scholarly journals Relationship between Financial Development and Growth: Focusing on the Effect of Industry Dependence on External Finance and Industry Growth Opportunities

2014 ◽  
Vol 14 (4) ◽  
pp. 346-354
Author(s):  
Yoon-Jin Hwang
Keyword(s):  
Financial Development ◽  
Growth Opportunities ◽  
Industry Growth ◽  
External Finance

Effects of Financial Development and Institutions On Firm Growth in Malaysia

2020 ◽  
Vol 11 (1) ◽  
pp. 50-50
Author(s):  
Huay Huay Lee ◽  
Siong Hook Law ◽  
W.N.W. Azman-Saini
Keyword(s):  
Financial Development ◽  
Firm Growth ◽  
Generalized Method Of Moments ◽  
Necessary Condition ◽  
Growth Opportunities ◽  
Firm Level ◽  
External Finance ◽  
Level Data ◽  
Development Institutions ◽  
Good Potential

This study is motivated by Modigliani and Miller's (1958) financing constraints theory (FCT) and others like Rajan and Zingales (1998), Fisman and Love (2007), and Manganelli and Popov (2013) also sharing similar enthusiasm that firm growth are dependence on access to external finance but subject to macroeconomic environment. Using firm-level data from firms listed in Bursa Malaysia for 2006-2014 period, the study applies dynamic panel system generalized method of moments (GMM) estimation (Blundell and Bond, 1998) to estimate how a country's embedded financial development and institutional quality impacts the linkage of firms' external financial dependence and growth opportunities to firm growth. A dynamic system GMM approach is employed to address the endogeneity and serial correlation concern. Firms which have greater growth opportunities actually grow faster with better financial development with embedded good institutions in the case of Malaysia. So findings concluded that firms experience higher growth through better allocation of finance since they have good potential to grow. This has shed important lights to policymakers in formulating the design of many financial development policies across a wide set of countries aimed at fostering financial markets and banking services sector to provide the vital sources of external financing needed by corporations in financing their investments. A well-functioning financial systems is a necessary condition for promoting firm growth. Keywords:Firm growth; financial development; institutions; external financial dependence; growth opportunities

Banking on the Confucian Clan: Why China Developed Financial Markets So Late

2021 ◽  
Author(s):  
Zhiwu Chen ◽  
Chicheng Ma ◽  
Andrew J Sinclair
Keyword(s):  
Financial Markets ◽  
Financial Development ◽  
Regional Variation ◽  
External Finance ◽  
The Past ◽  
Past Millennium

Abstract Over the past millennium, China has relied on the Confucian clan to achieve interpersonal cooperation, focusing on kinship and neglecting the development of impersonal institutions needed for external finance. In this paper, we test the hypothesis that the Confucian clan and financial markets are competing substitutes. Using the large cross-regional variation in the adoption of modern banks, we find that regions with historically stronger Confucian clans established significantly fewer modern banks in the four decades following the founding of China's first modern bank in 1897. Our evidence also shows that the clan continues to limit China's financial development today.

Financial Deepening

2019 ◽  
Vol 18 (2) ◽  
pp. 111-137
Author(s):  
Shankha Chakraborty
Keyword(s):  
Financial Development ◽  
Financial Market ◽  
Capital Accumulation ◽  
Agency Problems ◽  
Financial Structure ◽  
Financial Deepening ◽  
External Finance ◽  
Long Run ◽  
Financial Contract ◽  
Further Development

This article proposes a tractable model of the evolution of financial structure. Firms invest out of internal assets and by borrowing from banks and the financial market. In the presence of moral hazard, whereby owner–managers may intentionally reduce profitability of investment to appropriate resources, banks can monitor firms and partially alleviate agency problems. Under the optimal financial contract, banks monitor and outside investors lend to firms only if they borrow from banks too. The model is broadly consistent with financial development facts. Capital accumulation is facilitated by an increasing reliance on both types of external finance. Initially firms rely more heavily on expensive bank finance. With further development, banks eliminate much of the agency problem and firms substitute in favour of cheaper market finance. The short- and long-run effects of financial sector reforms are considered. JEL: E44, G20, O16

scholarly journals faktor-faktor yang mempengaruhi pertumbuhan perusahaan

2017 ◽  
Vol 1 (2) ◽  
Author(s):  
Alfonsa Dian Sumarna
Keyword(s):  
Hypothesis Testing ◽  
Firm Size ◽  
Firm Age ◽  
Small Company ◽  
Growth Opportunities ◽  
External Finance ◽  
Company Growth ◽  
Large Enterprises

<p><em>Result of the hypothesis testing showed that independen variable like firm-size is significant negative with company growth and  internal finance, external finance and growth opportunities is significant positive with company growth but independen variable like  firm-age didn’t have any significant with company growth. The result also showed that small company is growthing faster that then medium and large enterprises.</em></p>

scholarly journals Leverage and investment opportunities: the effect on high growth firms

2020 ◽  
Vol 31 (83) ◽  
pp. 302-317
Author(s):  
Rossimar Laura Oliveira ◽  
Eduardo Kazuo Kayo
Keyword(s):  
Capital Structure ◽  
Inverse Relationship ◽  
Negative Relationship ◽  
High Growth ◽  
Growth Opportunities ◽  
Dynamic Panel ◽  
Industry Growth ◽  
Investment Opportunities ◽  
Growth Firms ◽  
The Relationship

ABSTRACT The objective of this paper is to investigate if the high growth of a firm results in a reduction in its debt levels. This is expected to happen for firms that experience a positive idiosyncratic shock to their growth opportunities, which would affect their cash flow and profitability. Although the relationship between growth opportunities (e.g., Tobin’s Q) and capital structure has already been widely discussed from a conceptual viewpoint, there are still important empirical gaps, particularly due to the endogeneity of the first variable. This paper seeks to minimize these problems by operationalizing the concept of idiosyncratic technological shocks. This issue is relevant because the negative relationship between growth and leverage may indicate that for the most efficient companies there will be a reduction in bankruptcy cost and a reduction in agency costs for the least efficient companies. This paper contributes to the development of studies in the area by demonstrating the inverse relationship between growth and leverage, with the model and the variable that represents the positive shocks experienced by companies. The dynamic panel method enables an analysis of the variation in debt in relation to the variation in value using the first differences and controlling the lagged debt effect. To apply the model, we used data from Brazilian companies, covering 1995 to 2016. The main results show that the greater the ratio between the firm’s growth opportunities and its industry growth opportunities, the lower its leverage indicators. The complementary results suggest that less leveraged firms have this negative relationship to an even stronger degree.

scholarly journals Financial sector development & firm growth in BRICS countries

2017 ◽  
Vol 7 (4-1) ◽  
pp. 126-134
Author(s):  
Shame Mugova
Keyword(s):  
Firm Growth ◽  
Financial Sector ◽  
Productive Capacity ◽  
Growth Opportunities ◽  
Listed Firms ◽  
Speed Of Adjustment ◽  
External Finance ◽  
Financial Sector Development ◽  
Brics Countries ◽  
The Impact

The development of an economy’s financial sector facilitates improved access to capital. This study focuses on firm growth in terms of how much assets it controls and BRICS is chosen as the empirical medium of investigation. The impact financial sector development on firm growth amongst 3353 listed firms in BRICS countries is investigated using a GMM estimation technique. Firm’s investment in assets increases the organizational resources and productive capacity needed to achieve growth in the market. Financial sector development improves access to capital and firms with higher access to external finance pursue growth opportunities using debt. Financial sector development helps firms to adjust their capital structures quickly thereby minimizing the costs of staying off target. The speed of adjustment of firms towards their target capital structure facilitates financing of firm growth. The study found that listed firms in Brazil, Russia India, China and South Africa have a target total liabilities-to-total assets ratio and financial sector development helps firms to partially adjust towards target levels and pursue growth opportunities.

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