Determinants of financial performance in Albanian economic entities, case of construction industry in Albania

Financial performance mainly reflects the overall financial health of the business sector over a period of time. It shows how well an entity is using its resources to maximize shareholder’s wealth. Although a thorough assessment of a firm's financial performance takes into account many other measures, the most common performance measurement used in the area of finance are financial ratios. This paper provides a comprehensive study of the financial performance measurement literature related to the construction sector in Albania. The literature covers studies from Albania, Iran, India and Pakistan, but some international evidence has also been presented. The construction sector is chosen because of its impact on economic growth in Albania, it represents the second main sector according to its share effect on Albanian GDP. The financial ratios used to measure the financial performance of the construction sector are the debt ratio, the liquidity ratio and the profitability ratio from the period 2018-2020 for 100 construction companies in Albania. Return on Assets (ROA) is taken as the predictor variable and three financial ratios are taken as the predictive variables. This research reveals that the financial ratios have positive correlation with the dependent variable whereas the leverage ratio has negative correlation. To overcome the limitations of the forthcoming studies, the considered number of years need to be increased and other models such as Market Value Added, Capital Asset Pricing Model and Economic Value Added can be used to be tested for research to analyze other factors that may affect financial performance.

The market reaction to profitability: Does leverage matter?

This study examined the market reaction to profitability by discussing the impact of dividends yield (DY) and earnings yield (EY) based on leverage (LVRG), as a control variable, on stocks’ prices (SP) of the industrial companies listed on Amman Stock Exchange (ASE), for the whole sample and the two subsamples (low and high leveraged companies). For this purpose, the data of the three samples were analyzed, for seven years from 2011 to 2017. The multiple regression analysis results showed that based on the leverage ratio (LVRG), as a control variable, there is a significant effect of DY on SP at 1% significance level, and an insignificant effect of EY on SP at 5% significance level, in the high leveraged sample. The impact of DY and EY on SP at 5% significance level in the whole and low leveraged samples is insignificant.

What Factors Drive the Banks Systemic Risk among South Asian Countries

Purpose: This study designs to examine the determinants (size, liquidity ratio, leverage ratio, deposit ratio, asset growth, net interest income ratio and return on asset ratio) of bank’s systemic risk. We use the data of listed commercial banks of the South Asian countries (Pakistan, Bangladesh, and India). Design/Methodology/Approach: The sample consists 30 banks from Bangladesh, 87 banks from India and 22 banks from Pakistan. This study covers the period from 2006 to 2018. The data is collected from the published annual reports of banks and stock exchanges of respective country. The panel data analysis is performed for the estimation of research models. Findings: The findings demonstrate that larger banks contribute lower in the systemic risk of banks. Additionally, highly liquid banks enhance the systemic risk of the banking system. Moreover, the banks with greater reliance on the deposits, net interest income and with high return on asset reduce the systemic risk contribution of the banks. Implications/Originality/Value: This study provides the justification to devise the banking policies like enhance the proportion of liquidity among assets, reliance on net interest income and promote the financing needs through deposits to limit the systemic risk contribution of the banking system.

Determinants of profitability in Chinese companies

Purpose This study is conducted to determine the factors that affect profitability in Chinese listed companies (by using financial ratios). Four independent variables liquidity, intangible assets, working capital and company leverage were empirically tested for their relationships with profitability besides two control variables which are firm size and company efficiency.Design/methodology/approach This study used secondary data extracted manually from the annual reports of non-financial Chinese listed companies on the Shanghai stock exchange (http://www.szse.cn/); the data set covers 100 companies during the period of 2017–2019, and a random selection method was used in order to achieve credibility and fairness as much as possible.Findings The findings show firm size, working capital and intangible assets have positive and significant relationships with profitability [return on assets (ROA) and earnings per share (EPS)]. Positive working capital is important to lower the cost of capital and improve companies' profitability. Intangible assets are also an essential source to improve profitability due to their low costs. In addition, the findings display a negative and strong relationship between liquidity and profitability, meaning that companies suffer low profit due to inefficient use of liquid items. Interestingly, leverage, which is measured by debt ratio and leverage ratio, shows mixed results; debt ratio shows a positive and strong association with ROA but not with EPS; while leverage ratio displays a strong but negative association with ROA but not with EPS. These results confirm the inverted U-shape relationship between leverage and profitability, which depends on the balance between benefit and cost of debt.Social implications Profitability is also important for employees and society where business organization provides sustainability and stability for both of them. Employees can then significantly contribute to achieve higher firm's profitability by efficiently using firm's resources.Originality/value This study differs than previous studies in number of aspects: First, this study focuses on financial ratios to explain profitability in Chinese companies. This study provides empirical results about the factors connected to profitability and help stakeholders to make their right decisions. Second, it examines the impact of four independent factors and two control variables that some of them are new in Chinese context such as intangible assets. Third previous studies focus on financial industry such as banks; however, this study focuses on non-financial industry.

Dampak Profitabilitas, Rasio Likuiditas Dan Rasio Leverage Terhadap Financial Distress Pada Perusahaan Jasa Sub Sektor Property Dan Real Estate Di Indonesia

Financial distress starts from the company's inability to fulfill its obligations. Companies that have consecutively decreased, the company was in financial distress before the bankruptcy occurred.The purpose of this study was to determine the effect of profitability ratios, activity ratios and leverage ratios on financial distress in property and real estate sub-sector service companies listed on the Indonesia Stock Exchange (BEI).The research method used is a quantitative method with descriptive and verification approaches, quantitative research methods are research methods used to examine a particular population or sample. Descriptive research method is used to determine the value of the independent variable, while verification is used to determine the effect of two or more variables.The results showed the average value of each variable as follows: Financial Distress 4.52, Profitability Ratio 0.07, and Activity Ratio 17.13, Leverage Ratio 52.76. The results of the t test of the Profitability Ratio have an effect on Financial Distress, and the Activity Ratio has no effect on Financial Distress, the Leverage Ratio has an effect on Financial Distress. Based on the results of the f test, it shows that the profitability ratio, activity ratio and leverage ratio simultaneously (together) have a significant effect on financial distress. Keywords: Profitability Ratio, Activity Ratio, Leverage Ratio, Financial Distress.

Rasio Solvabilitas

Rasio solvabilitas atau leverage ratio merupakan rasio yang digunakan untuk mengukur sejauh mana aktiva perusahaan dibiayai dengan utang. Dalam arti luas dikatakan bahwa rasio solvabiliteitunakan untuk mengukur kemampuan perusahaan untuk membayar seluruh kewajibannya, baik jangka pendek maupun jangka panjang apabila perusahaan dibubarkan.

Rasio Solvabilitas

Rasio solvabilitas atau leverage ratio merupakan rasio yang digunakan untuk mengukur sejauh mana aktiva perusahaan dibiayai dengan utang. Dalam arti luas dikatakan bahwa rasio solvabiliteitunakan untuk mengukur kemampuan perusahaan untuk membayar seluruh kewajibannya, baik jangka pendek maupun jangka panjang apabila perusahaan dibubarkan.

Three Essays on Capital Structure

<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>

Three Essays on Capital Structure

<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>

Rasio Solvabilitas

Rasio solvabilitas atau leverage ratio merupakan rasio yang digunakan untuk mengukur sejauh mana aktiva perusahaan dibiayai dengan utang. Dalam arti luas dikatakan bahwa rasio solvabiliteitunakan untuk mengukur kemampuan perusahaan untuk membayar seluruh kewajibannya, baik jangka pendek maupun jangka panjang apabila perusahaan dibubarkan. Jenis-jenis rasio solvabilitas : debt to asset ratio (debt ratio), debt to equity ratio, long term debt to equity ratio, times interest earned dan fixed charge coverage. Debt to asset ratio (debt ratio) merupakan rasio yang digunakan untuk mengukur perbandingan antara total utang dengan total aktiva.