financing decisions
159229640
Economic policy uncertainty and firms' investment and financing decisions in China
Abstract This paper designs a quasi natural experiment for the identification of causal relationships between economic policy uncertainty and firms' investment financing decisions using China's supply side structural reform in 2015. We construct measures of asset reversibility across industries using China's national input output flow table and match them with nonfinancial firms listed in China's A share stock market from 2013 to 2017. We then use the difference in difference estimation strategy to investigate two dimensional variations in periods (i.e. before and after 2015) and asset reversibility (i.e. high and low reversibility industries) The empirical results show that economic policy uncertainty significantly impedes real investment and reduces net debt issuance for private firms, whereas no such effects exist in state owned firms. Interestingly, however, economic policy uncertainty has no significant impact on firms' cash holding decisions.
Guanchun Liu Cheng-si Zhang
73695298
Corporate Cash Shortfalls and Financing Decisions
Immediate cash needs are the primary motive for net debt issuances and a highly important motive for net equity issuances. Net debt issuers immediately spend almost all of the proceeds, but net equity issuers save most of the proceeds. Conditional on issuing a security, corporate lifecycle, precautionary saving, market timing, and static tradeoff theories are important in explaining the debt versus equity choice, even for firms that are running out of cash.
Rongbing Huang Jay R Ritter
159016994
Macroeconomic conditions, financial constraints, and firms' financing decisions
We examine how time varying macroeconomic conditions affect firms' financing decisions. A principal components decomposition of several macroeconomic variables characterizes three phases of the business cycle relative to recessions: early recovery, robust recovery, and economic crest; a fourth represents "windows of opportunity" in capital markets that are unrelated to recessions. This characterization yields results that traditional approaches miss. Specifically, debt issuance exhibits a non monotonic pattern during the upward phase of the business cycle: it declines in robust recovery relative to recessions but peaks at the economic crest. Financially constrained firms issue more equity during windows of high stock market valuation, whereas unconstrained firms time debt issuance in response to debt market spreads.
Journal of Banking Finance
Xin Chang Yunling Chen Sudipto Shankar Dasgupta
213041380
Corporate Environmental Performance and Financing Decisions
We investigate the financing strategies of environmentally responsible firms to understand how they set target capital structures and make incremental financing decisions. Literature shows that firms with better environmental performance have lower risk and better access to financing. However, it is not obvious how these firms choose to finance their investments. Using an extensive dataset of U.S. firms, we find that firms with superior environmental performance have significantly lower debt ratios and use mostly short term debt for temporary financing needs. In doing so, environmentally responsible firms are able to achieve more tax savings and experience lower costs of financial distress. Our results provide new empirical facts about environmental performance and financing decisions, and they help explain the observed relationship between environmental performance and economic performance.
Business Ethics: A European Review
Mohammed Benlemlih Li Cai
204447551
Is integrated reporting associated with corporate financing decisions? Some empirical evidence
Purpose The emerging practice of integrated reporting (IR) has raised curiosity regarding how it impacts on firms and their stakeholders. The purpose of this paper is to examine whether a firm's decision to provide integrated reports is associated with its financing decisions and whether financial reporting quality mediates the relationship. Design/methodology/approach A usable sample of 832 firm year observations was employed based on a dataset drawn from companies listed on the Johannesburg Securities Exchange (JSE) for the period between 2009 and 2015. Findings The findings show that firms that provide integrated reports tend to have lower levels of leverage, and this effect is partially mediated through financial reporting quality. We further document that the partial effect of financial reporting quality on leverage is stronger for firms that provide integrated reports than is the case for other firms. The findings suggest that IR enables firms to employ equity financing, which is a more informationally sensitive source of capital than debt financing. Originality/value This study is the first to document evidence suggesting that management can draw on IR in devising optimal financing strategy.
Asian Review of Accounting
Tesfaye Taddese Lemma Arifur Rahman Khan Mohammad Badrul Muttakin Dessalegn Getie Mihret
199748398
Effect of Investment Decisions, Financing Decisions and Dividend Policy on Profitability and Value of The Firm
The purpose of this study is to analyze the effect of investment decisions, financing decisions and dividend policies both directly and indirectly on value of the firm mediated by profitability. The sample technique was purposive sampling by pooling data. Data were analyzed by Structural Equation Modeling. The results showed that investment decisions and financing decisions have a positive and significant effect on profitability and value of the firm so that the main objective of the company is to maximize the welfare of company owners by increasing value of the firm through increased profitability, while dividend policy has a negative and not significant effect on profitability and value of the firm directly and indirectly. Keywords: Investment Decisions, Financing Decisions, Dividend Policies, Profitability and Value of the Firm
Sitti Murniati H Abdul Rahman Mus H Baharuddin Semmaila Hj Andi Nirwana Nur
52888745
Environmental Risk Management Strategies and the Moderating Role of Corporate Social Responsibility in Project Financing Decisions
The purpose of this study is to examine the moderating role of corporate social responsibility (CSR) in project financing decisions. CSR has gained growing prominence in today's business era. This study investigates four environmental strategies and the credit risk assessment, stakeholder assessment and corporate social responsibility assessment impact on project financing decision. It explores three main issues related to environmental responsibility (planet) economic responsibility (profit) and social responsibility (people) The study is explanatory and quantitative, and both domestic and foreign banks participated in the data collection process. The sample size for the study is 491 participants. Data was collected through a simple random sampling technique and was analyzed by applying simple linear regression, confirmatory factor analysis (CFA) and structural equation modeling analysis (SEM) through the Statistical Package for the Social Sciences (SPSS) The study shows that the Pakistani banking sector is implementing environmental management policies. Foreign banks are more motivated towards corporate social responsibility practices. Cultural differences can influence a manager's attitude towards implementation of environmental risk management policies. The result shows that corporate social responsibility has a moderating role in project financing decisions and environmental risk management, stakeholder and credit risk assessment. All hypotheses has significant values.
Muddassar Sarfraz Wang Qun Li Hui Muhammad Ibrahim Abdullah
167420245
Investment and Financing Decisions of Private and Public Firms
This paper analyzes the investment and financing decisions of private and public firms. We focus on their use of cash flow and find that private firms have lower investment cash flow sensitivities and a stronger link between performance and shareholder distributions, a behavior that is consistent with private firms suffering from fewer agency conflicts. However, our results are only observable in countries with a highly developed and liquid stock market and low ownership concentration. It is the "dark side" of liquidity that reduces the incentives for shareholders to actively monitor managers and leads to inefficient cash flow allocation in public firms.
Wolfgang Drobetz Malte Janzen Iwan Meier
58021556
Optimal ordering and financing decisions under advance selling and delayed payment for a capital constrained supply chain
Abstract We compare two different financing strategies, advance selling, and delayed payment, for a supply chain with a capital constrained retailer facing uncertain demand. We firstly establish the retailer's optimal ordering and financing decisions under advance selling and delayed payment, respectively. In case of advance selling, we find that a strikingly different price discount rate should be adopted when the retailer changes to being capital constrained. In case of delayed payment, we analytically investigate the impact of the retailer's capital level on her own performance. Furthermore, we identify the conditions under which advance selling strategy or delayed payment strategy is preferable. In particular, advance selling strategy is preferable for the retailer when she is sufficiently capital constrained or customers are relatively price sensitive; In contrast, delayed payment strategy is preferable for the supplier and the entire supply chain when the retailer is sufficiently capital constrained.
J. Oper. Res. Soc.
Wei Jin Jianwen Luo Qinhong Zhang
84836570
Determinants of financing decisions and management implications: evidence from Spanish agricultural cooperatives
The unique characteristics of agricultural cooperatives are likely to affect the availability of the funding they can access. This paper analyses the determining factors behind the financing decisions made in these cooperatives, and the management and organisational implications these decisions have for these entities. Financial information obtained from a sample of 106 Spanish agricultural cooperatives was used to calculate the variables that modelled the research hypotheses, which were then introduced into regression models to determine which ones had a significant effect on their financing decisions. According to the economic theory of cooperativism, the results show that these entities come closer to the pecking order theory, i.e. policies that maximise the prices received by members to the detriment of the entity's self financing abilities, coupled with restrictions on cooperatives' equity capital that may lead them to use debt to fund growth. The results also show positive relationships between cooperatives' indebtedness and other factors, such as investments in non current assets, liquidity and cooperative size in terms of turnover per member.
Alicia Mateos-Ronco Sandra Guzman-Asuncion