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The cost of capital, corporation finance, and the theory of investment [Reply]
... Menurut (Millier and Modigliani, 1958), " kebijakan dividen tidak mempengaruhi harga saham perusahaan dan nilai perusahaan. Jadi teori ini menggambarkan hubungan variabel growth terhadap kebijakan dividen seperti dalam pengujian dengan (Citra, 2017) dan (Luh and Wiagustini, 2015) dengan penjualan tinggi, likuiditas tinggi, maka perusahaan akan membayar dividen. ...
... Ini sesuai dengan teori Signal (Signalling Theory), dengan membagi dividen itu memberi signal bahwa perusahan dalam keadaan yang baik dan bagus karena memiliki cash lebih setelah dana untuk ekspansi usaha disisihkan dan seluruh kewajiban dilunasi. (Millier and Modigliani, 1958) bahwa arus kas bebas merupakan aliran uang kas yang berlebih atas apa yang dibutuhkan untuk membiayai semua proyek. ...
... Hal ini sesuai dengan teori Signal (Signalling Theory) bahwa dengan membagi dividen itu memberi signal bahwa perusahan dalam keadaan yang baik dan bagus karena memiliki cash lebih setelah dana untuk ekspansi usaha disisihkan dan seluruh kewajiban dilunasi. (Millier and Modigliani, 1958) Penelitian ini menggunakan free cash flow sebagai variabel moderasi untuk mengetahui pengaruh profitabilitas, likuiditas, leverage dan growth terhadap kebijakan dividen. Sejauh ini menurut pengamatan penulis, belum ada penelitian yang dilakukan untuk menguji free cash flow sebagai variabel moderasi apakah memberkuat atau memperlemah pengaruh growth terhadap kebijakan dividen. ...
One of the objectives of investors to invest is to increase their wealth. Added wealth is obtained through dividends distributed by company management. Management’s decision to divide dividends (dividend policy) is an attraction for investors to buy company shares even at high prices so that it will strengthen the company’s cash position to be used to run company operations with the aim of gaining high profits and increasing company value. The high value of the company will make it easier for management to raise funds. Logically high profits will produce high liquidity, with high liquidity in addition to being able to pay off all of its obligations as well as being able to finance the growth of the company and set aside free cash to be distributed to shareholders as dividends. Therefore the purpose of this study is to examine whether free cash flow can strengthen or weaken profitability, liquidity, leverage and growth towards management policies to pay dividends. Using a sampling purpose, the company’s sampling consists of 31 companies listed on the Indonesia Stock Exchange in 2015-2017. For testing used logistic regression analysis consisting of logistic regression test, significant test of fit model with the approach of maximum likelihood method and partial test and model formation. The results of this study indicate that free cash flow cannot encourage / strengthen the influence of profitability, liquidity, leverage and growth on dividend policy, so that profitability, liquidity, leverage and growth have no effect on dividend policy. Keywords: Profitability, liquidity, leverage, growth, free cash flow and dividend policy.
... Modigliani and Miller introduced the theory of modern capital structure in 1958. Modigliani & Miller (1959) proved that the value of a company is not influenced by its capital structure (Brigham & Houston, 2011). Modigliani & Miller (1959) argue that in perfect market conditions, the use of debt is irrelevant to firm value, but with taxes, debt will be relevant (Modigliani & Miller, 1959) in Ali & Hartono (2003). ...
... Modigliani & Miller (1959) proved that the value of a company is not influenced by its capital structure (Brigham & Houston, 2011). Modigliani & Miller (1959) argue that in perfect market conditions, the use of debt is irrelevant to firm value, but with taxes, debt will be relevant (Modigliani & Miller, 1959) in Ali & Hartono (2003). However, Modigliani & Miller (1959) and Brigham & Houston (2011) stated there are several unrealistic assumptions, including 1. ...
... Modigliani & Miller (1959) proved that the value of a company is not influenced by its capital structure (Brigham & Houston, 2011). Modigliani & Miller (1959) argue that in perfect market conditions, the use of debt is irrelevant to firm value, but with taxes, debt will be relevant (Modigliani & Miller, 1959) in Ali & Hartono (2003). However, Modigliani & Miller (1959) and Brigham & Houston (2011) stated there are several unrealistic assumptions, including 1. ...
External and internal factors can affect a company's capital structure. Managers cannot limit the macroeconomic component of external factors, while a company can monitor internal factors and their effects. This study aims to determine the effect of specific macroeconomic variables, namely, Interest Rates, Inflation Rates, GDP, and company internal variables, namely, Return on Assets (ROA), Tangible Assets (TAN), and Firm Size (SIZE) on Capital Structure (DER) of food and beverage sub-sector manufacturing companies in the Indonesia Stock Exchange. This research is associative research, and the data type used is quantitative. The data is obtained from the company's financial statements audited on the Indonesia Stock Exchange during the study period. The analytical method used is descriptive analysis and panel data regression. The population of this study is the food and beverage sub-sector manufacturing companies for the period 2017-2021, totaling 62 companies. The sample in this study amounted to 27 companies. The results of this study indicate that simultaneously, Interest Rates, Inflation Rates, GDP, ROA, TAN, and SIZE have a significant effect on DER in food and beverage sub-sector manufacturing companies on the Indonesia Stock Exchange in the 2017-2021 period. Partially, the Interest Rate and TAN variables have a positive and insignificant effect on DER. The inflation rate variable positively and significantly affects DER at = 0.1. The SIZE variable has a positive and significant effect on DER. The GDP variable has a negative and insignificant effect on DER. In contrast, the ROA variable positively and significantly affects DER at = 0.1 in food and beverage sub-sector manufacturing companies on the Indonesia Stock Exchange.
... Furthermore, there exist a multitude of theories seeking to elucidate the relationship between a company's capital structure and its performance, a pivotal issue in the realm of finance (Le & Phan, 2017). According to the widely accepted Modigliani-Miller (MM) theory (Modigliani & Miller, 1959), a company's capital structure has no impact on its value. However, this theory is built upon unrealistic assumptions of a flawless capital market, which is non-existent in reality. ...
... The trade-off theory posits that an organization will balance the costs and benefits of debt to maximize firm value (Kraus & Litzenberger, 1973). The primary advantage of debt lies in the tax shield resulting from reduced income due to interest payments (Modigliani & Miller, 1959), while the cost of debt is influenced by direct and indirect bankruptcy costs, coupled with an escalation in financial risk (Kraus & Litzenberger, 1973). According to agency theory, the optimal capital structure for maximizing firm value is one that minimizes conflicts of interest among stakeholders (Jensen & Meckling, 2019). ...
This study delves into the capital structure debate, examining its impact on financial performance among 50 non-financial firms listed on the Colombo Stock Exchange from 2013 to 2022. It specifically analyses Short-Term Debt to Total Assets Ratio (STDTA), Long-Term Debt to Total Assets Ratio (LTDTA), and Debt-To-Equity Ratio (DTE) as indicators, with Return on Assets (ROA) as the performance metric. Results show a positive link between STDTA and LTDTA with financial performance, while DTE shows no significant correlation. This suggests firms should consider a balanced mix of short-and long-term debt to enhance profitability. Future research could explore qualitative methods for deeper insights into capital structure dynamics and firm value.
... The traditional view of capital structure is the trade-off theory (Modigliani and Miller, 1958), which argues that there is an optimal level of debt for firms 1 . The theory suggests that firms should balance the benefits of debt financing, such as tax shields and lower cost of capital, against the costs of financial distress and agency costs. ...
... Modigliani and Miller (1958). The Cost of Capital, Corporation Finance and the Theory of Investment. ...
This article examines the optimal capital structure of manufacturing firms in Uzbekistan, a developing country in Central Asia. Using panel data analysis of 35 manufacturing firms listed on the Uzbekistan Stock Exchange for the period 2015-2020, the study investigates the determinants of capital structure, including profitability, size, growth opportunities, asset tangibility, taxes, and interest rates. The findings suggest that profitability and asset tangibility are the most significant determinants of capital structure for manufacturing firms in Uzbekistan. Profitable firms tend to use more debt financing to take advantage of the tax shield benefits of debt, while asset-intensive firms are cautious about using debt financing to avoid the risk of bankruptcy and the loss of fixed assets. The study highlights the importance of considering country-specific factors when examining the determinants of capital structure and provides valuable insights for policymakers and investors in Uzbekistan. The findings of this study can assist manufacturing firms in Uzbekistan in making informed financing choices to maximize their profitability and growth potential, while also identifying investment opportunities for policymakers and investors in the country. ISBN 978-9943-9631-5-3 | УЎК 339.97(082) | КБК 65.5я43
... So the decision to access to the debt is well explained theoretically, Modigliani & Miller (1959) were the first to conduct a real theoretical reflection on firm financial structure, they have shown that debt is less preferred than other financing choices because of the absence of leveraging effect. Then in 1963, they adjusted their reasoning for his first model by rejecting the no-taxes hypothesis, they confirmed the existence of an optimal capital structure where the use of debt is maximized and consequently the maximization of the firm's value. ...
... Miller (1977) adjusted the Modigliani & Miller (1963) model, he added the concept of individual taxation to show the impact of personal taxation on access to debt, he found that individual taxation rejected the preference for debt over other forms of financing. Then, major theories emerged over the years following the hypothesis of market perfection on which the model of Modigliani & Miller (1959) is based, they explained the capital structure based on the hypotheses of market imperfections, such as the positive agency theory, the theory of transaction of cost economics, the signal theory, the Static Trade theory, and the Pecking Order Theory Thus, although capital structure is well explained theoretically, few previous studies have investigated the relationship between CSR and debt financing. Moreover, the empirical results of these studies are mixed, some studies show that firms with social activities have easy access to debt Latapí Agudelo et al. (2019) as they build close relationships with stakeholders to support their activities in times of crisis. ...
The objective of this study is to investigate the relationship between corporate social responsibility and debt financing acces. After discussing the theoretical link between these types of activities and debt financing, we perform binary logistic regression on the data of 100 Tunisian firms in order to empirically show the effect of CSR on access to debt. Our result indicate a significant and positive relationship between CSR and debt, which means that socially responsible firms access to debt more than other financing modes because CSR improves the reputation of the firm and facilitates their access to debt and therefore improves its ability to acces to debt.
... One of the significant topics in corporate financing is the capital structure decision. Apart from the classical study by Modigliani and Miller (1958), many empirical works have been done to explain the corporate decisions regarding its capital structure. Classical theories, including the trade-off and pecking order theory, have been used to explain such decisions. ...
... Since the seminal paper published by Modigliani and Miller (1958), many researchers in corporate finance have sought to investigate the issue of whether there exists an optimal capital structure choice. Scholars have used several well-founded theories to determine whether an optimal debt-to-equity ratio exists and, if it is extant, to explain it. ...
Purpose
This paper aims to examine the relationship between Shariah compliance and corporate capital structure decisions. This study explores the variation of capital structure speed of adjustment.
Design/methodology/approach
The authors’ sample includes a sample of the largest 200 nonfinancial firms trading in the Malaysian and Pakistan stock markets. This study uses ordinary least squares and dynamic two-step system generalized method of moments to test the hypotheses of the study.
Findings
The results show that Shariah-compliant firms use a lower level of leverage than the noncomplaint firms. Moreover, while both types of firms have optimal capital structures, the speed of adjustment toward the targets is slower for Shariah-complaint firms than non-Shariah-compliant firms. This variation can be seen through the different levels of market imperfection experienced by the two types of firms. Shariah-compliant firms follow Islamic rules that restrict the type and degree of leverage, thus affecting the availability of external funding to Shariah-compliant firms.
Research limitations/implications
The findings call for more development and innovation of financing instruments that comply with Shariah rules that will increase of supply of external funds for Shariah-compliant firms and, thus, reduce market imperfections that are faced by Shariah-compliant firms.
Originality/value
The study contributes to the limited number of studies that examine the nexus between conventional corporate theories and Islamic corporate finance.
... Therefore, based on the foregoing, the null hypothesis of the study which states that Capital adequacy no significant impact on shareholders wealth of listed deposit money banks in Nigeria is hereby rejected. The findings of the research corroborated with that of Noor and Rosyid (2018) Modigliani and Miller,(1958) , Olalekan and Adeyinka (2013 In addition, credit risk (CR) has a beta coefficient of 4.20 (p-value 0.0000) is positive and has a significant effect on Shareholders wealth of listed deposit money banks in Nigeria at 1% significance level. This implies that, for every one percent increase in the credit risk of listed deposit money banks in Nigeria, share price is increased by 419kobo. ...
This study investigated the effect of firm attributes on shareholders’ wealth of listed deposit money banks in Nigeria. This paper examined the effect of firm attributes on the shareholders’ wealth of listed deposit money banks in Nigeria. The study population consists of Fifteen (15) listed deposit money banks in Nigeria as at 31st December 2022, filtered to 13 Listed Deposit Money Banks whose data were extracted and studied between 2010 to 2022. Multiple regression techniques using robust ordinary least square (OLS) due to the pooled nature of the data used, and estimation was employed in analyzing the data obtained from the audited annual reports and accounts of sampled firms. The study found that all the independent variables, namely, capital adequacy ratio, credit risk, return on equity, and cost efficiency, have a positive significant effect on the share prices of listed deposit money banks in Nigeria, In view of the findings, this study recommend that management and other stakeholders in Nigerian Banking should ensure that the optimum level of capital adequacy is maintained, maintain an optimal level of credit risk while avoiding excessive risk-taking, maximize the bank’s profitability and cost efficiency, to enable deposit money bank continue to discharge their function effectively to the society while protecting the interest of, and maximizing the wealth of the shareholders at the same time. I certified. This paper is my work and the combination of variables used is not copied from any source.
... Existe um grande volume de trabalhos na literatura visando explicar a estrutura de capital das empresas, desde o trabalho seminal de Modigliani e Miller (1958, 1959, que determina o custo de capital das empresas através de condições de mercado. Entre as teorias dominantes que surgiram nesse contexto, destacam-se a hipótese do fluxo de caixa livre (Free Cash Flow Hypothesis) (Jensen, 1986), a teoria do déficit de fluxo de caixa (Cash Flow Shortfall Theory) (Miller & Rock, 1985), a teoria da hierarquia das fontes de recursos (Pecking Order Theory) (Myers & Majluf, 1984), e a teoria do timing do mercado (Equity Market Timing) (Baker & Wurgler, 2002). ...
Este artigo objetiva analisar a relação de finanças comportamentais e estrutura de capital por meio do desenvolvimento de três proposições. A metodologia deste trabalho é qualitativa e exploratória e se deu por meio de três entrevistas semiestruturadas com diretores financeiros de empresas de grande porte brasileiras. Os resultados desta pesquisa revelam a interação entre métricas quantitativas e vieses comportamentais na tomada de decisões financeiras. Entrevistados enfatizam métricas como TIR, Payback e VPL, mas suas respostas também destacam a influência de vieses comportamentais. A aversão ao risco, influenciada pelo cenário econômico, afeta a abordagem de investimento. A pandemia desencadeou mudanças comportamentais, com busca por colaboração e precaução. Dúvidas sobre dívida refletem o viés da aversão ao endividamento e a mentalidade de escassez. Esses resultados ressaltam a importância de considerar tanto aspectos quantitativos quanto comportamentais nas decisões financeiras corporativas. Em conclusão, o trabalho mostra a interrelação complexa entre métricas quantitativas e vieses comportamentais nas decisões financeiras. Essa abordagem híbrida revela a influência da aversão ao risco, mudanças de contexto e incertezas na tomada de decisões. Esse artigo contribui para a teoria ao elaborar três proposições para serem testadas quantitativamente e para a prática gerencial uma vez que pode auxiliar os executivos de finanças a compreenderem como seus vieses podem impactar a estrutura de capital, e por consequência, os resultados das firmas.
... O investidor também é atraído pela distribuição de dividendos, de forma a se beneficiar da expectativa de crescimento e retornos anormais. A hipótese do conteúdo informacional dos dividendos pressupõe que as decisões sobre a distribuição de dividendos pelos gestores transmitem informações ao mercado tanto sobre os fluxos de caixa das empresas quanto sobre seus resultados futuros (Modigliani & Miller, 1959;Miller & Modigliani, 1961;Watts, 1973;Bhattacharya, 1979;Miller & Rock, 1985;Nguyen & Bui, 2019). ...
Utilizando dados em painel (efeitos fixos e aleatórios), o presente estudo examina a associação entre os pagamentos de dividendos e a qualidade dos lucros das companhias abertas brasileiras no período de 2010 a 2019. Para capturar essa qualidade, foram considerados a persistência dos ganhos, o conteúdo informacional dos lucros por meio do coeficiente de resposta aos lucros e a qualidade dos accruals, utilizando a informação dos accruals discricionários e o modelo modificado de Jones (1991). Quanto aos dividendos, optou-se por testar, em cada modelo, o dividendo yield e o fato de se pagar dividendos acima do mínimo obrigatório. Diferentemente dos achados em mercados mais desenvolvidos, os resultados empíricos dos três modelos aplicados sugerem que, no mercado brasileiro, o pagamento de dividendos não indica necessariamente maior qualidade dos lucros. Esses resultados reforçam o entendimento de que o ambiente institucional brasileiro, com sua legislação específica sobre dividendos,
... Investors find dividend payouts appealing as well since they anticipate development and exceptional returns. The informational content of dividends theory states that managers' choices regarding dividend payments inform the market about the cash flows and potential future performance of the companies (Modigliani & Miller, 1959;Miller & Modigliani, 1961;Watts, 1973;Bhattacharya, 1979;Miller & Rock, 1985;Nguyen & Bui, 2019). ...
Using panel data analysis (fixed and random effects) as an econometric technique, this study examines the relationship between dividend disbursements and the caliber of earnings of Brazilian public businesses from 2010 to 2019. The modified Jones (1991) model and data from discretionary accruals were used to analyze the quality of accruals, the persistence of earnings, and the informative value of earnings using the earnings response coefficient. Tests of dividend yield and the act of paying out dividends beyond the required minimum in each model were used to assess dividends. The empirical results of the three models that were used indicate that, in the Brazilian market, dividend disbursements do not always imply a greater quality of earnings, in contrast to findings in more developed markets. These results support the idea that the relationship between dividend payments and the caliber of reported earnings might be influenced by Brazil's distinct institutional context, which includes its particular dividend laws.
... The empirical literature on corporate governance and financing decisions shows varied results and appears largely inconclusive. After the first studies done by Modigliani and Miller (1959), many researchers decided to investigate the factors that have an impact on the capital structure of firms. For instance, Berger and Humphrey (1997); Friend and Lang (1988); and Wen et al (2002) show that the character of corporate governance associate degree in a firm has an influence on its financing decisions. ...
... Os investidores também são atraídos pela distribuição de dividendos, de forma a se beneficiar da expectativa de crescimento e obter retornos anormais. A hipótese do conteúdo informacional dos dividendos pressupõe que as decisões sobre a distribuição de dividendos pelos gestores transmitem informações ao mercado, tanto sobre os fluxos de caixa das empresas, como sobre seus resultados futuros (Modigliani & Miller, 1959, Miller & Modigliani 1961, Watts, 1973, Bhattacharya, 1979, Miller & Rock,1985. ...
O presente estudo teve por objetivo examinar a associação entre os pagamentos de dividendos e a qualidade dos lucros das companhias abertas brasileiras, no período de 2010 a 2019. Para capturar essa qualidade, foram consideradas: a persistência dos ganhos, o conteúdo informacional dos lucros, por meio do coeficiente de resposta aos lucros, e a qualidade dos accruals, utilizando a informação dos accruals discricionários e o modelo modificado de Jones (1991). Quanto aos dividendos, optou-se por testar, em cada modelo, o dividendo yield e o fato de se pagar dividendos acima do mínimo obrigatório. Diferentemente dos achados em mercados mais desenvolvidos, os resultados empíricos, dos três modelos aplicados, sugerem que, no mercado brasileiro, o pagamento de dividendos não indica, necessariamente, maior qualidade dos ganhos. Esses resultados reforçam o entendimento de que o ambiente institucional brasileiro, com sua legislação específica sobre dividendos, pode afetar a relação entre o pagamento de dividendos e a qualidade dos ganhos reportados.
... One of the most significant economic and financial theories examined over the last century is the EMH (Efficient Market Hypothesis). EMH is based on traditional financial theory, such as the arbitrage principle (Modigliani & Miller, 1958, 1959Miller, 1988), the portfolio principle (Markowitz, 1952), the capital asset pricing model (Sanvicente et al., 1963;Treynor, 1961), arbitrage pricing theory (Ross, 1976), and option pricing theory (Black & Scholes, 1973). Furthermore, Adam Smith (Barma & Vogel, 2021) argued that while trading in the stock market, a sensible economic individual will always seek maximum profitability. ...
This paper aims to analyze whether the events of 2020 and 2022 (the COVID-19 pandemic crisis, the oil price war between Russia and Saudi Arabia, and the Russian invasion of Ukraine in 2022) affected efficiency and accentuated shocks across markets in the Netherlands (AEX), Belgium (BEL 20), France (CAC 40), Portugal (PSI 20), Norway (OBX), and the West Texas Intermediate (WTI) oil index during the period from September 18th, 2017, to September 15th, 2022. The findings reveal that markets exhibit more substantial signals of (in)efficiency throughout the global economy's uncertainty sub-period; nonetheless, we find that the shocks across markets did not increase from the Tranquil sub-period to the stressful sub-period. Furthermore, we also find that WTI lacks the hedging and haven features exhibited by the European capital markets studied. These findings have significant consequences, especially for overseas investors and oil corporations, which try to spread risk, particularly during uncertain times. Finally, we demonstrate that there is no evidence that market inefficiency increases co-movements.
... Some scholars found that capital structure is significant positive correlation with company performance firm performance, i.e., the higher the level of gearing, the better the firm's performance. Modigliani and Miller argue that capital structure has no relationship with company value and performance [1]. However, Agrawal and Knoeber argue that debt financing can enhance performance through supervision of creditors [2]. ...
The financial structure of a firm is often regarded as the most essential factor influencing its operating performance. The real estate industry, as an important part of China's current national economy, is a typical capital-intensive industry with a large demand for capital. However, the industry's characteristics lead to a relatively slow return of capital in the real estate industry, putting pressure on the industry's financing capacity and capital structure. This paper divides the capital structure into two components: gearing ratio and debt structure, and takes China's real estate listed companies from 2010 to 2020 as a sample. The influence of capital structure on the performance of listed companies is examined empirically. It is found that there is a non-linear relationship between gearing and firm performance, i.e. an inverted U-shaped relationship. This paper still holds after robustness tests such as variable substitution, which are hoped to be useful for business performance, future government regulation and policy implementation.
... [78] explains that in reflecting a firm's profitability, liquidity and financial position are also affected by leverage. Financial leverage refers to the level of funding for a firm's operations funded through external resources [79]. [80] suggest that leveraged firms have additional capital available to finance their operations and expansion compared to non-leveraged businesses that hinge solely on equity. ...
Literature suggests two contradictory views regarding the impacts of fintech lending on banks. The competition-instability proponents believe that fintech lending expansion erodes bank market and threatens banks as traditional intermediaries, thereby intensifying bank risk-taking and potentially disturbing financial stability. In contrast, the competition-stability proponents believe fintech lending reduces asymmetric information in the credit market, thus reducing bank risk-taking and increasing bank resilience to a systematic shock. This paper aims to examine the impacts of fintech lending expansion on bank-risk taking, i.e., credit channeling activity and bank risk. This study utilizes the OLS, random effects, fixed effects, and two-step GMM regressions to test the conjectures. Consistent with the competition-stability hypothesis, our evidence indicates that shadow banking increases as banks actively seek channels to diversify their risks but are less likely to use fintech lending as a credit channel. This paper also corroborates the notion that fintech lending expansion encourages banks to diversify their risks. Pertaining to the relationship between fintech lending and bank risk, our results suggest that fintech lending expansion encourages banks to work more efficiently to improve their credit quality rather than to intensify bank risk-taking. These findings also indicate that synergy between fintech lending and banks would increase bank credit quality. This paper also examines the reasonable credit limits for fintech lending firms based on MSMEs’ characteristics. Employing the threshold regression, we find that IDR5 billion is the maximum credit provision to induce the profitability of MSMEs whereas IDR6 billion is the maximum credit provision to minimize the default risk of MSMEs.
This paper examines whether drug manufacturing companies in India, Japan, China, and Untied States alter their capital structure as a response to an investment opportunity, specifically in the biosimilar market. The influence of investment opportunity is examined in the study using linear regression analysis. The article uses data from 10 drug manufacturing companies from each country during the period 2018–2022. The results provide insight into how such companies react to the investment shock and whether the firms purposefully change their capital structure due to this investment opportunity. We found that after the announcement of the opportunity, firms in three countries had reduced their leverage and financed their operations and investments from their retained earnings while increasing their tangible assets.
Introduction: The company's brand equity is one of the important factors to increase the company's cash flow in the future. This study aims to analyze the effect of brand equity on cash flow, the effect of brand equity on capital structure, the effect of cash flow on firm value, and capital structure on firm value. Literature Review: Research by Mendoza, (2017), Skalický, (2016), Sivric et al (2019), Guentherb and Guentherb (2019) state brand equity has a direct relationship with capital structure. Singh and Bansal (2016) examined the impact of financial leverage on firm profitability and firm value. Method: The data analysis method used in this study uses the PLS model and data processing using the WarpPLS (Partial Least Square) program. The study used a sample of consumption subsector companies listed on the Indonesia Stock Exchange in 2015-2019 and met the requirements for calculating the brand value of the Hirose method (2002). Results and Discussion: brand equity has a significant effect on cash flow; brand equity has a significant effect on capital structure, cash flow has an insignificant effect on firm value, capital structure has a significant effect on value. Conclusion: The findings of increasing brand equity have an influence on the company's cash flow which is characterized by an increase in NCFOSA and a decrease in the company's FLD. Increasing brand equity has an impact on capital structure. Changes in cash flow have no effect on firm value. Increased debt in the capital structure has an impact on firm value.
The shipping industry transports nearly 80% of the goods worldwide and requires large funding. The shipping industry shifted from debt to equity as the source of funding in the last decade. Because most shipping companies already had their initial public offering before 2013, these companies tend to engage in follow-on equity offerings (FPO). However, the challenge faced by the shipping companies is the lack of knowledge on successful FPO. The purpose of this study is to identify the most influential factors affecting shipping companies’ FPO from the investor perspective. This research applies a hybrid multiple-criteria decision-making model integrating the fuzzy-Delphi method and Decision-Making Trial and Evaluation Laboratory, processing survey responses covering four dimensions and 16 criteria from 33 investment experts. The results show that financial indicator is the primary cause affecting offering condition, technical indicators. An increase in earnings per share would help the financial performance of the shipping companies to appear most attractive to investors.
Estrutura de capital é um tema com múltiplas pesquisas empíricas na área de Finanças, desde a concepção dos conceitos iniciais da teoria tradicional e a proposta por Modigliani e Miller (1958). Esta pesquisa tem por base a dissertação de Semedo (2015), que verifica as teorias de estrutura de capital e descreve, por intermédio de uma revisão sistemática de literatura, as tendências de teorias abordadas nos periódicos nacionais em comparabilidade aos periódicos internacionais de Contabilidade. Verificou nos periódicos internacionais o fator de impacto por intermédio do Journal Citation Reports (JCR), os dez mais citados; e, no âmbito nacional os elencados na Associação Nacional de Programas de Pós-graduação em Ciências Contábeis - Anpcont com qualis CAPES A2 e B1 a busca por palavras nos títulos, resumos e palavras-chave: “estrutura de capital”, “assimetria de informação”, “pecking order”, “trade-off”, “conflitos de agência”, “sinalização”, “takeover”, “ciclo de vida”, “market timing” e “efeito fiscal”. O objetivo deste estudo é indicar as oportunidades para estudos de pesquisa de estrutura de capital no Brasil, pois no contexto entre a literatura internacional e a literatura nacional da área de Finanças, existe determinada equalização na abordagem dos assuntos, porém observou-se que alguns assuntos podem ter maior retórica nas pesquisas dos periódicos nacionais. A análise conforme a revisão sistemática de literatura constatou que os periódicos nacionais podem abordar com maior frequência teorias mais evidentes na base de dados e o estímulo a novas teorias dos periódicos internacionais possibilitando uma maior eloquência nas pesquisas científicas na área de Finanças como um todo.
This study examines the moderating effect of profitability on the effects of liquidity, firm size, and financial leverage on firm value in Nigeria from 2013 to 2021. These bias-free secondary series were obtained from the annual reports of fifteen maritime companies. At a 95% level of confidence, descriptive, Hausman, and Random effect POLS techniques were employed. The Hausman test demonstrates that the Random effect model is superior to the fixed effect model. The Random effect POLS demonstrates that profit after tax and gearing ratio significantly increase firm value; current asset ratio is negative and insignificant to firm value; and firm size increases firm value but not significantly. The study concludes that liquidity ratio, financial leverage, and profitability are crucial factors for determining the value of Nigerian maritime firms. To maximise shareholder value, the study advises maritime companies to place greater emphasis on increasing their profitability while decreasing their liquidity. In order to increase their capital base and maximise their value, maritime companies should consider selling stock to the general public.
Badanie zjawisk i procesów pieniężnych zachodzących w gospodarce stanowi przedmiot zainteresowania szerokiego grona przedstawicieli środowiska akademickiego. Osoby analizujące wskazane zjawiska i procesy, podejmując wysiłek w tym zakresie, uznają go za działalność naukową – prowadzenie badań naukowych. Czy w związku z tym ekonomia finansowa posługuje się oryginalnym zbiorem założeń ontologicznych i epistemologicznych? Czy i jeżeli tak, to co zasługuje na uznanie za paradygmaty ekonomii finansowej? Próby odpowiedzi na te pytania są przedmiotem artykułu poświęconego ocenie ekonomii finansowej z perspektywy filozofii nauki. Odpowiedzi na te pytania pozwolą nie tylko wyodrębnić istotę tego, czym jest ekonomia finansowa, określając w ten sposób jej ontologiczne granice, lecz również z perspektywy epistemologicznej ustalić, czy występuje charakterystyczna dla ekonomii finansowej metoda poznania ich istoty. Artykuł zawiera krytyczną weryfikację ekonomii finansowej z perspektywy filozofii nauki, w szczególności podjęto w Kuhnowskiej konwencji próbę identyfikacji paradygmatów ekonomii finansowej oraz ich krytycznej analizy. Artykuł pozwolił ustalić, że ekonomia finansowa jest nauką normalną, w rozumieniu zaproponowanym przez Thomasa Kuhna, czyli badań wyrastających z jednego lub wielu osiągnięć naukowych przeszłości, które dana społeczność uczonych aktualnie akceptuje i traktuje jako fundament swej dalszej praktyki. W pracy wskazano fundamentalne dzieła, które stanowią twardy rdzeń programu naukowego ekonomii finansowej w rozumieniu założeń naukowych programów badawczych Imre Lakatosa.
The study investigated the effect of debt financing on financial performance of listed consumer goods companies in Nigeria. The study addressed a number of objectives: to examine the effect of debt to equity ratio on return on assets of listed consumer goods companies in Nigeria; ascertain the effect of total debt ratio on the return on assets of listed consumer goods companies in Nigeria; and determine the effect of long-term debt ratio on the return on assets of listed consumer goods companies in Nigeria. The study adopted secondary panel data obtained from firms' annual reports and accounts from 2011 to 2022 and expo facto research design. Descriptive statistics was used to analyze the data and OLS Regression analysis was employed to test the hypotheses at 5% level of significance. The results revealed that debt-equity ratio was insignificant and negative effect on return on assets of listed consumer goods companies in Nigeria, similarity total debt ratio is not significant also documented negative relationship on return on assets of listed consumer goods companies in Nigeria, while long term debt ratio was also not significant at 5% level though has positive effect on return on assets of listed consumer goods companies in Nigeria. Based on these findings, the recommendation among others is that management of these firms should be careful when using debt as its source of financing its activities, they should seek to finance their activities with retained earnings and use debt as a last option as supported by the pecking order theory. Long term debt finance is mostly used by highly tangible firms, hence, policies that would encourage growing firms accumulate huge tangible assets should be pursued. Hence, tax concession and exemptions can be approved.
This study aims to examine multifractality and test whether green markets and traditional capital markets react similarly to the phenomenon of persistence during extreme events in international financial markets. The green indices analyzed are from the USA, namely S&P Green Bond, Wilderhill Clean Energy, and the capital markets of the. The results show no significant differences between green markets and traditional capital markets in terms of persistence, either in periods of stress or tranquility in the international financial markets; therefore, the research question is rejected because there are no distinct behavior patterns. The findings provide crucial insights for investors, policymakers, and other participants in the green and traditional financial markets.
W artykule przedstawiono opinie na temat różnych aspektów zarządzania strukturą kapitału, które przedstawili dyrektorzy tych przedsiębiorstw rolnych, które zostały zidentyfikowane jako odnotowujące sukces (7 firm) lub porażkę (2 firmy). Wyniki badania wskazują, że teorie Modiglianiego i Millera znalazły potwierdzenie w działalności gospodarczej.
Many studies have assessed the crowding effect of inward foreign direct investment on large states. The authors of this paper depart from existing studies by examining the crowding effect of inward foreign direct investment on domestic investment in small states. They employed data from 1990 to 2021 for 28 small states estimated by the general method of moments. They found that foreign direct investment crowds out domestic investment in the short and long runs. The crowding-out effect of foreign direct investment on domestic investment requires that governments of small states facilitate technology and technology transfer through technology education and training, establishing investment agreements, and reviewing existing agreements to emphasize technology transfer. Aside from increasing training and expenditure targeted at technology enhancement, local firms can employ expatriates or enter franchise agreements that involve technology transfer.
Among the most important contributions to the finance literature is Modigliani and Miller’s seminal work on capitalstructure. As still taught in virtually all corporate finance textbooks, their famous Propositions I and II provide the foundation for the analysis of capital structure. Proposition I argues that under certain assumptions capital structure is irrelevant to the value of the firm. Proposition II describes the change in the required return to equity in response to a change in financial risk due to a change in leverage. In establishing Proposition II, Modigliani and Miller rely critically on an arbitrage process that forces the cost of equity to assume a value consistent with Proposition I. Although most of their analysis assumes constant debt rates, Modigliani and Miller allow that interest rates do vary with the level of leverage but that this variation does not affect the arbitrage process. In this paper, we argue that the arbitrage process is no longer dependable when debt rates change due to variation in leverage and discuss implications for teaching capital structure.
Most emerging countries have communities categorized as excluded and underserved, unbanked and underbanked, the bottom of the pyramid (BoP), and ultra poor which have no ability to access bank financing. They are often victims of loan sharks. They should be a target of microfinance, but most banks and also microfinance institutions (MFIs) do not yet do well in serving them. Likewise, Islamic microfinance in fact has also not succeeded in reaching these people. Islamic nanofinance through qardhul hassan is promoted as a new paradigm to fill the Islamic microfinance gap. Through a field experiment for eight months by providing a fund IDR5 million with a maximum loan IDR1 million to provide nanofinancing, this study investigated the financial behavior of the nano-entrepreneurs in managing the qardhul hassan in Indonesia. The outcome of this study is expected to be input for policymakers, especially for the Islamic micro-industry, to come up with financing schemes according to the characteristics of these communities.
L’objectif de cet article est de vérifier empiriquement la théorie de l’efficience informationnelle sur les marchés boursiers de la bourse régionale des valeurs mobilières (BRVM), du Ghana Stock Exchange et du Nigeria Stock Exchange. Nous avons utilisé divers tests paramétriques et non paramétriques pour tester empiriquement l’efficience informationnelle sur les marchés boursiers de la Communauté Economique des Etats de l’Afrique de l’Ouest (CEDEAO). L’approche de Lo et MacKinlay (1988) qui consiste à tester la forme faible de l’efficience informationnelle par le ratio de variance a été utilisé en plus de l’analyse graphique par les hypothèses d’homoscedasticité et d’heteroscedasticité. Les tests de stationnarité de Dickey Fuller augmenté et de Phillips Perron appliqués aux rendements des indices de référence ont aussi servi pour la vérification de l’hypothèse de la marche aléatoire. En outre, nous avons appliqué les tests de Ljung Box, de Box Pierce et de Runs pour mieux affiner nos résultats de recherche. Les résultats de tous les tests paramétriques et non paramétriques convergent et indiquent une inefficience au sens faible des marchés de la BRVM, du Ghana et du Nigéria.
In this paper, we developed an approach for the empirical testing of the relationship between the financing choices of companies and the abnormal returns obtained by their shareholders. We innovate by incorporating controls on how this relationship is affected by the capabilities of each funding source, at different levels of returns, through quantile regression. The estimation of the model for a sample of Brazilian companies indicates the inexistence of a significant relationship between abnormal returns and debt issuance. The same occurs between abnormal returns and equity issuance, with one exception: when there is a deficit of internal financing that extrapolates the available safe debt and the abnormal returns are, at least, median, this relationship becomes significant and positive. Considered as a whole, the results suggest an indifference to the sources of funds used by the company. Among the contributions, we highlight the incorporation of the aforementioned controls, which bridges the gap identified in the literature relating business financial flows and stock returns.
Apresenta-se, aqui, uma proposta de abordagem para o teste empírico da relação entre as escolhas de financiamento das empresas e os retornos anormais obtidos por seus acionistas. Inova-se com a incorporação de controles sobre como essa relação é afetada pelas capacidades de cada fonte de financiamento, em diferentes níveis de retornos, por meio de regressão quantílica. A estimação do modelo para uma amostra de empresas brasileiras indica a inexistência de relação significante entre retornos anormais e emissão de dívida. O mesmo ocorre entre retornos anormais e emissão de ações, com uma exceção: quando há déficit de financiamento interno que extrapola a dívida segura disponível e os retornos anormais são, ao menos, medianos, essa relação passa a ser significante e positiva. Analisados como um todo, os resultados sugerem certa indiferença às fontes de recursos utilizadas pela empresa. Destaca-se, dentre as contribuições, a incorporação dos controles aqui mencionados, que preenchem lacuna presente em análises que relacionam fluxos financeiros empresariais e retornos, na literatura revisada.
En el origen y evolución de las finanzas ha resultado oportuno alinear la teoría con la práctica, con el fin de promover argumentos sólidos. Sin embargo, esta perspectiva está lejos de ser aplicada, ya que es común que se empleen los aspectos prácticos sin adherir a su interpretación las hipótesis teóricas sobre la influencia, relación y asociatividad de los términos. En este sentido, este estudio se plantea como objetivo evaluar si el teorema Modigliani-Miller y sus supuestos son aplicables a las pymes pertenecientes al sector comercio del Ecuador. Para ello se usan dos etapas metodológicas. En primer lugar, se utilizan con modelos no supervisados mediante Partitioning Around Medoids, con el fin de clasificar y aumentar la homogeneidad en la interpretación de modelos. Y, en segundo lugar, se emplean modelos de interpretación lineal clasificados con el objeto de explicar la relación subyacente de los diversos indicadores con la estructura de capital. Con las iteraciones se puede concluir que la teoría que mayor adaptabilidad posee en este grupo de empresas es la del trade-off, la cual sugiere que sí existe una estructura adecuada, que resulta de la combinación de factores financieros.
Today's hyper-competitive business environment calls for alignment among all organisational aspects for the attainment of sustainable competitive advantage. The capital structure of firms is merely one of these aspects and comprises two primary types of funding: equity and debt. Given the diverse characteristics these possess, there isn't a single debt-to-equity ratio that works for all firms or even the same firm at different stages. To support firm objectives, this must be determined with respect to the firm's competitive position, stage of maturity, shareholder and management requirements, and the wider environment. This chapter will first review some key attributes of both equity and debt and then discuss various determinants that can impact a mix of the two and ultimately the firm's capital structure to support its competitive position.
In finance, capital structure decisions are vital financial decisions and indecisiveness on the capital structure may lead to financial distress and eventually to bankruptcy. This study examines the factors that determine the capital structure of Indian Pharmaceutical industry. Sample of the study consists of ten companies of Indian pharmaceutical industry. The companies have been selected on the basis of debt-equity ratio and the availability of data for the period of study. The data used are secondary in nature and it has been collected from ACE Equity database for a period of sixteen years from 1998-1999 to 2013-2014. Correlation, Regression and Step wise regression were the statistical tools used for the analysis of the data. The results of the study indicate that among the sixteen variables, two variables namely Solvency ratio and liquidity are the prominent variables which determine the capital structure of Indian Pharmaceutical industry.
Capital structure decisions are the key financial decisions of a firm since it affect return and risk of shareholders. This study examines the factors that determine the capital structure of Indian cement industry. Sample of the study consists of ten companies of Indian Cement Industry selected on the basis of stratified random sampling techniques. The data used are secondary in nature and it has been collected from ACE Equity database for a period of sixteen years from 1997-1998 to 2012-2013. Correlation, Regression and Stepwise Regression were used for the analysis of the data. The results of the study indicate that, among the fourteen variables, three variables namely Solvency ratio, Return on Equity and the Bank Rate are the prominent variables which determine the capital structure of the Indian Cement Industry.
The article deals with the valuation of equity, in particular of shares that cannot be valued on the basis of market data. The clean surplus model is one of the models that allows the valuation of shares that are not marketable. The article presents the role of accounting and theoretical foundations, as well as the concept and assumptions of the clean surplus model. The model is related to financial research. In addition, the model can be used to confirm the reliability of the figures.
This chapter examines the effect of board gender diversity on corporate debt maturity It analyses a gender-based behavioral dimension for corporate debt maturity choice. The study finds that firms with a larger female representation on the board of directors and managers tend to have a larger proportion of short-maturity debt. The evidence also shows that when a woman holds the position of chair of the board and simultaneously is a shareholder, the chance for issuing a short-term debt is higher. These findings meet the argument that boards with female directors and leaders are more likely to issue short-term debt. This method of financing decision can be considered as a corporate governance device with potential impact on reducing managerial opportunism.
Resumo O objetivo deste artigo é propor uma nova abordagem para teste empírico da teoria de pecking order que lide com problemas comumente reportados e aplicá-la à análise de empresas brasileiras. As principais lacunas preenchidas são a falta de definições claras para dívida segura e folga financeira; a falta de controle, nas regressões, pelas capacidades das fontes de recursos; e a não consideração das oportunidades futuras de investimento em análises de financiamento. Disponibilizam-se métodos que oferecem controles em relação às informações que as empresas possuem acerca das capacidades de cada fonte de recursos, quando das decisões de financiamento e que levam em consideração as oportunidades de investimento atuais e futuras. A metodologia proposta oferece um ambiente mais controlado para o teste da teoria de pecking order, que pode ser adaptado para estudar outros tópicos em finanças, apoiando avanços na compreensão da captação e uso de recursos por parte de empresas de capital aberto. São definidas quatro políticas integradas de financiamento e cash holdings, que levam a diferentes déficits (ou superávits) internos esperados. As relações entre esses déficits (ou superávits), em diferentes níveis, e os fluxos de recursos observados nas fontes externas são analisadas em regressões quantílicas cross-section e em painel, controlando pelas capacidades de cada fonte, em painéis de dados desbalanceados com 4.465 observações de 223 empresas. Por meio do estudo das relações entre os déficits (ou superávits) de financiamento interno esperados e os fluxos observados nas fontes externas de recursos, contribuímos com uma nova metodologia de testes de estrutura de capital e encontramos fortes evidências de que as empresas brasileiras de capital aberto seguem a teoria de pecking order.
This article aims to propose a new approach to the empirical testing of the pecking order theory that tackles commonly reported issues and apply it to the analysis of Brazilian companies. The main gaps bridged herein are the lack of clear definitions for safe debt and financial slack; the lack of control, in regressions, for the financing sources’ capabilities; and the failure to consider future investment opportunities in financing analyses. We adopt methods that enable controlling for the information the companies have about each financing source’s capabilities, at the time their financing decisions are made, while taking current and future investment opportunities into account. The proposed methodology offers a rather controlled environment to test the pecking order theory, which can be adapted to study other topics in finance, supporting advances in understanding the raising and allocation of funds by listed companies. Four integrated financing and cash holding policies are defined, which lead to different expected internal deficits (or surpluses). The relationships between these deficits (or surpluses), at different levels, and the flows that are observed at the external sources of funds are analyzed in cross-section and panel data quantile regressions, controlling for each source’s capabilities, in unbalanced data panels with 4,465 observations of 223 companies. By studying the relationships between expected internal financing deficits (or surpluses) and the flows that are observed at the external sources of funds, we contribute with a new capital structure testing methodology, and we find strong evidence that Brazilian listed companies follow the pecking order theory.
This paper explores the relationship between innovation investment and enterprise value of Chinese innovation board enterprises, as well as the adjustment effect of different equity incentive intensity and the validity period of equity incentive. After theoretical and empirical research, there is a significant relationship between the innovation investment and the enterprise value of the science and technology innovation board enterprises, and the equity incentive also affects this relationship to a certain extent. In this regard, this paper puts forward relevant suggestions from different angles, hoping to provide help to the future development and value enhancement of the science and technology innovation board enterprises.
La gouvernance d'entreprise s'est construite au tour de plusieurs théories qui décrivent les conséquences de l'opportunisme des dirigeants survenant suite aux relations conflictuelles qu'ils entretiennent avec les actionnaires. Afin de pallier ce problème et d'aligner les intérêts des dirigeants sur ceux des actionnaires, la gouvernance d'entreprise propose plusieurs mécanismes de gouvernance qui peuvent être internes ou externes.
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