Short term and long term cash flow volatility and stock return: Empirical evidence from Iran

2011 ◽  
Vol 5 (30) ◽  
Author(s):  
Feraydoon Rahnamay Roodposhti
Keyword(s):  
Empirical Evidence ◽  
Cash Flow ◽  
Stock Return ◽  
Short Term ◽  
Cash Flow Volatility

ANALISIS PENGARUH NILAI SAHAM YANG BEREDAR, STRUKTUR MODAL, RISIKO PASAR, DAN SUKU BUNGA TERHAD AP RETITRN SAHAM DI BEJ DENGAN PENDEKATAN MODEL DINAMIS (Studi Kasus Pada Sektor Aneka lndustri Tahun 1996-2002)

2005 ◽  
Vol 1 (1) ◽  
pp. 20
Author(s):  
Ari Christianti ◽  
Murti Lestari
Keyword(s):  
Capital Structure ◽  
Dynamic Model ◽  
Stock Return ◽  
Negative Impact ◽  
Short Term ◽  
Correction Model ◽  
Industry Sector ◽  
The Interest Rate ◽  
Model Approach

The study aims at empirically proving and analyzing the balance model of Capital Asset Pricing Model (CAPM with the multifactor of risks, consisting of: outstanding stocks value, capital structure represented by Debt EquiQ Ratio (DER), market risk as represented by stock market beta, and the interest rate on company return on stock.This research uses a dynamic model approach considering the existence of the weaknessesin a classic linear model. Since the investment is related to investors behavior that need a lag to market change, the use of the dynamic model approach will be better. It is because the dynamic model uses autoregressive approach containing the lag. The dynamic model used here is Partial Adjustment Model (PAM) and Error Correction Model (ECM).  Based on the estimation of the PAM model it is proven that the model is inefficient in finding the evidence confirming the hypothesis. Subsequently,based on the result of the examination of the ECM model it isconcluded that outstanding stocks value has a positive and signiJicant impact in short term and a negative impact in long term. It means that in the short term outstanding stocks value serves as the consideration for investors in making an investment. However in the long term they are likely to believe that the use of smaller internal capital proportion will be more beneficial for them. The capital structure has only a longierm impact on the return on stock. It means that the impact of DER on stock return on miscellaneous industry sector needs the quite long lag to influence the investors in determining stocks return. It indicates that in the long term they believ:e that the use of increasing number of loan will causes the decrease in company liquidity. Consequently, the opportunity for the company to go bankrupt is bigger Beta stock in the study has a negative impact in the long term. Theoretically, it is not consistent with the parameter direction and indicated that beta stock does notserve as an app;r,pviate prory in measuring the rislcs on. miscellaneous industry sector The interest rate has in the long term a negative impact on stocks return and needs the long lag to influence the investors in determining the return on stocks.Keywords: Stock return, outstanding stock value, DER (Debt Equity Ratio), beta, interest rote, ECM (Eruor Correction Model)

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.

scholarly journals Capital structure: Empirical evidences of public and non-public firms in Brazil

2015 ◽  
Vol 12 (3) ◽  
pp. 223-232
Author(s):  
Gabriel Hideo Sakai de Macedo ◽  
Joelson Oliveira Sampaio ◽  
Eduardo Flores ◽  
Pedro Luiz Aprigio
Keyword(s):  
Capital Structure ◽  
Cash Flow ◽  
Stock Exchange ◽  
Credit Market ◽  
Convertible Debt ◽  
Short Term ◽  
Private Companies ◽  
Public Companies ◽  
Public Firms

This study seek to contribute to the literature through research focused on companies listed and not listed on the stock exchange. A survey was used to identify the capital structure of Brazilian companies and relate the results to the Brazilian credit market. The results indicate that most of the investigated companies prefer not to issue convertible debt, as well as the share of firms issuing common shares was small. It was found that firms do not have preference between long-term and short-term debt. Finally, it was also noted that private companies have great concern about the volatility of earnings and cash flow. The differential of this research was to analyze the practices adopted by both public companies and privately held

Extrapolation Bias and Robust Dynamic Liquidity Management

2021 ◽  
Author(s):  
Seokwoo Lee ◽  
Alejandro Rivera
Keyword(s):  
Cash Flow ◽  
Ambiguity Aversion ◽  
Cash Flows ◽  
Risk Models ◽  
Worst Case ◽  
Liquidity Management ◽  
Optimal Dynamic ◽  
Cash Flow Volatility ◽  
Future Cash Flows

We consider the optimal dynamic liquidity management of a financially constrained firm when its existing shareholders are risk neutral but ambiguity averse with respect to the firm’s future cash flows. The shareholders’ ambiguity aversion generates endogenous time-varying worst-case beliefs that overweight recent cash flow realizations, thereby providing a microeconomic foundation for extrapolation bias. Moreover, shareholders’ ambiguity aversion has different implications on firms’ liquidity management and recapitalization policies than risk. Models with risk alone imply that higher cash flow volatility increases firms’ payout and refinancing thresholds. By contrast, our model predicts that, when ambiguity-averse shareholders face a higher long-term cash flow uncertainty, they optimally reduce firms’ payout and refinancing thresholds. The implications for investment are also studied. This paper was accepted by Agostino Capponi, finance.

scholarly journals Management Strategies for Bank’s Liquidity Risk

2017 ◽  
Vol 9 (6) ◽  
pp. 98
Author(s):  
Sviatlana Hlebik ◽  
Lara Ghillani
Keyword(s):  
Risk Management ◽  
Financial Markets ◽  
Cash Flow ◽  
Management Strategies ◽  
Liquidity Risk ◽  
Major Focus ◽  
Single Institution ◽  
Short Term ◽  
Bank Managers

Liquidity risk management is today a major focus for regulators, due to increasing complexity of financial markets and concerns related to inadequate identification and managing liquidity risk, exacerbated by the financial crisis. Because the financial market is increasingly interconnected, a liquidity shortfall at a single institution can have system-wide consequences.This paper aims to provide analytical explanations of how important decisions made by bank managers can influence the capability of an institution to finance increases in assets and meet their commitments without impairing cash flow. Banks are particularly susceptible to liquidity risk because the maturity transformation from short-term deposits into long-term loans is one of their key business activity. Further, there can be uncertainties in cash-flow in the external occurrences and agents' behavior. Skillful liquidity risk management is essential, and the present work analyses impact of some management strategies on Basel III liquidity ratios.

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 KENDALA KEUANGAN DAN SALING KETERGANTUNGAN DALAM KEPUTUSAN KEUANGAN PADA SEKTOR CONSUMER GOODS DI INDONESIA

2020 ◽  
Vol 4 (2) ◽  
pp. 216
Author(s):  
Maya Novethesia ◽  
Ricky Sanjaya ◽  
Farah Margaretha
Keyword(s):  
Cash Flow ◽  
Consumer Goods ◽  
Stock Exchange ◽  
Least Square ◽  
Short Term ◽  
Purposive Sampling ◽  
Financial Decisions ◽  
Independent Variables ◽  
Short And Long Term

Penelitian ini dilakukan untuk menguji kendala keuangan dan saling ketergantungan dalam keputusan keuangan. Sampel yang digunakan dalam penelitian ini adalah perusahaan pada sektor consumer goods yang go public dan terdaftar di Bursa Efek Indonesia (BEI) periode 2014-2018. Terdapat 24 perusahaan swasta yang dapat diteliti setelah dilakukan purposive sampling. Arus kas sebagai variabel dependen yang diukur dengan pengeluaran modal, perubahan kas, dividen, perubahan hutang jangka pendek dan panjang dan total aset. Investasi, kas, dan hutang sebagai variabel independen yang diukur menggunakan aktiva tetap bersih, kas, hutang jangka pendek dan panjang, perubahan dalam modal kerja, dividen, nilai pasar dan total aset. Sedangkan arus kas perusahaan dan resiko operasional perusahaan sebagai variabel moderasi. Penelitian ini menggunakan metode least square dan uji individu (uji-t). Hasil penelitian ini menunjukkan bahwa investasi, kas, dan hutang berpengaruh positif terhadap arus kas perusahaan. Implikasi dari penelitian ini bagi manajer keuangan agar perlu memperhatikan jumlah hutang perusahaan karena sangat berpengaruh terhadap arus kas perusahaan. Bagi peneliti selanjutnya sebaiknya menggunakan perusahaan pada sektor lain.  This research was conducted to support finance and interdependence in financial decisions. The sample used in this study was companies in the consumer goods sector that went public and were listed on the Indonesia Stock Exchange (IDX) for the 2014-2018 period. There are 24 companies that can be issued after purposive sampling. Cash flow as the dependent variable needed with capital, cash changes, dividends, short-term loans and total assets. Investment, cash, and debt as independent variables using fixed bonds, cash, short and long term loans, changes in working capital, dividends, market value and total assets. While the company's cash flow and company operational risk as a moderating variable. This research uses the quadratic method and individual test (t-test). The results of this study prove that investment, cash, and loans are positive towards the company's cash flow. The implications of this study for financial managers need to be considered by the number of companies because they need to be considered for the company's cash flow. For further researchers need to use companies in other sectors.

scholarly journals ANALISIS PENERAPAN AKUNTANSI PADA USAHA EKONOMI DESA SIMPAN PINJAM (UED-SP) PERMAI DESA SUNGAI CINGAM KECAMATAN RUPAT KABUPATEN BENGKALIS

2016 ◽  
Vol 4 (1) ◽  
pp. 20
Author(s):  
Hazima Hazima ◽  
Rosmida Rosmida ◽  
Wan Junita Raflah
Keyword(s):  
Service Life ◽  
Cash Flow ◽  
Secondary Data ◽  
Financial Statements ◽  
Short Term ◽  
Generally Accepted Accounting Principles ◽  
Accounting Principles ◽  
Fixed Assets

Abstract: This  research  was  conducted  in  UED-SP  Permai  Sungai  Cingam Rupat, District of Bengkalis. The purpose of this study was to determine whether the accounting has been applied in UED-SP Permai Sungai Cingam Rupat, District of Bengkalis in accordance with the Generally Accepted Accounting Principles (GAAP). Data of study consisted of primary and secondary data. Based on the research and discussion conducted found some problems such as is not classify assets into current assets and fixed assets, does not classify debts into long-term debt and short-term debt and in calculating the inventory usage is not  in   accordance  with   the  service  life  should   be.   In   the  process   of implementation of the financial statements UED-SP Permai Sungai Cingam Rupat, District of Bengkalis is not follow all the Accounting Cycle, UED-SP Permai is not present Statement of Changes in Equity, Statement of Cash Flow, and Notes to Financial Statements. The results of research conducted on Usaha Ekonomi Desa-Simpan Pinjam (UED-SP) Permai can be concluded that the accounting is not applied on the whole in accordance with the Generally Accepted Accounting Principles (GAAP). Keywords: Financial Statements, UED-SP Sungai Cingam

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