FOREIGN FINANCING, EXCHANGE RATE EXPOSURES AND CORPORATE INVESTMENT IN SINGAPORE

We study the effect of exchange rate fluctuations on foreign corporate investment flows to Singaporean firms using a linear reduced-form empirical specification on data from the past decade. Overall, we find that the cost of debt capital falls on average when the Singapore dollar depreciates. Isolating the effect of exchange rates on US-denominated debt vis-a-vis interest rates and yield curve variables shows that an increase in the cost of foreign debt capital through exchange rate changes leads to lower investment, albeit only slightly and an order of magnitude less important than short-term government bond yields.

Prediksi Kebangkrutan Pada Perusahaan Yang Terdaftar Di Bursa Efek Indonesia

This study aims to examine the potential for bankruptcy of companies with three analytical models, namely Altman Z-Score, Springate S-Score, and Zmijewski X-Score, and assess the level of accuracy of the three models. Each model uses ratio analysis with the elements of assets, debt, capital, and company profits. This study uses a sample of coal mining companies listed on the Indonesia Stock Exchange (IDX) during the 2014-2018 period. The sampling technique in this study used purposive sampling and obtained 24 sample companies. This study uses secondary data, namely the company's financial statements obtained from IDX's official website. This study calculates financial ratios, compares the scores of the three bankruptcy prediction models, and tests the model's accuracy. The results of this study show that of the three models, the Springate S-Score model is the most accurate in predicting bankruptcy, with an accuracy rate of 83.33%, as evidenced by two companies that were delisted from the IDX. This study can be used as a reference and as material for consideration in making investment decisions for companies and investors.

Will the Reduction of CO2 Emissions Lower the Cost of Debt Financing? The Case of EU Countries

The main objective of this article is to test the relationship between the intensity of CO2 emissions and company’s cost of debt capital. This study fills a gap in the financial literature on this compound by examining a sample of 225 large nonfinancial enterprises operating in 15 EU countries in the years 2018–2021. The fractional logit regression controlling for company’s characteristics (assets, profitability, liquidity and leverage) was used. The results show that by reducing the intensity of CO2 emissions, a company can reduce the cost of debt. This relationship was confirmed for three measures of intensity, i.e., CO2 emissions in relation to revenues, assets and number of employees. Markets and financial institutions impose an additional risk premium in relation to companies operating in an industry considered to be comprised of strong CO2 emitters. The use of the latest data for a wide sample of European enterprises provides an up-to-date assessment of the analyzed issues and the results can be used by enterprises and public authorities when analyzing the benefits of implementing a technology that reduces CO2 emissions.

Does Real Earnings Management Explain Cost of Debt? Evidence from an Emerging Economy

This study tested the relationship between real earnings management and debt cost in Vietnam, a developing market. We used the Generalized Method of Moments (GMM) Technique on a sample of 241 listed firms in Vietnam for 7 years from 2010 to 2016, with a total of 1687 observations collected. The regression result showed a positive association between real earnings management and cost of debt. The results of the study revealed that real earnings management is shown through the rising transactions and directly affected financial reports, thereby affecting creditors by affecting their cost of debt. This can be seen as the driving force for listed companies to increase the quality of their financial information. Our study only focussed on earnings manipulation through real earnings management (REM) to affect transaction costs in Vietnam. The research explains the relationship between managerial behavior (real earnings management) and direct influence on creditors' behavior (cost of debt capital). The result would give outside stakeholders an overall view about the usage of REM in Vietnamese listed firms, the reasonable action of investors, financial institutions, banks, etc on the debt market to reduce risk and the signal of warning for regulators and policy-makers. Keywords: real activities earnings management, cost of debt capital

Policy Forum: In Defence of the First Nations Fiscal Management Act

The debate with respect to the recognition of Indigenous rights, title, and jurisdiction has largely been won. It has now moved to how best to implement those rights, title, and inherent jurisdictions. For Indigenous taxation jurisdiction, implementation must address challenges related to taxpayer representation, concurrent jurisdiction, service agreements with other governments, administrative capacity, financial management, and access to public debt capital at competitive rates. In this article, the author argues that the First Nations Fiscal Management Act (FMA) has been successful in overcoming these challenges. The FMA has protected and expanded Indigenous tax jurisdiction through standards and institutional support. As a result, it represents an effective path for interested Indigenous governments "to exercise [their] inherently governmental power of taxation" affirmed by the Supreme Court of Canada in <i>Matsqui Indian Band</i>, and to expand their use of that power.

DETERMINANTS OF INTEREST RATES ON CORPORATE DEBT

The objective of this article is theoretical and methodological justifying of determining algorithm of the cost of debt capital for enterprises functioning in emerging markets (EM). The methods of research: analysis and synthesis, system analysis, comparative analysis, empirical and statistical methods, factor analysis. Results. In this article key determinants of interest rates on debt capital for enterprises and their impact on the procedure of discount rate calculation are determined. The issue of the cost of debt calculation of enterprises in condition of absence of complete information concerning systematic and non-systematic crediting risks is studied. Differences between interest rate on the loan fixed in credit agreement and expected by creditors the cost of debt are identified. It is determined that the key factor impacting the deviation level of market value of debt capital from the nominal, and respectively, deviation of the cost of debt from the cost of capital is probability of default (PD). At the minimum values of PD, the contract interest rate corresponds to the rate of cost of debt and it is advisable to use it for discount rate calculation. Critical analysis of alternative methodological approaches of the cost of debt calculation is made. Ways of integrating of market information concerning credit default swaps into the process of expected cost of debt calculation are justified. Factors of shadowing of rates of the cost of debt and ways of reducing of shadow transactions’ level in the credit market are identified. Conclusions. At high PD values, expected by market premium for default risk may exceed the contract interest rate, which necessitates constant monitoring of credit risks and appropriate adaptation of interest rates. In the paper the algorithm of such adaptation are proposed. It is shown that in the case of non-use of interest rates adjustment taking into account changes in PD, CDS and LGD, premium for creditors’ systematic risk can differ significantly from market values of similar enterprises (peer-group), and estimated value of the cost of debt can acquire negative values. Contract (promised) interest rate should be set in such way that the premium for systematic risk of providing debt capital will be at the level of similar companies and does not change significantly as a result of probability of default changes. If in practice the opposite situation occurs, it is the evidence of contract interest rate shadowing, absence of effective system of assessment and management of credit risks. For solving the problem of interest rate transparency and filling of information gaps concerning PD borrowers in EM countries, should intensify CDS market. Keywords: debt capital, default probability, non-performing loans, credit default swap, credit spread, debt capital premium, shadow economy. JEL Classification E47 Formulas: 16; fig.: 0; tabl.: 3; bibl.: 15.

R&D Investments, Debt Capital, and Ownership Concentration: A Three-Way Interaction and Lag Effects on Firm Performance in China's Pharmaceutical Industry

The existing literature has yet to provide consistent evidence on the relationship between R&amp;D investments and firm performance. The current study attempted to fill this gap in the literature by examining the effect of lag structure and the moderating role of financial governance, in terms of debt capital and ownership concentration, on the returns of R&amp;D. Analyzing a sample of China's pharmaceutical firms from 2009 to 2018, we found that the effect of R&amp;D upon growth begins in the second year after R&amp;D spending and increases thereafter. There exists a vigorous debate about the choice between debt and ownership structure. To fill this gap, we proposed a three-way interactive effect. The results suggest that firms that invest heavily in R&amp;D may achieve their highest performance when the use of debt capital and the extent of ownership concentration are both low. This study contributes to the R&amp;D investments and financial governance literature by reconciling previous mixed evidence about the returns of R&amp;D and the debt–equity choices on R&amp;D investment decisions.

Asset of the Future - Comprehensive Business Transformation Program

In the recent years the oil and gas industry has started facing an unprecedented number of challenges. The average return on capital in the industry has deteriorated which results in investor mistrust and costs being higher than ever. Debt capital became two times costlier than for alterative types of energy. More conventional oilfields become depleted and new reserves are usually quite complex to develop. These and other challenges such as intense competition between oil and gas companies, the energy transition agenda as well as the volatility of oil prices in the aftermath of the pandemic are pushing the O&G companies to transform themselves. Gazprom Neft introduced the "Asset of the Future" program in late 2018 as a timely response which was aimed at completely transforming the Upstream business model. The main issue with the transformation was the scale of it, which included 10 subsidiaries (or subs) and more than 200 different processes. In this case traditional approaches such as improving each operation one by one would not suffice as the company sought a rapid and highly efficient implementation of changes. As such the program had to develop a new approach that focused on the integration of all business parts and continuous improvement. Integration of people, technology and processes will lead to better collaboration and as a result - to smarter decisions and better execution.

PANDEMI COVID-19: LEBIH BAIK MENAMBAH UTANG ATAU EKUITAS?

ABSTRACTCovid-19 Pandemic has caused massive changes. Lockdown policy set by the government to suppress the rate of transmission of the virus has had huge impact on the economy. Many companies must suffer losses, even have to declare bankruptcy. Operational activities had been limited that caused the company no longer being able to rely on internal funding to finance its business. The company is faced with a choice of external funding decisions, that is increasing debt (on liability side) or issue shares (on the equity side). This study aims to examine the effect of capital structure during the pandemic on financial performance. This research conducted on 121 companies from consumer non-cyclicals, transportation & logistic, and banking sector listed on Indonesia Stock Exchange. The results show that during the pandemic companies tend to prefer to increase debt than equity. Further testing shows that the companies with dominant debt capital structure have positive effect on financial performance. Meanwhile, the companies with a dominant equity capital structure have no significant effect.Keywords: debt, equity, financial performance, pandemicABSTRAKPandemi Covid-19 menyebabkan perubahan yang sangat masif. Kebijakan lockdown yang dilakukan oleh pemerintah untuk menekan laju penularan virus memberikan dampak yang sangat besar bagi perekonomian. Banyak perusahaan yang harus mengalami kerugian, bahkan harus mengumumkan kebangkrutan. Kegiatan operasional perusahaan yang terbatas mengakibatkan perusahaan tidak lagi dapat mengandalkan pendanaan internal untuk membiayai usahanya. Perusahaan dihadapkan pilihan keputusan pendanaan eksternal, yaitu menambah utang (di sisi liabilitas) atau menerbitkan saham (di sisi ekuitas). Penelitian ini bertujuan untuk menguji pengaruh struktur modal di masa pandemi terhadap kinerja keuangan. Pengujian dilakukan ke 121 perusahaan dari perusahaan sektor barang konsumen non-primer, transport dan logistik, dan perbankan yang terdaftar di Bursa Efek Indonesia. Hasil penelitian menunjukkan bahwa di masa pandemi, perusahaan cenderung lebih memilih menambah utang dibandingkan ekuitas. Pengujian lebih lanjut menunjukkan bahwa sampel perusahaan dengan struktur modal dominan utang menunjukkan hasil berpengaruh positif pada kinerja keuangan. Sedangkan pada sampel perusahaan dengan struktur modal dominan ekuitas menunjukkan hasil tidak signifikan.Kata kunci: ekuitas, kinerja keuangan, pandemi, utang