scholarly journals Generational Socioemotional Wealth and Debt Maturity: Evidence from Private Family Firms of GIPSI Countries

2021 ◽  
Vol 13 (12) ◽  
pp. 67
Author(s):  
Oscar Domenichelli ◽  
Giulia Bettin
Keyword(s):  
Sovereign Debt ◽  
Family Firms ◽  
Conflicts Of Interest ◽  
Debt Crisis ◽  
Debt Maturity ◽  
Socioemotional Wealth ◽  
Debt Maturity Structure ◽  
Maturity Structure ◽  
Generation Family

In this paper we investigate the relationship between generational socioemotional wealth (SEW) and debt maturity structure in private family firms of GIPSI countries for the period 2010-2018. This appears to be quite an important issue to study, given that SEW is a peculiar aspect of family firms and its impact on the debt maturity structure, still relatively unexplored, is likely to change according to the generation running the family business. We show that the importance attached to SEW decreases when moving from the firms’ founder to the subsequent generations, with a negative effect on the amount of long-term debt. The forward-looking orientation of first-generation family firms favours long-term credit by banks in order to expand a healthy business which can be inherited by future generations. These businesses are hence perceived as less risky and more value-creating by external creditors, compared to later-generation family firms. Alternatively, SEW preservation is often less of a target in later-generation family firms, because some descendants consider the firm simply as a source of extra finance and conflicts of interest often arise between multiple generations or different family branches entering the business. Short-term debt may then be employed as a signaling effect of the quality of the firm. At the same time, borrowing long-term capital may become difficult if lenders question the creditworthiness of these businesses. This issue emerged dramatically during the sovereign debt crisis, when a significant contraction of credit to firms was observed throughout the GIPSI countries.

scholarly journals The long-term horizon of family firms in M&A: The impact on research investments and debt maturity structure

2017 ◽  
Vol 15 (1) ◽  
pp. 108-122 ◽  
Author(s):  
Fabio Quarato
Keyword(s):  
Family Firms ◽  
Debt Maturity ◽  
Bank Debt ◽  
Growth Strategies ◽  
Debt Maturity Structure ◽  
Maturity Structure ◽  
Research Investments ◽  
The Impact ◽  
External Growth

Despite family business is the most widespread ownership structure worldwide, there is a lack of evidence on the impact of external growth strategies on their capital structure. Although most researches showed that the risk of losing control leads family firms to a lower level of debt, this article sheds new light on debt maturity structure and innovation investments when family firms embrace an acquisition path. In particular, I argue that family firms will use bank debt to a lower extent than nonfamily firms when they embrace an external growth strategy and, as a consequence, they are more likely to avoid cuts in research investments and focus more on long term debt. These hypotheses are consistent with agency theory arguments, as family principals exercise a more effective monitoring due to the larger ownership stake and the desire to pass the company on the offspring in profitable conditions. By having access to a panel data, I analyse acquisitions carried out in the period 2000-2013 by all Italian companies with turnover exceeding 50 million Euros, and the results support the long term perspective of family firms. In particular, family firms will use less bank debt to finance acquisitions, avoiding cutting research investments and relying on a more balanced debt maturity structure.

The impact of cash flow volatility on firm leverage and debt maturity structure: evidence from China

2018 ◽  
Vol 8 (1) ◽  
pp. 69-91 ◽  
Author(s):  
Zulfiqar Ali Memon ◽  
Yan Chen ◽  
Muhammad Zubair Tauni ◽  
Hashmat Ali
Keyword(s):  
Standard Deviation ◽  
Cash Flow ◽  
Cash Flows ◽  
Debt Maturity ◽  
Percent Reduction ◽  
Content Type ◽  
Debt Maturity Structure ◽  
Maturity Structure ◽  
Cash Flow Volatility

Purpose The purpose of this paper is to investigate the influence of cash flow volatility on firm’s leverage levels. It also analyzes how cash flow volatility influences the debt maturity structure for the Chinese listed firms. Design/methodology/approach The authors construct the measure for cash flow variability as five-year rolling standard deviation of the cash flow from operations. The authors use generalized linear model approach to determine the effect of volatility on leverage. In addition, the authors design a categorical debt maturity variable and assign categories depending upon firm’s usage of debt at various maturity levels. The authors apply Ordered Probit regression to analyze how volatility affects firm’s debt maturity structure. The authors lag volatility and other independent variables in the estimation models so as to eliminate any possible endogeneity problems. Finally, the authors execute various techniques for verifying the robustness of the main findings. Findings The authors provide evidence that higher volatility of cash flows results in lower leverage levels, while the sub-sampling analysis reveals that there is no such inverse association in the case of Chinese state-owned enterprises. The authors also provide novel findings that irrespective of the ownership structure, firms facing high volatility choose debt of relatively shorter maturities and vice versa. Overall, a rise of one standard deviation in volatility causes 8.89 percent reduction in long-term market leverage ratio and 26.62 percent reduction in the likelihood of issuing debentures or long-term notes. Research limitations/implications This study advocates that cash flow volatility is an essential factor for determining both the debt levels and firm’s term-to-maturity structure. The findings of this study can be helpful for the financial managers in maintaining optimal leverage and debt maturity structure, for lenders in reducing their risk of non-performing loans and for investors in their decision-making process. Originality/value Existing empirical literature regarding the influence of variability of cash flows on leverage and debt maturity structure is inconclusive. Moreover, prior research studies mainly focus only on the developed countries. No previous comprehensive study exists so far for Chinese firms in this regard. This paper endeavors to fulfill this research gap by furnishing novel findings in the context of atypical and distinctive institutional setup of Chinese firms.

Debt Maturity Structure and Credit Quality

2014 ◽  
Vol 49 (4) ◽  
pp. 817-842 ◽  
Author(s):  
Radhakrishnan Gopalan ◽  
Fenghua Song ◽  
Vijay Yerramilli
Keyword(s):  
Bond Market ◽  
Debt Maturity ◽  
Yield Spreads ◽  
Credit Quality ◽  
Debt Maturity Structure ◽  
Rollover Risk ◽  
Maturity Structure

AbstractWe examine whether a firm’s debt maturity structure affects its credit quality. Consistent with theory, we find that firms with greater exposure to rollover risk (measured by the amount of long-term debt payable within a year relative to assets) have lower credit quality; long-term bonds issued by those firms trade at higher yield spreads, indicating that bond market investors are cognizant of rollover risk arising from a firm’s debt maturity structure. These effects are stronger among firms with a speculative-grade rating and declining profitability, and during recessions.

scholarly journals Earnings management and debt maturity: Evidence from Italy

2020 ◽  
Vol 17 (3) ◽  
pp. 179-186 ◽  
Author(s):  
Andrea Rey ◽  
Danilo Tuccillo ◽  
Fabiana Roberto
Keyword(s):  
Earnings Management ◽  
Academic Community ◽  
Debt Maturity ◽  
Accrual Quality ◽  
Debt Maturity Structure ◽  
Total Debt ◽  
Maturity Structure ◽  
Decision Making Processes ◽  
One Year

In this work, we examine whether earnings management affects the debt maturity structure of Italian non-SMEs. We employ accruals quality as a proxy for earnings management. We measure the accrual quality as the absolute value of residual reflects the accruals that are not related to cash flow realized in the current, following or previous year. We measure the debt maturity in two ways. First, we consider it as a dummy variable that takes the value equal to 1 if some of the debt is long-term (exceeding one year), and 0 otherwise. Second, we compute the debt maturity as the ratio of long-term debt to total debt. We employ a quantitative approach, carrying out several regressions (probit, logit, and tobit) analyses to investigate the effect earnings management on debt maturity structure, using financial statement data of 1,001 Italian non-SMEs sampled over the period 2011-2017. This paper provides theoretical and practical findings that support the literature on earnings management. First, the study confirms that accrual quality can use as a proxy of earnings management by the academic community. Then the findings show that earnings management is negatively associated with the possibility to access to long-term debt, and with a proportion of long-term debt in total debt. This evidence may support the managers when they have to plan the financial structure, the lenders and the creditors in their decision-making processes, and the policymakers when they have to set programs aimed to make easier the access to external financial resources.

scholarly journals Debt maturity structure and firms’ performance: Evidence from Vietnam

2020 ◽  
Vol 6 (03) ◽  
Author(s):  
Hoang duc LE
Keyword(s):  
Positive Impact ◽  
Stock Exchange ◽  
Debt Maturity ◽  
Financial Firms ◽  
Debt Maturity Structure ◽  
Maturity Structure ◽  
Generalized Methods Of Moments ◽  
Methods Of Moments ◽  
The Impact

This paper investigates the impact of debt maturity structure on firms’ performance for all non-financial firms listed on Ho Chi Minh City Stock Exchange and Hanoi Stock Exchange between 2010 and 2017. We find that an increase in the ratio of long-term debt over total debt is associated with a decrease in firms’ performance. We also show that long-term debt financing can lead to a reduction in firms’ performance because it dampens the positive impact of the investment on firms’ performance. Our results are robust when we employ a System Generalized Methods of Moments to deal with endogeneity problems.

scholarly journals Agency Conflicts, Socioemotional Wealth, and the Debt Maturity Structure of Family Firms: A Critical Analysis

2017 ◽  
Vol 9 (9) ◽  
pp. 40
Author(s):  
Oscar Domenichelli
Keyword(s):  
Family Firms ◽  
Family Businesses ◽  
Debt Maturity ◽  
Agency Conflicts ◽  
Minority Shareholders ◽  
Socioemotional Wealth ◽  
Maturity Structure ◽  
International Importance ◽  
Specific Factors ◽  
The Impact

This paper aims to study the impact of the distinctive agency and socioemotional features of family firms on their debt maturity choices using a literature analysis of this topic, still substantially unexplored. Therefore, the paper examines the relationships between owners and managers; majority and minority shareholders, and family shareholders and family outsiders; and owners and creditors. The analysis suggests that the propensity of family businesses to use long-term debt depends on the generation leading the family firm, family blockholders, motivation for expropriating minority shareholders, family outsiders and their socioemotional orientation. Much still remains to be empirically studied. One interesting issue to explore further would be the influence of country-specific factors worldwide, in combination with firm-specific characteristics relating to agency conflicts and socioemotional wealth, on the debt maturity decisions of family firms, compared to non-family ones. Given the international importance of family firms, and their widespread presence and activity worldwide, additional empirical results on this topic may help governments adopt specific policies, that will better support family businesses, in light of their peculiar and unique economic and non-economic aspects.

scholarly journals Debt and financial performance of SMEs: The missing role of debt maturity structure.

2013 ◽  
Vol 10 (3) ◽  
pp. 354-365 ◽  
Author(s):  
Hayam Wahba
Keyword(s):  
Financial Performance ◽  
Opposite Effect ◽  
Debt Maturity ◽  
Random Effects Model ◽  
Short Term ◽  
Debt Maturity Structure ◽  
Maturity Structure ◽  
The Relationship

This paper focuses on an important issue, which has generally received less attention in SMEs literature, being the effect of debt maturity structure on financial performance. The random effects model, as a panel data technique, is used to examine the relationship between debt and various measures of financial performance. The results reveal that it is not the level of leverage that determines financial performance, but rather the debt maturity structure. Specifically, the findings demonstrate that short-term debt and long-term debt have an opposite effect on financial performance and therefore tend to cancel out. This is the first study, to the best of knowledge, which offers empirical evidence regarding debt maturity structure not only in SMEs context, but also from an Egyptian perspective.

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