How do Spanish unlisted family firms rebalance their capital structures?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Zélia Serrasqueiro ◽  
Fernanda Matias ◽  
Julio Diéguez-Soto
Keyword(s):  
Capital Structure ◽  
Transaction Costs ◽  
Family Firms ◽  
Adjustment Costs ◽  
Dynamic Panel Data ◽  
Future Research ◽  
Short Term ◽  
Content Type ◽  
Speed Of Adjustment

PurposeThis paper seeks to analyze the family firm's capital structure decisions, focusing on the speed of adjustment (SOA) as well as on the effect of distance from the target capital structure on the SOA towards target short-term and long-term debt ratios in unlisted small and medium-sized family firms.Design/methodology/approachMethodologically, we use dynamic panel data estimators to estimate the effects of distance on the speeds of adjustment towards those targets. Data for the period 2006–2014 were collected for two research sub-samples: one sub-sample with 398 family firms; the other sub-sample contains 217 non-family firms.FindingsThe results show that the deviation from the target debt ratios impacts negatively on the speeds of adjustment towards target short-term and long-term debt ratios in unlisted family firms. These results suggest that family firms, deviating from target debt ratios, face deviation costs, i.e. insolvency costs, inferior to the adjustment costs, i.e. transaction costs. Therefore, family firms stay away from the target debt ratios for a long time than do non-family firms.Research limitations/implicationsThe research sample comprises a low number of family firms, therefore for future research we suggest increasing the size of the sample of family firms to get a deeper understanding of family firms' SOA towards capital structure. Additionally, we suggest the analysis of other potential determinants of the speed of adjustment towards target capital structure.Practical implicationsThe results obtained suggest that the distance from the target short-term and long-term debt ratios can be avoided if these firms do not depend almost exclusively on internal finance to adjust towards target capital structure. Moreover, for policymakers, we suggest the creation/promotion of alternative external finance sources, allowing reduced transaction costs that contribute to a faster adjustment of small family firms towards target capital structure.Originality/valueThe most previous research focusing on capital structure decisions have focused on listed family firms. To fill this gap, this study examines the speed of adjustment towards target debt ratios in the context of unlisted family firms. Moreover, transaction costs are a function of debt maturity, therefore this study examines separately the speeds of adjustment towards target short-term and long-term debt ratios. This paper shows that the adjustment costs (i.e. transaction costs) could hold back family firms from rebalancing its capital structure.

Mean reverting leverage policy in China: theory and evidence from industrial and sectorial level unit root analysis

2018 ◽  
Vol 12 (3) ◽  
pp. 290-306 ◽  
Author(s):  
Ajid ur Rehman
Keyword(s):  
Capital Structure ◽  
Unit Root ◽  
Unit Root Test ◽  
Target Level ◽  
Short Term ◽  
Chinese Firms ◽  
Content Type ◽  
Leverage Ratio ◽  
Stationary Behavior

Purpose This study aims to apply unit root test to investigate the behavior of Chinese firms toward their leverage policy. The study is based on two influential and competing theories of capital structure. Design/methodology/approach This study applies unit root test to investigate the behavior of Chinese firms toward their leverage policy. The study is based on two influential and competing theories of capital structure. Trade off theory advocates that firms have a target level of leverage ratio and that firms try to achieve that optimal leverage ratio, whereas pecking order theory argues that firms have no target level of leverage and that they follow a specific pattern of leverage. For this purpose, this study applies a Fisher type unit root test to 12,808 firm level observations. The data are unbalanced and cover a period from 1991 to 2014. Findings The results reveal the presence of a stationary behavior across short-term, long-term and total leverage policies. For short-term leverage policy, 21 per cent firms show stationary behavior, while for long-term, 20 per cent show a targeting behavior; for the total leverage policy 17 per cent of firms are found to follow a tradeoff model. To make the findings more interesting sample was further classified into profit and loss making firms. The study finds that loss making firms do not follow a target level of leverage in China. Furthermore, unit root is applied to all firms before and after crises-2008. It is revealed that stationary behavior is more prevalent before crises-2008. Originality/value This study is highly important from the point of view that it quantifies firms into distinct categories of following specific model of capital structure. To the best of the author’s knowledge, the findings of this study add to current research knowledge about Chinese firms with respect to adjustment behavior toward a target capital structure.

scholarly journals All insects are equal, but some insects are more equal than others

2018 ◽  
Vol 120 (4) ◽  
pp. 852-863 ◽  
Author(s):  
Arnout R.H. Fischer ◽  
L.P.A. (Bea) Steenbekkers
Keyword(s):  
Design Methodology ◽  
Prior Experience ◽  
Future Research ◽  
Valuable Contribution ◽  
Short Term ◽  
Content Type ◽  
Quasi Experimental ◽  
Insects As Food ◽  
Practical Implications

Purpose Lack of acceptance of insects as food is considered a barrier against societal adoption of the potentially valuable contribution of insects to human foods. An underlying barrier may be that insects are lumped together as one group, while consumers typically try specific insects. The purpose of this paper is to investigate the ways in which Dutch consumers, with and without insect tasting experience, are more or less willing to eat different insects. Design/methodology/approach In a quasi-experimental study (n=140), the participants with and without prior experience in eating insects were asked to give their willingness to eat a range of insects, and their attitudes and disgust towards eating insects. Findings Insects promoted in the market were more preferred than the less marketed insects, and a subgroup of preferred insects for participants with experience in eating insects was formed. Research limitations/implications Although well-known insects were more preferred, general willingness to eat remained low for all participants. The results indicate that in future research on insects as food the specific insects used should be taken into account. Practical implications Continued promotion of specific, carefully targeted, insects may not lead to short-term uptake of insects as food, but may contribute to willingness to eat insects as human food in the long term. Originality/value The paper shows substantial differences between consumers who have and who have not previously tasted insects, with higher acceptance of people with experience in tasting insects for the specific insects that are frequently promoted beyond their generally more positive attitude towards eating insects.

scholarly journals Capital structure, stock exchanges in Chile: 2007 to 2016

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Marcelo Rabelo Henrique ◽  
Sandro Braz Silva ◽  
Antonio Saporito
Keyword(s):  
Capital Structure ◽  
Pearson Correlation ◽  
Descriptive Analysis ◽  
Explanatory Power ◽  
Order Theory ◽  
Future Research ◽  
Pecking Order Theory ◽  
Content Type ◽  
The Capital Structure

PurposeThe article consists of analyzing the behavior of the determinants of the capital structure of Chilean companies between 2007 and 2016. The objective of this study was achieved through a typology of research based on bibliographic, documentary, exploratory and explanatory, considering annual financial reports from Economática in the chosen period.Design/methodology/approachAs this is a research study with a quantitative approach, the statistical tools used were descriptive analysis, Pearson correlation, variance inflation factor (VIF) and panel regression.FindingsThe results show that Chilean companies (240) have higher and costly long-term debt. These companies have high averages in current liquidity, return to shareholders, growth in sales and assets and market-to-book (MTB). Long-term debt was highlighted with an explanatory power of 85%. Current liquidity was highlighted as being significant in most of the indebtedness proposed in the survey, failing to register brands like this in expensive short-term and long-term indebtedness. It is noticed that flip flops companies are more prone to the pecking order theory (POT). The gap occupied by this study is linked to research involving South American countries, especially the Chilean market, and the determinants of the capital structure.Originality/valueAs future research, it is suggested to include other types of variables related to indebtedness and the same action for its determinants, in addition to the speed technique of adjusting corporate debts.

Re-examining the determinants of capital structure in Nigeria

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Segun Thompson Bolarinwa ◽  
Abiodun Adewale Adegboye
Keyword(s):  
Capital Structure ◽  
Design Methodology ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Short Term ◽  
Content Type ◽  
Frontier Analysis ◽  
Speed Of Adjustment ◽  
Dea Method ◽  
Difference Gmm

PurposeThe paper investigates the determinants of capital structure and the speed of adjustment of capital structure decisions of Nigerian firms.Design/methodology/approachThe paper adopts three methods: difference GMM, system GMM and stochastic frontier analysis (SFA).FindingsThe empirical results show that firms' efficiency affects the capital structure decisions of Nigerian firms. At the same time, short-term debt has a higher speed of adjustment in the context of Nigerian firms. The roles of other control variables are established in the paper.Social implicationsNigerian firms should adopt short-term debt in order to achieve their targeted debt levels. Managers of Nigerian firms are also advised to be more efficient in order to attract higher performance.Originality/valueThe paper is the first literature to measure the efficiency of firms using SFA method. Extant studies in the literature have neglected the determinant while four papers that adopt the determinant data envelope analysis (DEA) method. This is also the first study to document the speed of adjustment in capital structure decisions in the context of Nigerian firms.

Capital structure dynamics of Indian corporates

2019 ◽  
Vol 17 (2) ◽  
pp. 212-225
Author(s):  
Neelam Rani ◽  
Surendra S. Yadav ◽  
Naliniprava Tripathy
Keyword(s):  
Capital Structure ◽  
Generalized Method Of Moments ◽  
Adjustment Costs ◽  
Least Square ◽  
Future Research ◽  
Adjustment Process ◽  
Macroeconomic Factors ◽  
Content Type ◽  
Adjustment Speed ◽  
The Capital Structure

Purpose The purpose of this paper is to examine the capital structure determinants and speed of adjustment (SOA) toward the target capital structure of firms. Design/methodology/approach The study has used the generalized method of moments (GMM) model and two-stage least squares (TSLS) to the panel data of 3,310 Indian firms, from January 2000 to March 2018, to determine the adjustment speed toward target capital structure. Further, the study employed a fully modified ordinary least square technique to shed light on the dynamic nature of the adjustment process. Findings The results of the GMM estimations indicate that Indian firms are adjusting their capital structure toward the target rate of 10.38 percent per year. Similarly, the findings of TSLS estimate specify a SOA of 15.49 percent per year. The low adjustment speed suggests the prevalence of higher adjustment costs of Indian firms. Research limitations/implications Future research can be undertaken by including certain macroeconomic factors such as GDP, inflation and the interest rate, which also affect the SOA since firms are pretentious by market conditions while designing capital structure for firms. Practical implications In the current financial and regulatory set-up when there are frequent perturbations in the capital market, the study will be valuable for regulators, firms and academicians. The work would enable the concerned stakeholders to manage their scare resources and capital effectively by a better way to make informed decisions. It will facilitate managers of young companies to identify and regulate the factors that are more pertinent for them to make flexible financial decisions concerning the capital structure. Originality/value The study amplifies on previous studies and provides new insights on the speed of the adjustment process of Indian firms, helping to modify and refine their capital structures toward the optimum capital structure. This will not only enhance the financial flexibility in the capital structure of Indian corporates but also be of great value to the policymakers and other stakeholders.

Formal accounting planning in SMEs

2016 ◽  
Vol 23 (3) ◽  
pp. 691-702 ◽  
Author(s):  
Joachim Samuelsson ◽  
Jim Andersén ◽  
Torbjörn Ljungkvist ◽  
Christian Jansson
Keyword(s):  
Family Business ◽  
Entrepreneurial Orientation ◽  
Multivariate Regression ◽  
Family Firms ◽  
Management Accounting ◽  
Multivariate Regression Analysis ◽  
Family Ownership ◽  
Short Term ◽  
Content Type

Purpose – Several studies have highlighted the importance of management accounting practices such as formal short-term planning and formal long-term planning for SME performance. However, few studies have considered what actually explains differences in the use of formal planning (from a management accounting approach) in SMEs. Family ownership and EO are two plausible explanations for such differences. The purpose of this paper is therefore to examine how family ownership and EO are correlated to the use of formal short-term planning and formal long-term planning in SMEs. Design/methodology/approach – In this study, the authors examined how family ownership and entrepreneurial orientation (EO) affect the use of formal planning by analyzing a sample of 156 Swedish manufacturing SMEs, using multivariate regression analysis. Findings – As could be expected, the authors were able to validate the notion that family firms use less formal planning than non-family firms. However, in contrast to some previous studies, the authors found that there is a strongly positive relationship between EO and the use of formal short-term planning and long-term planning. Originality/value – Whereas many previous studies on family business have assumed that family firms use less formal planning than non-family firms, the present study is one of few to actually confirm this notion. Also, this study has provided strong evidence that EO is positively correlated to the use of formal planning, in the short term and in the longer term.

Factors affecting financial leveraging for BSE listed real estate development companies in India

2018 ◽  
Vol 23 (3) ◽  
pp. 274-294
Author(s):  
Rakesh Kumar Sharma
Keyword(s):  
Real Estate ◽  
Capital Structure ◽  
Short Term ◽  
Firm Level ◽  
Content Type ◽  
Factors Affecting ◽  
Tax Shield ◽  
Total Debt ◽  
Real Estate Sector

PurposeThe real estate sector in India has assumed growing importance with the liberalisation of the economy. Developments in the real estate sector are being influenced by the developments in the retail, hospitality and entertainment (e.g. hotels, resorts and cinema theatres) segment, economic services (e.g. hospitals, schools) and information technology-enabled services (such as call centres), and vice versa. This paper aims to study the determinants of capital structure by taking into account 125 major Bombay Stock Exchange (BSE) listed real estate companies selected on the basis of their market capitalisation.Design/methodology/approachTo discover what determines capital structure, nine firm level explanatory variables (profitability-EBIT margin, return on assets, earnings volatility, non-debt tax shield, tangibility, size, growth, age debt service ratio and tax shield) were selected and regressed against the appropriate capital structure measures, namely, total debt to total assets, long-term debts to total assets, short-term debts to total assets, total liabilities to total liabilities plus equity, total debt to capital used and total debt to total liabilities plus equity. A sample of 125 real estate companies was taken and secondary data were collected. Consequently, multivariate regression analysis was made based on financial statement data of the selected companies over the study period of 2009-2015.FindingsThe major findings of the study indicated that profitability, size, age, debt service capacity growth and tax shield variables are the significant firm-level determinants.Research limitations/implicationsThe present study is carried out by taking data of only 25 companies listed on the BSE and time period covered from 2009 from 2015. Time period and sample size may be limitations of the current study.Practical implicationsThe present study is an empirical analysis of the determinants of leverage of real estate sector in India with most recent available data. Different regression equations have been formed to develop the models using firm-specific determinants and different measures of leverage or capital structure. Data were regressed using SPSS application software, and the resulting (or obtained) regression outputs are analysed. This study will help the Indian real estate companies to the know the impact of different variables while raising short-term and long-term loans.Social implicationsThe current study will benefit all stakeholders of society who are fascinated to be acquainted with the financing of real estate companies and the factors affecting long-term and short-term financing of this sector. Specifically, public engrossed in different modes of investment and financial institution will be the prime gainers.Originality/valueThe present study has been completed using authentic data from the annual reports and database. This study uses explanatory variables and different measures of leverage which were limited in use in previous studies. Moreover, this research is a comprehensive study that deals with developing different regression models by using diverse measures of leverage.

Do working capital management practices influence investment and financing patterns of firms?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ahsan Akbar ◽  
Xinfeng Jiang ◽  
Minhas Akbar
Keyword(s):  
Capital Structure ◽  
Negative Relationship ◽  
Capital Management ◽  
Working Capital ◽  
Short Term ◽  
Working Capital Management ◽  
Content Type ◽  
Investment And Financing ◽  
The Impact

PurposeThe present study aims to investigate the impact of working capital management (WCM) practices on the investment and financing patterns of listed nonfinancial companies in Pakistan for a span of 10 years.Design/methodology/approachThe study is based on secondary financial data of 354 listed nonfinancial Pakistani firms during the period of 2005–2014. The two-step generalized method of moment (GMM) regression estimation technique is employed to ensure the robustness of results.FindingsEmpirical testing reveals that: excessive funds tied up in working capital have a negative impact on the investment portfolio of sample firms. Besides, a negative relationship between change in fixed assets and excess net working capital posits that, eventually, firms use idle resources tied up in short-lived assets to boost their investment activities. Furthermore, larger working capital levels were associated with higher leverage ratio which indicates that firms with inefficient WCM policies have to rely heavily on long-term debt to meet their short-term financing requirements. Additional results indicate that firms that take more time to sell inventory and convert receivables to cash, make more use of debt. Results of cash management models illustrate that cash-rich firms have lower leverage levels which signal the strong financial health and internal revenue generation capability of such firms.Originality/valueThere is a dearth of empirical studies that examine the implications of WCM decisions on a firm's capital structure. Besides, these studies are only confined to how a WCM policy influences the long-term investment activities of a firm. The research contributes to the extant literature by empirically revealing a link between the WCM practices and the firm's long-range investment and financing patterns. Hence, financial managers shall account for the impact of their short-term financial management decisions on the capital structure of the firm.

The dynamics of capital structure and heterogeneous systematic risk classes in Egypt

2008 ◽  
Vol 3 (1) ◽  
pp. 7-37 ◽  
Author(s):  
Tarek I. Eldomiaty ◽  
Mohamed H. Azim
Keyword(s):  
Capital Structure ◽  
Systematic Risk ◽  
Free Cash Flow ◽  
Debt Financing ◽  
Short Term ◽  
Pecking Order ◽  
Content Type ◽  
Basic Assumptions ◽  
Medium Risk

PurposeThe purpose of this paper is to examine firms' strategies to change long‐ and short‐term debt financing in Egypt. It aims to examine a list of capital structure determinants that include the basic assumptions of the three well‐known theories of capital structure: tradeoff, pecking order, and free cash.Design/methodology/approachThe paper utilizes the properties of partial adjustment model for three heterogeneous systematic risk classes: high, medium and low. The sensitivity analysis is carried out using the “extreme bound analysis”.FindingsThe results indicate that Egyptian firms adjust short‐ and long‐term debt according to the class of systematic risk; long‐term debt is a source of financing at all classes of systematic risk; firms have obvious tendency to extent short‐ to long‐term one; medium risk firms adjust long‐term debt according to the industry average debt, and depend heavily on long‐term debt financing; firms depend significantly and constantly on the liquidity position to adjust short‐term debt levels; and medium risk firms are relatively affected by the basic assumptions of free cash flow and low‐risk firms are relatively affected by the assumptions of the pecking order theory.Research limitations/implicationsIn general, the results provide evidence that the three theories have transitory effect from developed markets to transitional markets. In addition, the firm‐specific variables (industry characteristic, size and time) provide an additional support to the robustness of the results.Originality/valueFew, if any studies, have been carried out in Egyptian data.

scholarly journals Corporate social responsibility, environmental leadership and financial performance

2015 ◽  
Vol 11 (1) ◽  
pp. 131-148 ◽  
Author(s):  
Dafna M. DiSegni ◽  
Moshe Huly ◽  
Sagi Akron
Keyword(s):  
Social Responsibility ◽  
Capital Structure ◽  
Financial Performance ◽  
Environmental Sustainability ◽  
Operating Efficiency ◽  
Short Term ◽  
Content Type ◽  
Financial Measures ◽  
Liquidity Measures

Purpose – The purpose of this paper is to statistically assess the relationship between corporate characteristics, environmental contribution and financial performance. To this end, the authors compare the financial performance of all US corporations making up the Dow Jones Sustainability Indexes, being the most proactive companies in providing services and goods, while maintaining ethical responsibility and environmental sustainability. Design/methodology/approach – Various performance measures are compared to the mean performance of the related industry, sector and market portfolio. We employ an analysis for several time horizons of the financial measures. Findings – Analysis by the authors suggests that firms that are proactive in supporting social responsibility and environmental sustainability (SRES corporations) are characterized by significantly higher profit measures than the industry and the sector, though not higher than the entire market. They have lower short-term liquidity measures than those of the industry and related sector, and surprisingly, their long-term leverage is significantly higher. Strong SRES corporations are characterized by significantly higher managerial efficiency ratios than the respective industry and sector. Interestingly, however, the per-worker operating efficiency ratios are significantly lower than for all of the benchmarks. Practical implications – The revealed preference of corporations can be extracted from several horizon dependent financial measures. For instance, we could infer the corporate degree of SRES from their long-term capital structure, i.e. their long-term leverages and short-term liquidity measures. Originality/value – These results illustrate the strong relation between social and environmental sustainability, and long-term business plans in respect to the corporate capital structure.

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