Journal articles on the topic 'Long-Term Leverage'
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Holzhauer, Hunter, Xing Lu, Robert McLeod, and Jamshid Mehran. "How Long is Too Long? Volatility-Based Holding Strategies for Leveraged Bull and Bear ETFs." Journal of Finance Issues 12, no. 1 (December 31, 2013): 35–52. http://dx.doi.org/10.58886/jfi.v12i1.2294.
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Since their favorable introduction in the U.S. in 2006, leveraged bull and bear exchangetraded funds (ETFs) have provided short-term investors with the opportunity to express their directional views regarding a wide variety of indexes. However, unlike traditional unleveraged ETFs, leveraged ETFs are not intended to be used as long-term trading instruments. Instead, leveraged ETFs are designed to return a multiple of their benchmark index on a daily basis. Leveraged ETFs are structured only for short-term investors because these funds must be rebalanced each day to prevent leverage from becoming too excessive. This daily rebalancing complicates predicting long-term returns for leveraged ETFs due to both compounding and volatility. Using Morningstar return data and Chicago Board Options Exchange volatility index data, we investigate the effects of compounding and expected market volatility on specific longterm holding strategies for leveraged bull and bear ETF returns. We show that compounded leveraged returns over these holding periods are comparable to compounding the respective multiple of their underlying benchmark return with tracking error increasing over time and with leverage. Our results also show that expected market volatility has a significant effect on tracking error, after adjusting for expenses, and that this effect increases over time and with leverage. These results suggest that volatility indexes may be used by sophisticated investors to devise trading rules for long-term holding strategies for leveraged bull and bear ETFs.
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KOUT, Wided. "On the Properties of Leveraged ETFs." Finance Bulletin 1, no. 2 (June 7, 2019): 50–62. http://dx.doi.org/10.20870/fb.2018.1.2.2314.
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In this paper, we examine if, for a successful long-term investment of leveraged ETFs, it is necessary to adjust the level of leverage according to the fluctuations of the financial markets. For this purpose, we illustrate in particular the behavior of the Leverages ETF based on the optimal leverage introduced by Giese (2009). This latter one, which is based on the growth rate expectation, behaves as a function of the prevailing market environment. More precisely, it implies that the investor should use high leverage in low volatility markets and low leverage in high volatility markets. We study also how the degree of leverage depends on the main factor of market environment, namely the volatility of the market in force.
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Nugroho, Vina Christina, and Kim Sung Suk. "The Relationship Between Leverage, Maturity, and Investment Decision: Evidence From Emerging Markets." Organizations and Markets in Emerging Economies 10, no. 1 (May 28, 2019): 147–64. http://dx.doi.org/10.15388/omee.2019.10.00008.
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In this paper, we examine simultaneous relationship between leverage, maturity and over(under)- investment in emerging markets. We divide leverage into short term and long term to investigate the relation between current and future simultaneous relationship between leverage and investment decision, between debt maturity and investment decision, and between leverage and debt maturity. This research used twenty emerging market data from 2006 – 2016. First of all, our results show that firms in emerging markets prefer to use short-term debt to long-term debt to minimize the underinvestment problem. Second, there is a simultaneous non-linear relation between long-term leverage and growth opportunities in emerging markets firms. Third, long-term debt has non-linear effects on investment decision in emerging markets firms. It can be concluded that firms in emerging markets have different characteristics with regard to their capabilities to manage the interaction between leverage, maturity and investment compared to developed markets.
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Stoiljković, Aleksandra, Slavica Tomić, Bojan Leković, and Milenko Matić. "Determinants of Capital Structure: Empirical Evidence of Manufacturing Companies in the Republic of Serbia." Sustainability 15, no. 1 (December 31, 2022): 778. http://dx.doi.org/10.3390/su15010778.
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The subject of research in the paper is the capital structure of companies in the Republic of Serbia. The research sample consists of companies that operated in the manufacturing industry in the Republic of Serbia in the period 2006–2020. The aim of the research is to identify firm-specific variables that have significant influence on the capital structure of the analyzed companies. Using a panel data methodology, three leverage models were estimated: long-term leverage, short-term leverage, and total leverage. The research results confirm the importance of company size, profitability, tangibility, and risk in determining the capital structure of companies in the Republic of Serbia. However, the research results show that size, profitability, and tangibility of assets have the opposite effect on long-term leverage compared to short-term and total leverage. That is, the behavior of companies in the Republic of Serbia in the case of long-term leverage is in accordance with the predictions of the trade-off theory, while in the case of short-term and total leverage, the behavior of companies can be explained by the pecking order theory.
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Gomes, João, Urban Jermann, and Lukas Schmid. "Sticky Leverage." American Economic Review 106, no. 12 (December 1, 2016): 3800–3828. http://dx.doi.org/10.1257/aer.20130952.
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We develop a tractable general equilibrium model that captures the interplay between nominal long-term corporate debt, inflation, and real aggregates. We show that unanticipated inflation changes the real burden of debt and, more significantly, leads to a debt overhang that distorts future investment and production decisions. For these effects to be both large and very persistent, it is essential that debt maturity exceeds one period. We also show that interest rate rules can help stabilize our economy. (JEL E12, E31, E44, E52, G01, G32, G35)
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Kyereboah-Coleman, Anthony. "The determinants of capital structure of microfinance institutions in Ghana." South African Journal of Economic and Management Sciences 10, no. 2 (April 9, 2013): 270–79. http://dx.doi.org/10.4102/sajems.v10i2.587.
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Using a panel data methodology, this study examines the determinants of capital structure of 52 microfinance institutions (MFIs) in Ghana. The empirical results show that the MFIs are highly leveraged and that their capital structure is explained partly by standard finance theory and by other unconventional variables. Specifically, the study confirms that leverage is positively related to asset tangibility, with small MFIs using short-term and large MFIs using long-term debt. Though, the findings confirm that leverage is inversely related to risk, they also suggest that some MFIs enjoy long-term debt in spite of risk, while profitability is irrelevant in explaining the capital structure decisions of MFIs. Finally, the study shows that the reputation and board independence of MFIs significantly and positively affect their capital structure decisions.
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HUSSAIN, SADDAM, Chunjiao Yu, and Xiao Ling. "DETERMINANTS AFFECTING THE CAPITAL STRUCTURE DECISION OF A FIRM (A CASE STUDY OF TEXTILE SECTOR IN PAKISTAN)." International Journal of Management & Entrepreneurship Research 3, no. 3 (April 16, 2021): 118–33. http://dx.doi.org/10.51594/ijmer.v3i3.214.
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In this paper, we have examined the influence of specific factors based on a capital structure sample of five Pakistani textile sector (Leveraged) companies. The secondary data came from an analysis of the balance sheets of five companies listed on the Karachi Stock Exchange between 2004 and 2014.Regression and correlation analysis on the panel data shows that profitability is negatively correlated with leverage ratio, while tangibility is positively correlated with leverage ratio, but not significantly. Firm size and firm growth are also positively and significantly correlated with leverage. Return on equity is also negatively correlated with leverage. Our findings also show that large textile firms, compared with small ones, finance long-term through debt. Keywords: Capital Structure, Return on equity, Profitability, Tangibility, Leverage, Debt to equity ratio, Pakistan.
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Ghasemi, Maziar, and Nazrul Hisyam Ab Razak. "The Impact of Liquidity on the Capital Structure: Evidence from Malaysia." International Journal of Economics and Finance 8, no. 10 (September 23, 2016): 130. http://dx.doi.org/10.5539/ijef.v8n10p130.
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<p class="Content">For many years, liquidity of a company’s asset and its effect on the optimal debt level has been a controversial issue among scholars in finance studies. Prior studies have demonstrated that in some countries, asset liquidity increased debt level while in other countries liquid companies were less leveraged and more regularly financed by their own capital. This study investigates the effect of liquidity on the capital structure among the 300 listed companies in the Main market of Bursa Malaysia from 2005 to 2013 fiscal years. Pooled OLS is applied to investigate the impact of liquidity ratios on different Debt ratios. Liquidity of a company, which is the independent variable of this study, is measured by two common ratios which are: quick ratio and current ratio. Additionally, the Debt/Equity and Debt/Asset ratios represent the capital structures based on the short-term, long-term and total debt. The results show that all the measures of liquidity have significant impacts on all the proxies of leverage. According to the results, Quick ratio has a positive effect on leverage; although, Current ratio is negatively related to leverage. Moreover, short-term debt is more influenced by liquidity compared to long-term debt.</p>
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Lamichhane, Pitambar. "Nexus between firm fundamentals and financial leverage in Nepalese nonfinancial firms." Management Dynamics 23, no. 2 (December 31, 2020): 13–32. http://dx.doi.org/10.3126/md.v23i2.35801.
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This paper aims to analyze the nexus between firm fundamentals and financial leverage in Nepalese non-financial firms for the period 2000/01-2017/18 applying descriptive and causal comparative research design. Short-term, long-term and total financial leverage ratios are dependent variables and firm-fundamental variables are considered as explanatory variables. The result of this paper shows that Nepalese firms are highly levered. Regression results of this study reveals that profitability, earning variability, liquidity are major determinants of financial leverage. This study concludes that short-term financial leverage is positively affected by growth and earning variability whereas negatively affected by profitability, tangibility, and liquidity of firms. Similarly, long-term financial leverage is positively influenced by size, assets tangibility, and earning variability whereas negatively influenced by profitability and liquidity. Further, result of the paper reveals positive effect of assets tangibility and earning variability and negative effect of profitability and liquidity on total financial leverage. Finally, this paper concludes that firms’ non-debt tax shield and age of firms have no significant impact on financial leverage in Nepalese non-financial firms.
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Tsolas, Ioannis E. "Efficiency and Determinants of Capital Structure in the Greek Pharmaceutical, Cosmetic and Detergent Industries." Journal of Risk and Financial Management 14, no. 12 (December 2, 2021): 579. http://dx.doi.org/10.3390/jrfm14120579.
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The purpose of this paper is to investigate the relationship between a firm’s capital structure (i.e., leverage) and its operating environment, taking into account firm (i.e., efficiency, asset structure, profitability, size, age and risk) and industry effects. For a sample of Greek pharmaceutical, cosmetic and detergent (PCD) enterprises, firm efficiency was estimated using bootstrapped data envelopment analysis (DEA), and a leverage model was produced using ordinary least squares (OLS) regression. The findings confirm the significance of firm efficiency (i.e., the franchise-value hypothesis over the efficiency-risk hypothesis) and asset structure on leverage. Efficiency and overall and short-term leverage have a significant negative relationship, indicating that more efficient firms tend to choose a relatively low debt ratio. Pharma firms are more affected since they are less efficient than cosmetics and detergents firms. Furthermore, asset structure and short- and long- term leverage have a significant negative and positive relationship, respectively, indicating that the firms with more tangible assets have less short-term debt and more long-term debt in their capital structure. Cosmetic and detergent firms, which have slightly more tangible assets than pharma firms, appear to be able to substitute high-cost, short-term debt with the low-cost, long-term debt by using such assets as collateral.
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Meishan Chua, Nazrul Hisyam Ab Razak, Annuar Md Nassir, and Mohamed Hisham Yahya. "Speed of Adjustment towards Target Leverage in the ASEAN Countries." International Journal of Business and Society 22, no. 1 (March 24, 2021): 313–31. http://dx.doi.org/10.33736/ijbs.3177.2021.
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This study aims to investigate the speed of adjustment towards target total debt, long-term debt and short-term debt of the Association of South East Asian Nations (ASEAN) namely Malaysia, Singapore, Indonesia and Thailand. The sample of this study included 400 publicly listed firms from 2007 to 2017. Analyses were done with two-step System Generalised Method of Moments (SYS-GMM). Using large sample, the results showed that ASEAN firms are under-adjusted and adjusting with the speed of 30.95%, 37.49% and 40.11% toward total debt, long-term debt and short-term debt, accordingly. To close half of the leverage gap, ASEAN firms need 1.87, 1.62 and 1.35 years for total debt, long-term debt and short-term debt, respectively. The results based on individual country indicated that each country has its own adjustment speed to achieve the target leverage. This study suggests that ASEAN firms are attempting to alter the leverage to its optimum.
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Murwaningsari, Etty. "PENGARUH KESEMPATAN PERTUMBUHAN DAN INVESTASI JANGKA PANJANG TERHADAP LEVERAGE DAN FUTURE EARNINGS RESPONSE COEFFICIENT." Media Riset Bisnis & Manajemen 13, no. 1 (April 2, 2013): 1–19. http://dx.doi.org/10.25105/mrbm.v13i1.1121.
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The objectives of this research are to analyze direct effects of growth opportunity and long term investment towards future earnings response coefficient, as well as their indirect effects towards future earnings response coefficient through leverage as intervening variable. This research used secondary data from manufacturing companies listed in Indonesia Stock Exchange (IDX) between 2002-2011. Number of samplesused in this research are 111 companies. Method used in this researchis Structure Equation Model (SEM) processed using AMOS 6. Results from this research demonstrated that growth opportunityhas positive and significant effect whilst longterm investment andleverage have negative and significanteffects towardsfuture earnings response coefficient. On the other hand, growth opportunity and long term investment have positive significant towards leverage. Further testing proved that indirect effect is very weak. Control variableswhich have positive significant effect are fixed assets and institutional possession towards leverage and future earnings response coefficient. For company size variables and audit quality were proven to have no effect towards leverage and future earnings response coefficient.Keywords: Growth Opportunity, Long Term Investment,Leverage, Future Earnings Response Coefficient (FERC)
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Reid, Lindsay. "Finding a Peace that Lasts." Journal of Conflict Resolution 61, no. 7 (October 26, 2015): 1401–31. http://dx.doi.org/10.1177/0022002715611231.
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How does leverage vary across different mediators? What influence does this variation have on mediation outcomes? Extant literature has equated mediation leverage with material power. Leverage, however, is context dependent and comprised of two dimensions: capability and credibility. Capability leverage is a function of economic resources and power, while credibility leverage derives influence from historical and cultural ties that bolster a mediator’s contextual knowledge of a conflict. I hypothesize that mediators with capability leverage are more likely to achieve short-term success, whereas mediators with credibility leverage generate more durable settlements. I quantitatively test the hypotheses using civil war mediation attempts from 1989 to 2006. I find that capability leverage does indeed contribute to the achievement of short-term success; credibility leverage, however, generates a more durable peace. The results demonstrate the importance of understanding mediation leverage as a context-dependent concept and highlight the potential long-term benefits of softer forms of mediation.
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Gungoraydinoglu, Ali, and Özde Öztekin. "Financial Leverage and Debt Maturity Targeting: International Evidence." Journal of Risk and Financial Management 14, no. 9 (September 9, 2021): 437. http://dx.doi.org/10.3390/jrfm14090437.
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We provide evidence on leverage and debt maturity targeting in a large international setting. There are key differences in the relative importance of institutional factors in explaining actual as opposed to target capital structures. Targets and target deviations are plausibly influenced by the institutional environment. Firms from countries with strong legal institutions target lower leverage and higher long-term debt, whereas better-functioning financial systems result in lower target leverage and long-term debt. Financial crisis has shifted the desired structure of the securities toward shorter maturities and has led to more prevalent target deviations. Better institutions significantly decrease the likelihood of target deviations.
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Morresi, Ottorino. "Capital structure in blockholder-dominated firms: a closer look on corporate ownership and control." Corporate Ownership and Control 7, no. 3 (2010): 86–104. http://dx.doi.org/10.22495/cocv7i3p7.
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In countries where holding control takes on much relevance it is arguable that capital structure choices are shaped in response to ownership characteristics. These issues are explored in the Italian context being dominated by pyramidal groups and majority-controlled firms. The results show that (1) family firms are more indebted than non-family counterparts and, within family firms, (2) founding-family controlled ones are more reliant on debt; (3) family firms exploit control-enhancing devices along with long-term leverage; (4) higher cash flow rights are associated with a lower leverage; (5) institutional investors are more common in firms with a higher dependence on long-term debt; (6) decreasing trends of the long-term leverage over time seem to occur with upward paths of the votes-to-capital ratio
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Schad, Rainer. "Competition Between Volatility and Overall Market Gain and the Performance of Leveraged Index Funds." International Journal of Financial Research 9, no. 3 (May 6, 2018): 20. http://dx.doi.org/10.5430/ijfr.v9n3p20.
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A simple yet powerful mathematical model is developed for comparison of the performance of leveraged funds versus that of their underlying index. The model strictly separates the pure market volatility from the actual long term gain of the market. This allows to study the interplay between volatility of various amplitude and gain. The fund performance is analyzed for different factors of leverage and clear limits for still acceptable market volatility are identified. For low volatility values the performance of leveraged index funds significantly exceeds the performance of what the leverage factor would suggest, reaching gains as large as 7x the gain of the index for a 3x leveraged fund. This favorable regime quickly deteriorates for intermediate values of market volatility and produces increasingly negative returns once the daily fluctuations exceed 1.5 to 2%. The model provides a practical understanding of the risks and opportunities of leveraged funds.
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Nikica Grubišić. "LONG-TERM PROSPECT OF OIL AND GAS PRICES." Journal of Energy - Energija 58, no. 1 (September 15, 2022): 14–25. http://dx.doi.org/10.37798/2009581290.
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Ever since the market was formed, people have been interested in the future prices fluctuations. The one whose cognition was closer to the realization had leverage in comparison to other participants of the market competition. When it comes to oil, it becomes all the more interesting. Oil is a loyal companion of the cyclic development of capitalism, and earnings from changes in oil prices have become greater than the earnings from the production itself. Therefore, this paper endeavours to consider the long-term oil and gas prices prospect through capital market analysis rather than through the usual complex econometric models.
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Mulvey, John M., Cenk Ural, and Zhuojuan Zhang. "Improving performance for long-term investors: wide diversification, leverage, and overlay strategies." Quantitative Finance 7, no. 2 (April 2007): 175–87. http://dx.doi.org/10.1080/14697680701198028.
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D'Mello, Ranjan, Mark Gruskin, and Manoj Kulchania. "Shareholders valuation of long-term debt and decline in firms' leverage ratio." Journal of Corporate Finance 48 (February 2018): 352–74. http://dx.doi.org/10.1016/j.jcorpfin.2017.11.006.
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LEUNG, TIM, and HYUNGBIN PARK. "LONG-TERM GROWTH RATE OF EXPECTED UTILITY FOR LEVERAGED ETFs: MARTINGALE EXTRACTION APPROACH." International Journal of Theoretical and Applied Finance 20, no. 06 (September 2017): 1750037. http://dx.doi.org/10.1142/s0219024917500376.
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This paper studies the long-term growth rate of expected utility or expected return from holding a leveraged exchanged-traded fund (LETF), which is a constant proportion portfolio of the reference asset. We develop a martingale extraction approach to tackle the path-dependence in the expectation and determine the long-term growth rate through the eigenpair associated with the infinitesimal generator of a time-homogeneous Markovian diffusion. The long-term growth rates are derived explicitly under a number of models for the reference asset, including the geometric Brownian motion model, GARCH model, inverse GARCH model, extended CIR model, 3/2 model, quadratic model, as well as the Heston and [Formula: see text] stochastic volatility models. We also investigate the impact of stochastic interest rate such as the Vasicek model and the inverse GARCH short rate model. Additionally, we determine the optimal leverage ratio that maximizes the long-term growth rate, and examine the effects of model parameters.
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Dewasurendra, Sagara, Pedro Judice, and Qiji Zhu. "The Optimum Leverage Level of the Banking Sector." Risks 7, no. 2 (May 1, 2019): 51. http://dx.doi.org/10.3390/risks7020051.
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Banks make profits from the difference between short-term and long-term loan interest rates. To issue loans, banks raise funds from capital markets. Since the long-term loan rate is relatively stable, but short-term interest is usually variable, there is an interest rate risk. Therefore, banks need information about the optimal leverage strategies based on the current economic situation. Recent studies on the economic crisis by many economists showed that the crisis was due to too much leveraging by “big banks”. This leveraging turns out to be close to Kelly’s optimal point. It is known that Kelly’s strategy does not address risk adequately. We used the return–drawdown ratio and inflection point of Kelly’s cumulative return curve in a finite investment horizon to derive more conservative leverage levels. Moreover, we carried out a sensitivity analysis to determine strategies during a period of interest rates increase, which is the most important and risky period to leverage. Thus, we brought theoretical results closer to practical applications. Furthermore, by using the sensitivity analysis method, banks can change the allocation sizes to loans with different maturities to mediate the risks corresponding to different monetary policy environments. This provides bank managers flexible tools in mitigating risk.
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Chen, Caiyun, Xuefei Peng, and Liufang Yu. "Interest Rate Liberalization and Firm Leverage in China: Effects and Channels." Discrete Dynamics in Nature and Society 2023 (January 11, 2023): 1–20. http://dx.doi.org/10.1155/2023/7926625.
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We examine whether and how interest rate liberalization affects firm leverage in China. We find that interest rate liberalization exerts a negative effect on the leverage of firms. Specifically, firms experience a reduction in total leverage during the liberalization period, and firms’ short-term leverage declines more relative to long-term leverage. Mechanism analysis shows that firms with high information asymmetry enjoy more decline in leverage relative to firms with low information asymmetry, and further, liberalization policy enables the reduction in credit transaction costs, which indicates that the behavior of banks actively collecting corporate information is an important channel that interest rate liberalization impacts firm leverage. Finally, in additional tests, we find that the impact is more salient when firms are non-state-owned, and loss making. Compare to operating liabilities, firms experience more reduction in financial liability.
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Fardelia Safira, Della, and Tituk Diah Widajantie. "PENGARUH PROFITABILITAS, UKURAN PERUSAHAAN, LEVERAGE, DAN PENGUNGKAPAN CSR TERHADAP NILAI PERUSAHAAN (STUDI EMPIRIS PERUSAHAAN MANUFAKTUR YANG TERDAFTAR DI BEI TAHUN 2015-2019)." E-Bisnis : Jurnal Ilmiah Ekonomi dan Bisnis 14, no. 1 (July 1, 2021): 103–12. http://dx.doi.org/10.51903/e-bisnis.v14i1.374.
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The Company has short-term and long-term. In the short term the company aims to maximize current profits, while in the long term it aims to increase the value of the company itself. This research aimed to examine and analyze the effect of profitability, company size, leverage, and CSR disclosure to the value of manufacturing companies listed on the IDX in 2015-2019. While, the sampling collection technique used purposive sampling with 10 samples which fulfilled the criteria. The data analysis technique used multiple regression linear with SPSS (Statistical Product and Service Solutions). In this research, the testing variable of profitability used Return On Asset (ROA), company size used total assets, leverage used Debt to Equity Ratio (DER), CSR used Corporate Social Disclousure Index (CSDI), and the value of the company used Tobins’Q. The research result concluded that: (1) profitability effect the value of the company, (2) company size did not effect the value of the company, (3) leverage did not effect the value of the company, (4) CSR disclosure effect the value of the company.
Keywords: Profitability, Company Size, Leverage, CSR Disclosure, and the value of the company.
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Valipoor Hafshejani, Keyvan, Mojtaba Motalebian Chaleshtori, and Bahareh Banitalebi Dehkordi. "Study of the effect of short-term and long-term institutional shareholders on the capital structure of companies listed in the Tehran Stock Exchange." Journal of Management and Accounting Studies 4, no. 04 (July 21, 2019): 32–38. http://dx.doi.org/10.24200/jmas.vol4iss04pp32-38.
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Managers when making decisions regarding capital structure, look for a way of financing so that it can add to the company's value. Many researches have been done and different theories have been emerged to explain the best model to justify the formed capital structure. It is expected that institutional shareholders, because of their supervisory mechanism, affect decisions regarding the financing and somewhat decrease problems of representativeness; therefore, the aim of this study was to investigate the effect of short-term and long-term institutional shareholders on the capital structure. Methodology: In this regard, the level of financial leverage was used to examine changes in the capital structure. In order to analyze data, multiple linear regressions in the panel data were used. For this purpose, financial information of 98 listed companies in the Tehran Stock Exchange during the years 2010 to 2014 was collected. Results: The results suggested a positive and significant effect of the percentage of short-term institutional shareholders on financial leverage. Conclusion: Moreover, the percentage of long-term institutional shareholders had a significantly negative impact on the company's financial leverage.
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Çekrezi, Anila. "Impact Of Firm Specific Factors On Capital Structure Decision: An Empirical Study Of Albanian Firms." European Journal of Sustainable Development 2, no. 4 (April 1, 2013): 135. http://dx.doi.org/10.14207/ejsd.2013.v2n4p135.
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This paper attempts to explore the impact of firm specific factors on capital structuredecision for a sample of 65 non- listed firms, which operate in Albania, over the period2008-2011.In this paper are used three capital structure measures ; short –term debt tototal assets (STDA), long- term debt to total assets (LTDA) and total debt to total assets(TDTA) as dependent variables and four dependent variables: tangibility(TANG),liquidity (LIQ), profitability(ROA=return on assets) and size (SIZE). The investigationuses panel data procedure and the data are taken from balance sheets and include onlyaccounting measures on the firm’s leverage. This study found that tangibility (the ratio offixed assets to total assets), liquidity (the ratio of current assets to current liabilities)profitability (the ratio of earnings after taxes to total assets) and size (natural logarithm oftotal assets) have a significant impact on leverage. Also empirical evidence reveals asignificant negative relation of ROA to leverage and a significant positive relation ofSIZE to leverage. And the second objective of this study is to identify the impact ofindustry classification on firm’s leverage, using a dummy variable for the trade sector. Soone of the hypothesis tested is if financial leverage is independent of industryclassification. Results reveal that long term debt to total assets and total debt to totalassets ratios are significantly different across Albanian industries.
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Rasool, Faiz, Kashif Hamid, and Muhammad Yasir Saeed. "Corporate Policy and Capital Structure Decisions: Empirical Evidence from Non- Financial Sectors of Pakistan." Global Economics Review VI, no. II (June 30, 2021): 121–30. http://dx.doi.org/10.31703/ger.2021(vi-ii).10.
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Capital structure is expressed as the mixture of long-term debt and equity that a company uses in its financing composition. The importance of long-term financing in any business cannot be misjudged because it identifies the choice of optimal financing mix for the long-run survival of the business. The basic purpose of this study is to identify the behavior of financing composition through main corporate financial decisions in the non-financial sector of Pakistan. Data has been taken for 52 non-financial companies for 2015-2020. Outcomes of the study have been retrieved through OLS, Fixed Effect, Random Effect Model and Housman Test by using Views software. The main corporate financial policies regarding leverage decisions include a firm’s profitability, earning volatility, firm size, non-debt tax shield, and liquidity. Results identified that earning volatility, liquidity and profitability of the firm have a negative but significantly related to leverage; on the other hand,the study denotes that assets tangibility, not debt tax shield, firm size positively related to leverage. However as per fixed effect model earning volatility, liquidity and profitability has negative significant impact on leverage whereas, assets tangibility and firm size has positive significant impact on leverage. It is concluded that earning validity,liquidity and profitability are negative determinants of the firm’s leverage. Whereas, assets tangibility and firm size are the positive determinants of the leverage. The corporate policy regarding these determinants should be well recognized while designing the capital structure of the organization.
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Liew, Jim Kyung-Soo, and Ahmad Ajakh. "Volatility-Adjusted 60/40 versus 100—New Risk Investing Paradigm." Journal of Risk and Financial Management 13, no. 9 (August 20, 2020): 190. http://dx.doi.org/10.3390/jrfm13090190.
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In this study we examine the volatility-adjusted 60/40 rule at the individual company level. We document that strong diversification benefits exist over the long-term, and that both the equity and corporate bonds exhibit positive expected drifts. For our sample of 30 large-cap companies, given that corporate bond positions have shown less volatility than the equity position, we leveraged the resultant portfolio of 60/40 to match that of the equity position. When we compare the two investments, we document an outperformance of 100 to 200 bps per year, even after we account for the leverage costs of 100 bps. We believe our work will open up a new risk investing paradigm for those seeking long-term advantages.
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Rehman, Ajid ur. "Mean reverting leverage policy in China: theory and evidence from industrial and sectorial level unit root analysis." Journal of Asia Business Studies 12, no. 3 (August 6, 2018): 290–306. http://dx.doi.org/10.1108/jabs-10-2016-0138.
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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.
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Kizildag, Murat, and Ozgur Ozdemir. "Underlying factors of ups and downs in financial leverage overtime." Tourism Economics 23, no. 6 (December 21, 2016): 1321–42. http://dx.doi.org/10.1177/1354816616683579.
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We present new stylized facts on the underlying reasons of US hospitality and tourism firms’ fluctuating levels of financial leverage during the period 1990–2015 using comprehensive micro- and macro-level accounting data overtime. To characterize this puzzling phenomenon, we quantified firm-specific and macroeconomic parameters and a diverse set of leverage proxies at various time frames with various structures. We further took account of the recent economic upheaval in our analyses so that we can compare firms’ leverage behavior as “before” and “after” the major economic turmoil in 2007–2009 periods. The primary themes of our arguments were that firm-specific leverage factors significantly influenced short-term leverage, while long-term leverage was mostly determined by macroeconomic indicators. Beyond that, book leverage was more favorable across firms than market leverage. Last, hospitality and tourism firms substantially extended their borrowing capacities, aggressively grew their leverage ratios, and dramatically increased collateral values leading to lower cost of borrowing due to relaxed lending standards in the aftermath of the recent upheaval. Our article complements previous work by examining whether leverage factors demonstrate discrepancies from the prior findings and by proposing rigorous industry-specific outlook and solution for the financial leverage literature.
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Fan, Joseph P. H., Sheridan Titman, and Garry Twite. "An International Comparison of Capital Structure and Debt Maturity Choices." Journal of Financial and Quantitative Analysis 47, no. 1 (December 1, 2011): 23–56. http://dx.doi.org/10.1017/s0022109011000597.
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AbstractThis study examines how the institutional environment influences capital structure and debt maturity choices of firms in 39 developed and developing countries. We find that a country’s legal and tax system, corruption, and the preferences of capital suppliers explain a significant portion of the variation in leverage and debt maturity ratios. Specifically, firms in more corrupt countries and those with weaker laws tend to use more debt, especially short-term debt; explicit bankruptcy codes and deposit insurance are associated with higher leverage and more long-term debt. More debt is used in countries where there is a greater tax gain from leverage.
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Elsa, Theresia, and Sansaloni Butar Butar. "Determinants of Debt Maturity Structure: Evidence from Indonesian Companies." Jurnal Akuntansi Bisnis 20, no. 1 (March 30, 2022): 17–28. http://dx.doi.org/10.24167/jab.v20i1.4312.
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AbstractThis study examines the effect of earnings management, firm size, asset maturity, and leverage on the debt maturity structure. The debt maturity structure refers to the proportion of long-term debt to total debt. The choice between long-term and short-term debt has its own consequences. Long-term debt bears higher debt costs but the payback period is long enough to make it easier for companies to pay debt installments. Samples were taken from public companies listed on the Indonesia Stock Exchange (IDX) in 2016-2020 that met the sample criteria. The final observations that meet the sample criteria during the research period are 2,229 company years. Hypotheses were tested using multiple linear regression and the results showed that earnings management had a negative effect on the debt maturity structure. These results indicate that the company prefers short-term debt rather than long-term debt. In addition, firm size and asset maturity have a positive effect on the structure of debt maturity and leverage has no effect on the structure of debt maturity.AbstrakPenelitian ini menguji pengaruh manajemen laba, ukuran perusahaan, maturitas aset, dan leverage terhadap struktur maturitas utang. Struktur jatuh tempo utang mengacu pada proporsi utang jangka panjang terhadap total utang. Pilihan antara utang jangka panjang dan jangka pendek memiliki konsekuensi tersendiri. Utang jangka panjang menanggung biaya utang yang lebih tinggi namun payback periodnya cukup lama sehingga memudahkan perusahaan dalam membayar cicilan utang. Sampel diambil dari perusahaan publik yang terdaftar di Bursa Efek Indonesia (BEI) tahun 2016-2020 yang memenuhi kriteria sampel. Observasi akhir yang memenuhi kriteria sampel selama periode penelitian adalah 2.229 tahun perusahaan. Pengujian hipotesis menggunakan regresi linier berganda dan hasilnya menunjukkan bahwa manajemen laba berpengaruh negatif terhadap struktur jatuh tempo utang. Hasil ini menunjukkan bahwa perusahaan lebih menyukai utang jangka pendek daripada utang jangka panjang. Selain itu, ukuran perusahaan dan jatuh tempo aset berpengaruh positif terhadap struktur jatuh tempo utang dan leverage tidak berpengaruh terhadap struktur jatuh tempo utang.
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Rozendaal, Jeroen C., Yannick Malevergne, and Didier Sornette. "Macroeconomic Dynamics of Assets, Leverage and Trust." International Journal of Bifurcation and Chaos 26, no. 08 (July 2016): 1650133. http://dx.doi.org/10.1142/s0218127416501339.
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A macroeconomic model based on the economic variables (i) assets, (ii) leverage (defined as debt over asset) and (iii) trust (defined as the maximum sustainable leverage) is proposed to investigate the role of credit in the dynamics of economic growth, and how credit may be associated with both economic performance and confidence. Our first notable finding is the mechanism of reward/penalty associated with patience, as quantified by the return on assets. In regular economies where the EBITA/Assets ratio is larger than the cost of debt, starting with a trust higher than leverage results in the highest long-term return on assets (which can be seen as a proxy for economic growth). Therefore, patient economies that first build trust and then increase leverage are positively rewarded. Our second main finding concerns a recommendation for the reaction of a central bank to an external shock that affects negatively the economic growth. We find that late policy intervention in the model economy results in the highest long-term return on assets. However, this comes at the cost of suffering longer from the crisis until the intervention occurs. The phenomenon that late intervention is most effective to attain a high long-term return on assets can be ascribed to the fact that postponing intervention allows trust to increase first, and it is most effective to intervene when trust is high. These results are derived from two fundamental assumptions underlying our model: (a) trust tends to increase when it is above leverage; (b) economic agents learn optimally to adjust debt for a given level of trust and amount of assets. Using a Markov Switching Model for the EBITA/Assets ratio, we have successfully calibrated our model to the empirical data of the return on equity of the EURO STOXX 50 for the time period 2000–2013. We find that dynamics of leverage and trust can be highly nonmonotonous with curved trajectories, as a result of the nonlinear coupling between the variables. This has an important implication for policy makers, suggesting that simple linear forecasting can be deceiving in some regimes and may lead to inappropriate policy decisions.
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Napu, Fithriah. "PENGARUH LEVERAGE KEUANGAN TERHADAP NILAI PERUSAHAAN PADA PERUSAHAAN MANUFAKTUR FOOD AND BEVERAGE DI BURSA EFEK INDONESIA." Mega Aktiva: Jurnal Ekonomi dan Manajemen 8, no. 2 (December 23, 2019): 121. http://dx.doi.org/10.32833/majem.v8i2.95.
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The purpose of this study is to examine and analyze the effect of financial leverage consisting of LDE (Long Term Debt To Equity Ratio), DE (Debt To Equity Ratio), DSR (Debt-Size Ratio), DM (Debt Maturity Ratio) Against Manufacturing Company Value On the Indonesian Stock Exchange. The sample used in this study 51 came from the financial statements of 17 manufacturing companies listed on the Indonesia Stock Exchange from 2005 to 2007 and met established criteria, with each company totaling 3 financial statements (three years). The analysis technique used is multiple regression analysis, with the help of SPSS version 16 software. The results of the study suggest that (1) Financial leverage consisting of LDE (Long term debt to equity ratio), DE (Debt to equity ratio), DSR (Debt-size ratio), DM (Debt maturity ratio) simultaneously affect Company Value Manufacturing on the Indonesia Stock Exchange (IDX). (2). Partially the influence of financial leverage variables that significantly influence the value of the company in this study are DSR (Debt-size ratio) and DM (Debt maturity ratio), while LDE (Long term debt to equity ratio), DE (Debt to equity ratio do not have significant influence on Company Value (3) The coefficient of determination (R2) of 0.365 indicates that the accuracy of the model for the sake of prediction is enough to consider factors Financial leverage can contribute an influence of 36.5% on Company Value.
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Pan, Zhiyuan, and Li Liu. "Forecasting stock return volatility: A comparison between the roles of short-term and long-term leverage effects." Physica A: Statistical Mechanics and its Applications 492 (February 2018): 168–80. http://dx.doi.org/10.1016/j.physa.2017.09.030.
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Park, Kwangmin, and SooCheong (Shawn) Jang. "Is franchising an additional financing source for franchisors? A Blinder–Oaxaca decomposition analysis." Tourism Economics 24, no. 5 (February 13, 2018): 541–59. http://dx.doi.org/10.1177/1354816618757561.
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Numerous studies have used agency theory (Jensen and Meckling, 1976) and capital scarcity theory (Oxenfeldt and Kelly, 1969) to explain franchising motivations. Although both theories may in part account for why firms choose to franchise, past studies have not seriously considered the potential relationship between franchising and capital structures. Using Blinder–Oaxaca decomposition analysis, this study examined the impact of franchising on short- and long-term debt leverage. The final sample included 191 restaurant firms from 1980 to 2015. Sixty-five firms were non-franchise firms, while 126 firms engaged in the franchising business. The results of the Blinder–Oaxaca decomposition analysis showed that franchising has a significant effect on decreasing long-term debts and confirmed that franchising plays an important role as an additional source of long-term capital. Consequently, the capital scarcity theory is supported as one aspect of long-term debt leverage. However, franchise restaurant firms have larger short-term debt than non-franchise firms, although it is merely marginally significant. This contradicts capital scarcity theory but is in accordance with some past studies (e.g. Norton, 1988; 1995). This implies that franchisors constantly need short-term capital to support franchisees.
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Kahle, Kathleen M., and Kuldeep Shastri. "Firm Performance, Capital Structure, and the Tax Benefits of Employee Stock Options." Journal of Financial and Quantitative Analysis 40, no. 1 (March 2005): 135–60. http://dx.doi.org/10.1017/s0022109000001770.
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AbstractThis paper analyzes the relation between the capital structure of a firm and the tax benefits realized from the exercise of stock options. Theory suggests that firms with tax benefits from the exercise of stock options should carry less debt since tax benefits are a non-debt tax shield. We find that both long- and short-term debt ratios are negatively related to the size of tax benefits from option exercise. Moreover, one-year changes in long-term leverage are negatively related to changes in the number of options exercised. Such a relation does not exist for changes in short-term leverage. Finally, firms with option-related tax benefits tend to issue equity, with the net amount of equity issued an increasing function of these tax benefits.
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Februansyah, Rivaldy, and Ika Yanuarti. "Pengaruh Financial Leverage terhadap Financial Performance pada Sektor Industri Manufaktur yang Terdaftar di Bursa Efek Indonesia (BEI) Periode 2015." Jurnal Manajemen 9, no. 2 (March 16, 2018): 33–48. http://dx.doi.org/10.31937/manajemen.v9i2.719.
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The manufacturing sector is one of the most dominant economic sectors in in achieving growth and development in Indonesia. It needs adequate fund to develop its business. The sources of fund are from internal and external. The firm usually optimized the usage of internal fund prior to external fund. The internal fund comes from equity while the external funds are from debt and stock. Debt is also known as financial leverage. There is a phenomenon that the usage of debt increased the firm’s financial performance, since interest on debt could lower the payment of tax (tax shield). On the other side, the higher the financial leverage the higher the risk of bankruptcy. This research aims to analyze whether financial leverage has an influence on financial performance in the manufacturing sector listed on the Indonesia Stock Exchange (IDX) period 2015. The method of analysis used in this research is multiple linear regression analysis. This research uses quantitative approach with a sample of 140 listed companies in the manufacturing industry. The firm’s financial performance could be measured by the financial ratios. Financial Leverage ratios are ratios that measure the ability of firm’s to meet its financial obligation and the level of usage debt as compared to equity. There are several financial leverage ratios that used in this research, such as Debt Ratio (DR), Debt to Equity Ratio (DER), Interest Coverage Ratio (ICR), and Long Term Debt Ratio (LTDR). Financial performance indicates the ability of firm to generate profit and measured by Profitability Ratio. Return on Asset (ROA) is one of the Profitability Ratio. The statistical result shows that Debt Ratio (DR) negatively affect Return on Asset (ROA) and Interest Coverage Ratio (ICR) positively affect Return on Asset (ROA). Meanwhile, Debt to Equity Ratio (DER) and Long Term Debt Ratio (LTDR) did not affect Return on Asset (ROA). On the other hand, result shows that Debt Ratio (DR), Debt to Equity Ratio (DER), Interest Coverage Ratio (ICR), and Long Term Debt Ratio (LTDR) affect Return on Asset (ROA) simultaneously.
Keywords: Financial Leverage, Debt Ratio (DR), Debt to Equity Ratio (DER), Interest Coverage Ratio (ICR), Long Term Debt Ratio (LTDR), Financial Performance, Return on Assets (ROA)
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Oware, Kofi Mintah, and T. Mallikarjunappa. "Corporate social responsibility and debt financing of listed firms: a quantile regression approach." Journal of Financial Reporting and Accounting 19, no. 4 (February 9, 2021): 615–39. http://dx.doi.org/10.1108/jfra-07-2020-0202.
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Purpose The purpose of the study is to examine the effect of corporate social responsibility (CSR) on debt financing (natural logarithm of debt and leverage ratios) of listed firms. Design/methodology/approach Using content analysis for data extraction, the study examines listed firms on the Bombay Stock Exchange (BSE) from 2010 to 2019 financial year. It uses a quantile regression and panel fixed effect regression as the model's application. Findings The study shows that CSR expenditure has a positive and strong correlation with debt financing (i.e. natural logarithm of long-term and short-term debts). The first findings show that CSR expenditure has a negative and statistically significant association with total leverage ratio, using conditional mean and median percentile. However, there is a positive and statistically significant association between CSR expenditure and long-term leverage ratio at the 25th and 50th percentile. The second findings show that CSR expenditure has a positive and statistically significant association with long-term debt but an insignificant association with short-term debt and total debt under a conditional mean average. The application of quantile regression addresses the values that fall outside the confidence interval and therefore document a positive and statistically significant association between CSR expenditure and debt financing (short-term debt, long-term debt and total debt) at the 25th, 50th and 75th percentile. Originality/value The introduction of quantile regression gives a novelty in CSR and debt financing study, which to the best of the authors’ knowledge, has not received any attention. Similarly, firms have better information on how to position their CSR expenditure to attract providers of debt financing.
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Wright, Joseph D. "Technology: The classic Canadian dilemma—Short-term gain for long-term pain!" Forestry Chronicle 78, no. 1 (February 1, 2002): 124–27. http://dx.doi.org/10.5558/tfc78124-1.
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In a globally competitive world, innovation is an essential component of long-term success. For commodity industries in particular, global companies will dominate, with niche-market, nimble, small companies providing specialized products to select customers. Both will require technology. To survive in international markets, Canadian pulp and paper producers must develop integrated business and technology strategies to meet global competition from low-cost fibres and state-of-the-art mills. For competitive positioning, and for increased returns on investment, the mandatory progress in cost reduction must be balanced with revenue growth through new product innovations. Companies can leverage their limited resources through participation in the programs of a research institute. Paprican, as an example, provides access to broadly based technical skills in areas related to cost reduction, and environmental sustainability. At the same time, it delivers world-class, strategically driven research that enables new product design and development. For technologies related to public policy directives such as environmental performance or global warming initiatives, governments must participate as stakeholders in the solutions to their issues. Key words: pulp and paper industry, international competitiveness, research and development, research institutes, innovation, return on investment, multidisciplinary research, public policy
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Khan, Naveed, Hamid Ullah, and Mustafa Afeef. "The Effect of Leverage and Debt Maturity on the Corporate Financial Performance: Evidence from Non Financial Firms Listed at Pakistan Stock Exchange." Sustainable Business and Society in Emerging Economies 3, no. 1 (March 31, 2021): 35–47. http://dx.doi.org/10.26710/sbsee.v3i1.1829.
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Purpose This study examined the effect of leverage, debt maturity on corporate financial performance of non-financial firms listed at the Pakistan Stock Exchange. Targeted population of this study was 100 firm listed at PSX as KSE-100 index out of which 74 non-financial firms were selected from 28 different sectors for the period of 5 years 2013 to 2017.
Design/Methodology/Approach: Financial performance measured by ROA, ROE, while leverage, short term leverage, long term leverage taken as independent variables, four variables were taken as control which are size, current ratio, sale growth, tangibility. On the basis of Hausman test, results of random effect model were found appropriate.
Findings: ST and LT Leverage have a negative significant and insignificant effect on financial performance (ROA) respectively, moreover long term leverage has a positive and significant but short has a negative and insignificant effect on ROE. The results of the control variables showed that size has a negative and significant effect on ROA and ROE, whereas current ratio has insignificant and negative effect on ROA, ROE. Sale growth has a positive and insignificant effect on firms ROA and ROE. Tangibility has insignificant and negative effect on financial performance.
Implications/Originality/Value: This study is consistent with traditional trade-off theory and recommended that management of the non-financial firms listed at the PSX should employ minimal debt level or use an optimal level of capital structure and also to attract good management thus to improve their financial performance.
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Nini, Nini, Dina Patrisia, and Agus Nurofik. "The Effect of Capital Structure on Company Financial Performance." Jurnal Economia 16, no. 2 (October 30, 2020): 173–83. http://dx.doi.org/10.21831/economia.v16i2.30661.
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Abstract: This study aims to examine the effect of capital structure on the company's financial performance particularly in manufacturing companies listed on the Indonesia Stock Exchange for the 4 years period from 2014 to 2018. Capital structure is measured by Market Total Leverage (MTLEV), Market Long-Term Leverage (MLLEV) and Market Short-Term Leverage (MSLEV). On the other hand, the company's financial performance is measured by Return on Equity (ROE) and Price to Book Value (PBV). The populations in this study are manufacturing companies listed on the Indonesia Stock Exchange and the selection of samples was determined by purposive sampling method, with the final samples as many as 333 company-years. The type of data used is secondary data from IDX using multiple regression analysis methods. The results of the analysis show that the capital structure has negative and significant effect on the company's financial performance in each model.Keywords: capital structure, company financial performance Pengaruh Struktur Modal Terhadap Kinerja Keuangan PerusahaanAbstrak: Penelitian ini bertujuan untuk menguji pengaruh struktur modal terhadap kinerja keuangan perusahaan pada perusahaan manufaktur yang terdaftar di Bursa Efek Indonesia periode 2014-2018. Struktur modal diukur dengan Market Total Leverage (MTLEV), Market Long-Term Leverage (MLLEV) dan Market Short-Term Leverage (MSLEV). Sementara kinerja keuangan perusahaan diukur dengan Return on Equity (ROE) dan Price to Book Value (PBV). Populasi pada penelitian ini adalah perusahaan manufaktur yang terdaftar di Bursa Efek Indonesia. Sampel ditentukan dengan metode purposive sampling, kemudian sampel akhir diperoleh sebanyak 333 perusahaan-tahun. Jenis data yang digunakan adalah data sekunder dari IDX dengan menggunakan metode analisis regresi berganda. Hasil analisis menunjukan bahwa struktur modal berpengaruh negatif dan signifikan terhadap kinerja keuangan perusahaan disetiap model.Keywords: struktur modal, kinerja keuangan perusahaan
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Robinson, Brian. "Expert systems in agriculture and long-term research." Canadian Journal of Plant Science 76, no. 4 (October 1, 1996): 611–17. http://dx.doi.org/10.4141/cjps96-109.
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Expert systems (ES) technology has many existing and potential uses as input into the agricultural production process. ES are simply computer programs that attempt to emulate human expertise for problem solving purposes. This technology is well suited to agricultural problem solving because of its ability to encode existing knowledge within specific application areas and then apply this knowledge within the problem solving process. ES effectively leverage management's input into agricultural production systems by allowing for the assimilation of all available knowledge pertinent to the task at hand. There are many types of agricultural ES and these can generally be categorized into: Crop Management Advisors, Livestock Management Advisors, Planning Systems, Pest Management Sytems, Diagnostic Systems, Conser-vation/Engineering Systems, Process Control Systems and Marketing Advisory Systems. The cost of ES development can be high. Potential projects, therefore, should be subjected to a benefit/cost analysis to ensure that development efforts are well targeted. ES development and agricultural research are complementary processes and should become more coordinated within an integrated knowledge production and implementation cycle. Key words: Expert systems, knowledge, management, agriculture, research
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Edwards, Franklin R. "Hedge Funds and the Collapse of Long-Term Capital Management." Journal of Economic Perspectives 13, no. 2 (May 1, 1999): 189–210. http://dx.doi.org/10.1257/jep.13.2.189.
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The Fed-engineered rescue of Long-Term Capital Management (LTCM) in September 1998 set off alarms throughout financial markets about the activities of hedge funds and the stability of financial markets in general. With only $4.8 billion in equity, LTCM managed to leverage itself to the hilt by borrowing more than $125 billion from banks and securities firms and entering into derivatives contracts totaling more than $1 trillion (notional). When LTCM's speculations went sour in the summer of 1998, the impending liquidation of LTCM's portfolio threatened to destabilize financial markets throughout the world. Public policy response to LTCM should focus on risks of systemic fragility and ways in which bank regulation can be improved.
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Ross, Chase P. "The Collateral Premium and Levered Safe-Asset Production." Finance and Economics Discussion Series, no. 2022-046 (July 2022): 1–62. http://dx.doi.org/10.17016/feds.2022.046.
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Banks are vital suppliers of money-like safe assets, which they produce by issuing short-term liabilities and pledging collateral. But their ability to create safe assets varies over time as leverage constraints fluctuate. I present a model to describe private safe-asset production when intermediaries face leverage constraints. I measure bank leverage constraints using bank-intermediated basis trades. The collateral premium — a strategy long Treasuries used more often as repo collateral and short Treasuries used less often — has a positive expected return of 22 basis points per year because the collateral premium compensates for bank leverage risk.
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Qiao, Frank, Z. Michael Wang, and Jim McCarthy. "Managing long-term capacity in the age of conservation." Water Supply 13, no. 5 (September 1, 2013): 1188–94. http://dx.doi.org/10.2166/ws.2013.112.
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This paper illustrates the long-term planning challenge for water utilities in the age of conservation using detailed operating data of three sampling entities from the mid 1990s to 2009. The induced behavioral change from conservation measures is found to be of a permanent nature and the unit consumption to be in long-term descent. This in turn may call for a paradigm change in pricing and capacity planning for utilities. The ever-declining per capita consumption alters many commonly acknowledged norms for utilities, in particular for fast growing ones that may have taken on additional financial leverage to support previously anticipated growth. If not managed properly, the full cost recovery mechanism of pricing may force those utilities into an unsustainable future of ever-decreasing total demand and ever-increasing cash flow shortfall. Collection of more detailed water demand data in a timely fashion may prove to be a necessary exercise for sound management of median to large water utilities.
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ELbekpashy, Mostafa S., and Khairy ELgiziry. "Investigating the Impact of Firm Characteristics on Capital Structure of Quoted and Unquoted SMEs." Accounting and Finance Research 7, no. 1 (December 4, 2017): 144. http://dx.doi.org/10.5430/afr.v7n1p144.
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This study aims to enhance the understanding of SMEs’ capital structure in Egypt. The study tests the impact of asset structure, size, profitability, liquidity, growth, age, and ownership structure as independent variables on the leverage ratio. Three alternative variables are used as a proxy for leverage: total, long term, and short term leverage. The study further investigates the significance of the relationship between the economic sector as a control variable and the three leverage ratios. Multiple regression analysis is used to develop the explanatory models for two samples of SMEs. The first sample comprises of 28 firms, which represent all listed and traded SMEs in Egypt as of 31/12/2016, covering the period from 2008 till 2015. The second sample includes panel data of 95 non-quoted SMEs. The overall model recommends that all the independent and control variables are significantly explaining the capital structure decisions of SMEs in Egypt. The results of the two samples show a high degree of similarities. The managerial ownership is found to be negatively correlated to short term leverage, while the block holding ownership is positively correlated to the total and the short term leverage. Moreover, the sector shows a significant relationship with the capital structure. The results of the study demonstrate that the best explanation of the SMEs behavior in Egypt is the pecking order theory. Finally, the study introduces useful recommendations for policy makers and SMEs’ management in Egypt.
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Lucky, Lucky Anyike, and Agilebu Ogechi Michael. "Leverage and Corporate Financial Distress in Nigeria: A Panel Data Analysis." Asian Finance & Banking Review 3, no. 2 (August 10, 2019): 26–38. http://dx.doi.org/10.46281/asfbr.v3i2.370.
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This study examined the effect leverage on corporate financial distress of quoted manufacturing firms in Nigeria. The objective is to examine if financial leverage have any effect on financial distress of the Nigeria firms. Cross sectional data was sourced from financial statement of ten quoted manufacturing firms. Z-Score and Changes in operating profits was proxy for corporate financial distress while debt equity ratio, short, long term debt and total debt to total assets were proxy for leverage. After cross examination of the validity of the pooled effect, fixed effect and the random effect, the study accepts the fixed effect model. Findings reveal that financial leverage have positive effect on financial distress measured by the z-score while total debt ratio and debt equity ratio have positive effect on financial distress measured by changes on operating profits while short term debt and long term debt have negative effect on operating profits. From the regression summary, the study concludes that leverage have significant effect on corporate financial distress. We recommend that Financial structure of the manufacturing firms ought to be adequately planned to safeguard the interest of the equity holders, shareholders and financial requirements of the firm and the firms should formulate policies of increasing its equity capital as oppose to debt and that Implementable investment policies should be formulated and the business environment should be well examined. Recognizing faults of investment might be paramount to develop the business’s financial performance, since it specifies the loopholes which corrective decision can be applied.
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Rahman, Syed Mohammad Khaled, and Tasmina Chowdhury Tania. "MANUFACTURING FIRMS’ CAPITAL STRUCTURE IN BANGLADESH: COMPARISON BETWEEN LISTED MNCS AND LOCAL COMPANIES." International Journal of Accounting & Finance Review 6, no. 1 (January 6, 2021): 1–18. http://dx.doi.org/10.46281/ijafr.v6i1.935.
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The capital structure of a firm has immense significance as it has implications on corporate value and financial performance. The basic aim of the research was to analyze and compare the capital structure of Dhaka Stock Exchange (DSE)-listed multi-national companies (MNCs) and local companies of Bangladesh over 24 years (1996-2019). Stratified sampling techniques were applied to the selection of firms. Six financial leverage ratios were used to analyze and compare capital structures. There were significant differences in capital structure between local companies and MNCs as the null hypothesis was rejected. It was also found that the mean equity-financing proportion of domestic companies and MNCs were 65% and 92.5% respectively. The proportion of long term debt in total capital employed was very low for both types of companies. MNCs can raise the proportion of both short and long-term debt to take the advantage of financial leverage. Domestic companies can redeem some short term loan and replace some short term debt with long term debt. This research would be useful for corporate financial managers, creditors, and investors to take appropriate financing as well as investment decisions which would affect shareholders' wealth and value of the firm in the long run to a significant extent.
JEL Classification Codes: G30, G32, G39
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Gralewska, Milena, and Anna Białek-Jaworska. "Information Asymmetry, Capital Structure and Equity Value of Firms Listed on the WSE." Journal of Banking and Financial Economics 2022, no. 1(17) (2022): 17–41. http://dx.doi.org/10.7172/2353-6845.jbfe.2022.1.2.
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The paper investigates the impact of capital structure and information asymmetry on the value of companies listed on the Warsaw Stock Exchange. The study was conducted using the ordinary least squares (OLS) method on a sample of 273 companies in 2017 and the GMM dynamic paneldata approach with instrumental variables. Data retrieved from the Notoria, Bloomberg and Orbis databases were used. The results show that despite its impact on reducing the cost of capital, increasing debt does not lead to an increase in equity value. Therefore, the benefi ts of higher short-term leverage are limited and visible only for long-term debt. On the other hand, despite bigger information asymmetry, companies are valued higher, which means that asymmetrical information does not necessarily hurt valuation in the short term but in the long term. The results contribute to the literature on firms’ use of leverage under information asymmetry, showing higher trust in cash flow than profits in books.
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Novita, Santi, Bambang Tjahjadi, and Andry Irwanto. "Industry and Financial Crises in Fragile and Zombie Firms: Does Leverage Matter?" Journal of Business and Economics Review (JBER) Vol.3(3) Jul-Sep 2018 3, no. 3 (September 30, 2018): 51–58. http://dx.doi.org/10.35609/jber.2018.3.3(2).
Full textAbstract:
Objective - This paper shows how leverage affects firm's fragility and financial soundness during financial and industry crises. Methodology/Technique - Long term inefficient and zombie firms are explored through the effects of leverage in additional tests. Findings - There are two main results obtained from the sample of Indonesian non-financial firms from 2007 to 2016. First, leverage has a statistically significant correlation with firm's fragility. Second, leverage has an effect on firm's financial soundness during industry crisis. Novelty - Unlike the previous paper, this paper demonstrates a significant implication on the need to differentiate fragile firms and firms that are persistently inefficient, such as zombie firms. Type of Paper: Empirical. Keywords: Fragility; Zombie; Financial Soundness; Leverage; Industry Crisis; Financial Crisis. JEL Classification: M20, M41.