Working capital allocations and productivity: empirical issues and role of asset utilization

PurposeThe article highlights potential mismeasurement in working capital allocations among academicians and practitioners and revisits the relationship between firms' working capital and productivity, as evident from their values.Design/methodology/approachThe research design acknowledges the relative role of firms' working capital vis-a-vis other assets in generating revenue, thereby effectively accounting for the overall asset efficiency in influencing firm value. The authors use a multivariate framework to draw inferences from the marginal impact of working capital and its components on firm value while controlling for asset utilization.FindingsThe authors find that, after accounting for asset utilization, the marginal impact of working capital and its components on firm value is quite weak. The results are consistent with the hypothesis that firms' trade-off between short-term and long-term assets per se should not have any value implications. After controlling for their asset turnovers, the authors find that higher allocations to working capital relative to other assets are not necessarily value-destructive. The findings contrast with the past literature.Research limitations/implicationsThe article, through its analytical and empirical insights, suggests that working capital allocations should be measured by managers and academicians relative to firms' other asset rather than their sales. Firm values should, therefore, be compared based on firms' overall asset utilization rather than inter-temporal allocations to short-term versus long-term assets.Originality/valueContrary to the existing literature so far, the article explicitly acknowledges the relative role of firms' other assets, and hence the overall asset utilization, to infer the marginal impact of working capital on firm value.

Financial access and the finance–growth nexus: evidence from developing economies

PurposeThis study examines the impact of financial institutions access and financial institutions depth on economic growth in 51 low- and lower–middle-income countries from 1996 to 2017.Design/methodology/approachThe study employs an index of financial institutions depth and financial institutions access that considers the multidimensional nature of finance. The study employs a generalised least squares model as the baseline fixed effects model suffers from serial correlation. In addition, the study examines the marginal impact of financial development on growth at varying levels of financial access.FindingsThe results show that both financial access and financial depth are positive to growth. However, the marginal impact of financial depth is negative at low levels of financial access, while the finance–growth relationship becomes positive at higher levels of financial access. Results suggest the importance of developing inclusive financial systems that emphasise quality rather than quantity to promote economic growth.Research limitations/implicationsThe major limitation lies in the measurement of financial access as it focusses more on financial system penetration and overlooks the other aspects of financial inclusion such as financial literacy and cultural differences.Practical implicationsDeveloping countries should continue to develop an inclusive financial system that supports the Universal Financial Access 2020 initiative.Originality/valueThis study provides further empirical evidence on the finance–growth literature focussing on the impact of financial inclusion which is scarce. Furthermore, the study employs an index of finance that captures the multidimensional nature of finance.

How Industrialization Stage Moderates the Impact of China’s Low-Carbon Pilot Policy?

The goal of China’s low-carbon pilot policy (LCP) is not only to solve the problem of climate change but, more importantly, to achieve the low-carbon transformation of cities. This paper analyzes the industrialization stage’s moderating effect on LCP policy implementation using the difference-in-difference model (DID) with the Low Carbon Development Index (LCDI) as the explained variable. We find that for the low-carbon pilot cities (LCPCs) at the later stage of industrialization, the LCP policy has a positive impact on LCDI, gradually increasing with the study period’s extension. The marginal impact reaches its maximum in the second year after its implementation. For the LCPCs at the middle stage of industrialization, the LCP policy has a weakly negative impact on LCDI. The marginal impact does not change to positive until the fourth year after its implementation. In terms of mechanism analysis, the LCP policy enhances LCDI by slowing down the industrialization process and boosting innovation; the industrialization stage does not constrain the effect. In contrast, the LCP policy’s impact on LCDI by facilitating FDI (Foreign Direct Investment)inflows is strongly influenced by the industrialization stage. For the LCPCs at the later stage of industrialization, the LCP policy can enhance LCDI through FDI. For the LCPCs at the middle stage of industrialization, the LCP policy reduces the inflow of FDI, and the positive effect of FDI on LCDI does not pass the significance test. Thus, this paper argues that a one-size-fits-all strategy to policy implementation should be avoided. Instead, the industrialization stage should be considered a criterion for city classification, and a differentiated target responsibility assessment mechanism should be adopted according to local conditions.

Overreaction in the REITs Market: New Evidence from Quantile Autoregression Approach

Real estate investment trusts (REITs) provide portfolio diversification and tax benefits, a stable stream of income, and inflation hedging to investors. This study employs a quantile autoregression model to investigate the dependence structures of REITs’ returns across quantiles and return frequencies. This approach permits investigation of the marginal and aggregate effects of the sign and size of returns, business cycles, volatility, and REIT eras on the dependence structure of daily, weekly, and monthly REIT returns. The study documents asymmetric and misaligned dependence patterns. A bad market state is characterized by either positive or weakly negative dependence, while a good market state is generally marked by negative dependence on past returns. The results are consistent with under-reaction to good news in a bad state and overreaction to bad news in a good state. Past negative returns increase and decrease the predictability of REIT returns at lower and upper quantiles, respectively. Extreme positive returns in the lower (upper) quantiles dampen (amplify) autocorrelation of daily, weekly, and monthly REIT returns. The previous day’s REIT returns dampen autoregression more during recession periods than during non-recession periods. The marginal impact of the high volatility of daily returns supports a positive feedback trading strategy. The marginal impact of the Vintage REIT era on monthly return autocorrelation is higher than the New REIT era, suggesting that increased participation of retail and institutional investors improves market efficiency by reducing REITs’ returns predictability. Overall, the evidence supports the time-varying efficiency of the REITs markets and adaptive market hypothesis. The predictability of REIT returns is driven by the state of the market, sign, size, volatility, and frequency of returns. The results have implications for trading strategies, policies for the real estate securitization process, and investment decisions.

The influence of signal attributes on the willingness to pay for pasture-raised beef

Purpose This study aims to identify the marginal impact of introducing a signal attribute of pasture-raised beef on consumer willingness to pay (WTP) for other independent attributes. Design/methodology/approach The study is divided into two steps. The first, qualitative, consisted of investigating the values consumers have regarding beef production. To this end, 52 interviews with Brazilian and US consumers were conducted using laddering. In the second, quantitative, six experiments, (face to face and online) with 267 consumers of beef were performed. Findings As a result, the main value found for the Brazilians was security, while for the Americans was self-direction. For consumers, the WTP for animal welfare was the most important in the choice experiments where this information was present. Originality/value These findings offer an alternate beef differentiation, enabling it to be sold with higher added value by integrating these.

Marginal Impacts of Park-and-Ride Facilities in the Twin Cities Region of the US

Understanding the marginal impacts of park-and-ride (P&R) transit facilities can help in planning an efficient transit system. However, these marginal impacts are not well established in a U.S. context. This study helps to fill this gap using a survey of P&R users from the Twin Cities region in which the questions were specifically designed to determine how respondents would react to the removal of a P&R facility. The responses allow for an estimation of the net (or marginal) impact on ridership and vehicle miles traveled (VMT) directly attributable to the presence of P&R facilities. Over 80% of the surveyed P&R users would only use transit if they had access to a P&R facility. They would generate an average of 19 additional VMT per round trip without a P&R option. If access to their current P&R facility was removed but they were given the option to choose an alternative facility, the respondents who would quit using transit dropped to 32% with an average of 10 additional VMT generated, although these numbers vary to some degree when broken down by specific P&R facilities.