider ownership stakes is inversely associated with corporate cash holdings. Keywords: demand for money, corporate governance, corporate cash holding. JEL Classification: G39, E41, G34

Cash Flow Volatility and Corporate Bond Yield Spreads

2008 ◽  
Author(s):  
Kenneth R. Vetzal ◽  
Alan V. S. Douglas ◽  
Alan Guoming Huang
Keyword(s):  
Cash Flow ◽  
Corporate Bond ◽  
Yield Spreads ◽  
Bond Yield ◽  
Cash Flow Volatility
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