No full-text available
To read the full-text of this research,
you can request a copy directly from the authors.
The Financial Structure of Private Held Belgian Firms
Abstract
We examine the determinants of the debt-equity choice and the debt maturity choice for a sample of small, privately held firms
in a creditor oriented environment. Our results, which are based on 4,706 firm-year observations for 1132 Belgian firms in
the period 1996–2000, generally confirm the role of asymmetric information and agency costs of debt as major determinants
of the financial structure of privately held firms. High growth firms and firms with less tangible assets have a lower debt
ratio. We also find that more profitable firms have less debt. Firms tend to match the maturity of debt with the maturity
of their assets. Growth options do not seem to influence debt maturity, which would suggest that the underinvestment problem
is resolved by lowering leverage and by bank monitoring, not by reducing debt maturity. Credit risk is also an important determinant
of debt maturity: firms with higher credit risk borrow more on the short term. Finally, in contrast to most studies on the
financial structure of companies, we find that larger firms tend to have a higher debt ratio and a shorter debt maturity.
... Bank credit is found to be the most important source of finance for firms (Bornheim and Herbeck, 1998;Angelini et al., 1998;Binks et al., 2006;Cole, 1998), and is granted according to different lending technologies (Berger and Udell, 2006). Heyman et al. (2008) suggest that maturity matching between debt and the life of assets plays an important role in deciding the length of the debt used to finance the firm, since the matching provides the minimum risk maturity structure. Short-term debt is positively correlated with a firm's growth opportunities (García-Teruel and Martínez-Solano, 2007), it is higher in stronger and more flexible firms, when there are big differences between short-term and long-term interest rates and when firms have more growth opportunities. ...
... The steady use of shortterm debt means that the firm is not correctly matching the life of the assets and the debt used to finance them. Such a mismatch implicitly increases the firm's financial risk (Heyman et al., 2008). Here an important question arises: what is the level of long-term debt, defined as 0 D , that is optimal in the sense that the overall amount of interest paid (on short-and longterm debt) is minimized during a period (say one year)? ...
... The literature stresses that it is important to match the length of assets' life and the maturity of liabilities (Heyman et al., 2008). The model elaborated in this paper provides partial support for this proposition. ...
... The firm's financial stability analysis allows external parties to assess the enterprise's long-term financial capabilities, depending on the firm's capital structure, the degree of participation of creditors and investors, the conditions for attracting and servicing loans [5][6][7][8]. ...
... Daily firm business transactions affect financial stability and cause it to move from one state to another. According to [5][6][7][8][9][10] the ratio of working capital to inventory and the debt ratio to equity are essential characteristics of financial stability and solvency-their external manifestation. In the sustainable development context, new rules for conducting business are being formed at all economic levels, leading to a revision of the established criteria and measures for managing the capital structure to carry out the desired effect. ...
... Numerous studies have established different factors correspond or do not correspond to a particular theory. There are factors such as firm size, age, growth, tangible assets, tax shield, and profitability [6][7][8][9][10][11][12][13][14][15][16][17]. ...
... On the other hand, small rms tend to be more innovative and resilient, and thus, are less likely to experience nancial distress (Kane et al., 2005). Additionally, due to better access to nance, larger rms are inclined to use more debt (Heyman et al., 2008) and to have more complex nancial structures. These structures facilitate managers in undertaking sophisticated but risky investments, and thus a higher probability of nancial distress (ElBannan, 2021). ...
... Distressed rms tend to have larger sizes. With better access to nance, larger rms tend to use more debt (Heyman et al., 2008) and have more complex nancial structures, enabling managers to undertake sophisticated but risky investments, thus increasing the probability of nancial distress (ElBannan, 2021). ...
This study examines the effect of corporate environmental disclosures on financial distress in Vietnam. From sustainability reports and annual reports of firms listed on the Ho Chi Minh Stock Exchange, we manually collected a dataset on environmental information disclosures about seven management standards, including the utilization of raw materials, energy usage, water consumption, conservation of land and soil, gas emissions, wastewater and solid waste, and compliance with environmental protection laws. We measure the level of environmental information disclosures based on the counts of these standards that a firm has disclosed and employed both Altman’s Z-score and Ohlson’s O-score as proxies for financial distress. The research sample includes 269 firms from 2015 to 2020. The findings indicate that firms with better corporate environmental disclosures tend to have lower financial distress levels. The results are robust with respect to different measures of environmental information disclosures and financial distress, and have implications for investors, creditors, and policymakers. We contribute to the literature by providing evidence from a frontier market with weak legal institutions, where various environmental issues and regulations about disclosing environmental information have just gone into effect.
... Their analysis shows that asset structure drives a firm's debt-to-equity mix to the degree that they are re-deployable. Heyman et al. (2008), in a study on Belgian firms, concur with the maturity matching principle that long-term assets are financed by long-term debt. This implies that an increase in asset tangibility is associated with an increase in long-term debt, suggesting that firms with fewer physical assets tend to have lower leverage levels. ...
... Campello and Giambona (2011) attest that asset tangibility is a significant determinant of leverage. Heyman et al. (2008), in support of the asset's liability matching principle, document that the growth in a firm's physical and long-term assets is financed by long-term debt, suggesting a positive relationship between debt and tangible investment. The results also suggest that lenders consider other criteria of intangible assets to evaluate firms, as indicated by Deari (2009), who found that lenders also significantly use a firm's goodwill in credit valuation. ...
The asset structure of a firm plays a pivotal role in determining its leverage. A higher proportion of physical assets is often associated with high debt ratios. This study explores the impact of investment tangibility on financial leverage, examining both tangible and intangible investments. Using a dynamic panel data model estimated through the two-step system generalized method of moments (GMM), we analyse a dataset encompassing 815 non-financial listed firms from 22 African stock markets. The results show that African firms have higher inclinations to invest in physical assets. We found a statistically significant negative relationship between leverage and tangible and intangible investments. The findings indicate that African firms tend to maintain lower leverages regardless of whether they invest in tangible or intangible assets. The observed relationship aligns with the hypothesis that high-growth firms, in their expansion efforts, strategically tend to opt for low debt to mitigate the agency costs associated with debt and to help prevent underinvestment. This outcome underscores the interconnected nature of financing and investment decisions. This research contributes to the literature on financial leverage and investment by dissecting investments into tangible and non-tangible components and highlighting their distinct impacts on leverage. Moreover, it provides empirical evidence for previously unexplored African firms, shedding light on the reasons behind the relatively low leverage levels observed in African firms.
... In literature, studies examining the relationship between financial leverage and firm size have found a positive relationship (Daskalakis & Psillaki, 2008;Degryse et al., 2012;Heyman et al., 2008;Köksal et al., 2013;Ozkan, 2001). Large firms can access the capital markets more easily and borrow money at lower interest rates (Ferri & Jones, 1979). ...
... The firm size is positively related to the LEV. This finding endorses the prior studies (Daskalakis & Psillaki, 2008;Degryse et al., 2012;Heyman et al., 2008;Köksal et al., 2013;Ozkan, 2001). The tangibility is also positively related to the LEV. ...
This study examines the influence of corporate social responsibility (CSR) on the capital structure (LEV)of 331 companies listed on twenty emerging markets for the periods 2005-2019. The LEV is measured by the total liabilities divided by total assets. The CSR performance is proxied by the environmental, social and governance (ESG) ratings obtained from Thomson Reuters DataStream. The firm size is introduced as a potential moderator on the CSR and LEV relationship. The analysis results showed that there is no direct evidence that CSR performance effects LEV. Moreover, the firm size negatively and significantly moderates the relationship between corporate governance performance (GPS) and social performance(SPS) and LEV. Additionally, the profitability is negatively and significantly, and asset tangibility is positively and significantly related to LEV. Our results confirm that CSR performance facilitates financing through debt for small and medium size companies and decreases cost of equity for large companies. These findings are consistent with the recent studies.
... In literature, there is almost unanimity to use the financial leverage as a measure of capital structure and financing decision (e.g. Cassar & Holmes, 2003;Hall et al., 2004;Heyman et al., 2008). In contrast, few studies have used equity as a proxy to measure financial decisions. ...
... The firm's size was measured as the logarithms of total assets following Sogorb-Mira (2005), Abor andBiekpe (2009), Sahin (2018), and Rao et al. (2019). Profitability was measured as the ratio of profit before tax to total assets following Sogorb-Mira (2005), Heyman et al. (2008), Abor andBiekpe (2009), andRao et al. (2019). Liquidity was measured as the ratio of current assets to current liabilities, according to Hongli et al. (2019) and Rao et al. (2019). ...
This study aims to identify the determinants of the capital structure of SMEs in Algeria during the period 2010-2018. Where a sample consists of 20 SMEs from the Public Works and Hydraulics sector. The study used financial leverage as the dependent variable and assets structure, profitability, liquidity, and size as independent variables. The study used Panel Data methods for testing the hypothesis. The results show that profitability, liquidity, and assets structure are negatively related to financial leverage, while size does not affect the financial leverage. The results indicate that SMEs in Algeria rely on their internal resources to finance their activities.
... In combination with the traditional concern of SMEs with control and independence, SMEs with growth opportunities may seek external debt instead of external equity. As a result, the influence of growth opportunities on SMEs finance seeking can be either negative (e.g., Heyman et al., 2008;Lopez-Gracia and Sogorb-Mira, 2008), positive (e.g., Degryse et al., 2010;Riding et al., 2010), or insignificant (see Psillaki and Daskakis, 2009). ...
... Given agency costs can affect SME financing decisions through diverse factors including ownership, growth opportunities, asset structure and asset tangibility (Degryse et al., 2010;Riding et al., 2010;Heyman et al., 2008), we also specify an agency cost model to investigate the agency cost problem in Australian SMEs. ...
... The perceived risk of NTBFs that aim for high growth is generally considerable (Shepherd, Douglas, & Shanley, 2000). A higher perceived risk augments the cost premium of outside financing (Heyman,10 ENTREPRENEURSHIP THEORY and PRACTICE Deloof, & Ooghe, 2008). Third, in situations where sufficient external financing is generally or temporarily not available, financing through operations can substitute for the lack of external financing. ...
... This important dimension is generally disregarded by entrepreneurship scholars. Yet, literature regarding optimal capital structuring, in particular, suggests the salient role of financing through internal sources and especially operations (e.g., Heyman et al., 2008). In this regard, it is important to highlight that a significant portion of our sample did not use any form of external funding. ...
... Las PYMES tienen un acceso limitado a la financiación externa a diferencia de las grandes empresas y, esto ha provocado que estas empresas se animen a depender más de la autofinanciación, fondos generados (recursos propios) o en deuda a corto plazo (Heyman et al, 2008). ...
En el mundo actual, la estructura de capital se ha convertido en una herramienta trascendental para el desempeño empresarial. Aunado a ello, las decisiones de inversión estimulan el crecimiento y diversificación empresarial al facilitar la creación de nuevas organizaciones y fomentar los procesos de desarrollo en las organizaciones. El presente análisis teórico-empírico tuvo como propósito analizar la influencia de la estructura de capital en el impacto de las decisiones de inversión de los gerentes en las pequeñas y medianas empresas (Pymes), de Aguascalientes. Se analizaron las diferentes teorías de la estructura de capital mayormente aceptadas, demostrando así, la influencia que tienen las decisiones en el desempeño. Es importante que los gerentes de las Pymes gestionen de una forma adecuada los recursos internos y externos con los que cuenta la organización con la finalidad de lograr un crecimiento sostenible.
... Los datos empíricos indican que, si bien numerosos factores restringen los requisitos financieros de las pequeñas y medianas empresas, el tamaño de la empresa surge como un elemento fundamental que influye en la accesibilidad financiera (Heyman et al., 2008;Streimikiene et al., 2021). ...
PRÓLOGO Es un privilegio presentar este manuscrito que profundiza un tema fundamen- tal en el panorama empresarial actual: el empoderamiento de las mujeres en las pequeñas y medianas empresas (PYMES), con un énfasis particular en el sector artesanal en Ecuador, Colombia, México y Perú. En un contexto mundial, en el que la igualdad de género y la inclusión se reconocen cada vez más como catalizadores del progreso económico y social, este trabajo académico surge como una contribución notable para comprender y abogar por la participación activa de las mujeres en el ámbito empresarial. A través de un examen meticuloso, los autores de esta obra, que son especia- listas en los campos de la gestión y las finanzas, analizan la intrincada dinámica asociada a la administración de empresas dirigida por mujeres en las pymes. Cada capítulo, que abarca desde las estrategias de gestión hasta las consi- deraciones financieras y reglamentarias, ofrece una visión profunda y perspi- caz de los obstáculos y las perspectivas a las que se enfrentan las mujeres emprendedoras en la industria artesanal. El manuscrito está organizado en tres secciones que abordan varias facetas del tema: los enfoques gerenciales, la administración financiera y las estrategias regulatorias educativas de control interno. Estas secciones, respaldadas por una investigación rigurosa y metodologías pioneras, proporcionan una base sólida para comprender la complejidad de este tema multifacético. Además de su importancia académica, este manuscrito posee la capacidad de ejercer una influencia notable en los protocolos empresariales y las medidas gubernamentales diseñadas para fomentar la paridad de género y un creci- miento económico integral. Al proporcionar perspectivas fundamentales y sugerencias pragmáticas, se convierte en un recurso inestimable para acadé- micos, profesionales y responsables políticos dedicados a construir un futuro más justo y próspero. Esencialmente, este manuscrito sirve como testimonio de la dedicación perpe- tua de los sectores académico y empresarial a la promoción de la igualdad de perspectivas y el empoderamiento de las mujeres en el ámbito comercial. Se cree firmemente que las reflexiones y descubrimientos presentados contribui- rán de manera sustancial al progreso de dicha causa. PhD. Mónica Lorena Sánchez Limón Doctora en Ciencias Administrativas por la UNAM. Profesora Titular e Investigadora de la Universidad Autónoma de Tamaulipas Vicepresidenta de Comités de la Academia Nacional de Ciencias Administrativas (ACACIA)
... Birkenmaier & Fu, (2019). The findings of this study was consistent with the views of (Lee, Ahn & Shin, 2004;Lee, Kim & Ahn, 2019;Heyman, Deloof & Ooghe (2008) who believed that the financial structure of high-growth companies and those with less tangible assets had a lower percentage of liability, which in turn influenced consumer buying decisions. The firm financial structure involves an interaction between the ability of external financial firms to provide financial resources and consumers with investor expectations for other forms of investment that help in shaping their behaviour (Huyghebaert & Van de Gucht, 2007). ...
The organisational perspective on consumer behaviour in the digital manufacturing sector
is always seen as a primary concern in the management reality of the company. The purpose of this
study was to examine the effect of digital manufacturing and consumer behaviour on firm
sustainability in Malaysia. It also investigates the mediating effect of financial structure on the
relationship between digital manufacturing and consumer behaviour on firm sustainability. The
survey data were received from 102 manufacturing firms in Malaysia and examined using partial
least squares structural equation modelling (PLS-SEM) through SmartPLS. The findings of this study
have shown that technology has a direct positive relationship with consumer behaviour on firm
sustainability in Malaysia. Relatedly, automation has a direct positive relationship with consumer
behaviour. However, the findings revealed that there was no direct significant link between the
industrial revolution 4.0 and consumer behaviour on firm sustainability. This study also confirmed
the direct positive effect of technology on the financial structure. Similarly, the result indicated that
automation has a direct relationship with financial structure on firm sustainability, inversely industrial
revolution 4.0 did not have a direct relationship with financial structure. In addition, financial
structure has a direct positive relationship with consumer behaviour on firm sustainability. The study
further reported that financial structure fully mediates between technology and consumer behaviour
on firm sustainability. Again, financial structure partially mediated between automation and
consumer behaviour on firm sustainability. However, financial structure did not mediates between
industrial revolution 4.0 and consumer behaviour on firm sustainability. This current study offer a
new theoretical contribution by integrating a novel insight to link the relationship between digital
manufacturing components of (technology, automation and industry revolution 4.0), financial
structure and consumer behaviour on firm sustainability, also mediating effect of financial structure
between technology, automation and industrial revolution 4.0 on consumer behaviour on firm
sustainability that has never been studied before in the existing the literature. This study suggests that
managers of manufacturing firms should always take consumer behaviour into account when making,
strategic planning decisions in the contemporary increase of digital manufacturing business for the
firm consumers in Malaysia.
... Leverage ratio is the next potential factor, where leverage is the ratio of the proportion rating in using debt when investing and the utilization of DER in its measurement (Heyman & Ooghe, 2008). DER is a balanced ratio between a company's capital and debt. ...
The capital market is a forum for companies to sell shares and bonds in the hope of obtaining additional funds raised from the proceeds of selling part ownership of the company or issuing debt securities. The long-term market or commonly called the capital market has a variety of instruments that can be considered for investors. Furthermore, the purpose of this study is to analyze the important determinants which can have an impact on the yield to maturity of company obligations in Indonesia by placing leverage variable as a moderation variable. The data in this study was obtained from 25 company bonds as a sample of the total population of 59 corporate bonds in industrial sector which were further tested with panel data analysis techniques. It made the total data of 75 with 3 years of research duration. This study found that profitability, leverage and company size influenced the yield to maturity of company bonds in Indonesia. otherwise, bond ratings were found to have no effect. Subsequent findings suggest the role of leverage as a moderation variable. In addition, the end of this part of the study presents practical and academic advice as a form of researcher contribution, to invest in corporate bonds with higher degree of profitability, leverage and company size.
... Following prior studies, we controlled for the firm's age and size, environmental munificence, environmental dynamism, and industry types to eliminate the interference of irrelevant factors on the dependent variable (Zott and Amit 2007;Pati et al. 2018;. We measured firm age using the number of years since the firm was founded and measured firm size by the number of full-time employees (Heyman et al. 2008). To control for environmental munificence and environmental dynamism, we regressed the industry's annual sales over a 5-year period and measured environmental munificence by the coefficient and environmental dynamism using the standard error (Boyd 1995). ...
What affects manufacturing firms’ cross-channel integration capability and, ultimately, performance? Drawing on the capability hierarchy view, we investigate the impact of technology and marketing capabilities on manufacturing firms’ cross-channel integration capability and subsequent performance. In addition, we examine how the relationships between two capabilities and cross-channel integration capability are moderated by platform IT support. Using survey data from 146 Chinese multichannel manufacturing firms, we show that technology capability and marketing capability promote cross-channel integration capability and thereby enhance performance. Platform IT support positively moderates the relationship between marketing capability and cross-channel integration capability. However, platform IT support has no significant moderating role in the relationship between technology capability and cross-channel integration capability. These findings have theoretical implications for the research about antecedents of cross-channel integration capability and practical implications for multichannel manufacturing firms.
... Thus profitable firms are expected to have a high level of debt. However, in the case of small and medium firms or privately held firms, there is evidence of a negative relationship between profitability and the debt ratio (Sogorb-Mira, 2005;Heyman et al., 2008) since more profitable firms prefer to finance investments internally. Also firms that generate high levels of internal funds should not use external funds very often, according to the pecking order theory, which is the usual capital structure framework set for small and medium firms (Myers, 1984;Myers and Majluf, 1984). ...
Venture capital (VC) refers to investments provided to early-stage, innovative, and high growth start-up companies. A common characteristic of all venture capital investments is that investee companies do not have cash flows to pay interest on debt or dividends on equity. Rather, investments are made with a view towards capital gain on exit. The most sought after exit routes are an initial public offering (IPO), where a company lists on a stock exchange for the first time, and an acquisition exit (trade sale), where the company is sold in entirety to another company. However, VCs often exit their investments by secondary sales, wherein the entrepreneur retains his or her share but the VC sells to another company or investor buybacks, where the entrepreneur repurchases the VC's interest and write-offs (liquidations). This publication provides a comprehensive picture of all the issues dealing with the structure, governance, and performance of venture capital from a global perspective.
... UKM dengan peluang pertumbuhan mungkin mencari utang eksternal sebagai ganti ekuitas eksternal. Hasilnya, pengaruh peluang pertumbuhan pada pencarian pembiayaan UKM dapat menjadi negatif (Heyman et al., 2008;Lopez-Gracia et al., 2008), positif (Riding et al., 2012;Degryse et al., 2012), atau tidak keduanya (Psillaki et al., 2009). ...
Currently, there are relatively few studies that have examined the comparison between the finance-seeking behavior for small and medium-sized enterprises in developed and developing countries. In general, this study aims to analyze differences in finance-seeking behavior between enterprises from Australia and Pakistan, including identifying various antecedents of finance-seeking behavior by enterprises in both countries. For this reason, we conducted an exploratory study through a content analysis of two scientific journal articles. Specifically, we systematically examine two scientific journal articles that discuss access to finance by small and medium-sized enterprises, both in terms of substance and methods. The first article was written by Xiang and Worthington and the second article was written by Saeed and Sameer. We found that the study of Xiang and Worthington succeeded in identifying various antecedents of finance-seeking behavior at the micro (internal) level, such as business objectives, profitability, growth, product and service quality, business ownership, business size, business life, and government assistance. On the other hand, the study of Saeed and Sameer revealed that there were other antecedents at the meso level (external or industrial) that could influence the search for enterprise financing, namely the concentration of the banking industry. In conclusion, the study of Saeed and Sameer further complements the study of Xiang and Worthington in identifying various antecedents of finance-seeking behavior. Saat ini ada beberapa studi yang meneliti perbandingan antara perilaku pencarian keuangan untuk usaha kecil dan menengah di negara maju dan berkembang. Secara umum, penelitian ini bertujuan untuk menganalisis perbedaan perilaku pencarian keuangan antara perusahaan dari Australia dan Pakistan, termasuk mengidentifikasi berbagai anteseden perilaku pencarian keuangan oleh perusahaan di kedua negara. Untuk alasan ini, kami melakukan studi eksplorasi melalui analisis konten dari dua artikel jurnal ilmiah. Secara khusus, kami secara sistematis memeriksa dua artikel jurnal ilmiah yang membahas akses ke keuangan oleh perusahaan kecil dan menengah, baik dari aspek substansi maupun metode. Artikel pertama ditulis oleh Xiang dan Worthington (2015) dan artikel kedua ditulis oleh Saeed dan Sameer (2015). Kami menemukan bahwa penelitian Xiang dan Worthington berhasil mengidentifikasi berbagai anteseden perilaku pencarian keuangan di tingkat mikro (internal), seperti tujuan bisnis, profitabilitas, pertumbuhan, kualitas produk dan layanan, kepemilikan bisnis, ukuran bisnis, kehidupan bisnis, dan bantuan pemerintah. Di sisi lain, studi Saeed dan Sameer mengungkapkan bahwa ada anteseden (penentu) lain di tingkat meso (eksternal atau industri) yang dapat mempengaruhi pencarian pembiayaan perusahaan, yaitu konsentrasi industri perbankan. Sebagai kesimpulan, studi Saeed dan Sameer lebih lanjut melengkapi studi tentang Xiang dan Worthington dalam mengidentifikasi berbagai anteseden perilaku pencarian keuangan.
... Küresel finansal krizin Fransa, Almanya ve Birleşik Krallık'taki firmalar üzerindeki etkisini araştırmış ve finansal kaldıraç oranlarının kriz sırasında başlangıçta arttığını ancak daha sonra eski seviyelerine döndüğünü doğrulamıştır (Iqbal ve Kume, 2014). Ampirik bulgular, finansal kriz öncesinde düşük finansal kaldıraca sahip firmaların diğer firmalara göre borca daha fazla güvendiğini, yüksek kaldıraçlı firmaların diğer firmalardan daha az borç kullandığını göstermektedir (Heyman, Deloof ve Ooghe, 2008;Nguyen, Nguyen ve Yin, 2015). Kısakürek ve Aydın (2013), 1992-2011 yıllarında BİST'te işlem gören 104 adet finans sektörü dışında yer alan işletmenin sermaye yapısı ile kârlılıkları arasındaki ilişkiyi kriz yıllarını da dikkate alarak incelemiştir. ...
... Moreover, we control for profitability, measured by the return on assets ratio that is equal to the firm's net income scaled by its total assets. According to the Pecking Order Theory (Myers & Majluf, 1984), a profitable firm favors self-financing its projects rather than referring to external financing in order to avoid information asymmetry problems and to refrain from debt payments and costs (Cole, 2013;Heyman, Deloof, & Ooghe, 2008;Matias & Serrasqueiro, 2017;). Thus, this paper predicts a negative relationship between profitability and leverage. ...
Small and medium-sized enterprises (SMEs) have received rising attention from researchers because of their important role in economic growth. Among these studies, the attention has been directed toward the risk-taking behaviour of SMEs’ managers while focusing on the reasons for and consequences of this behaviour, from the company’s and the manager’s perspectives. However, since other stakeholders are also considered key actors for SMEs, this thesis aims to extend the previous literature by studying the consequences of managers’ risk-taking behaviour from their perspectives during and after the financial crisis of 2008. Our choice relies on three major stakeholders among several others: shareholders, banks, and employees. In order to conduct our three empirical analyses, we employ a sample composed of publicly held SMEs in France. The findings of the first essay suggest that financial debt is not considered a disciplining mechanism since it enhances the risk-taking behaviour of managers. Then, the second essay reveals that information asymmetry problems with banks, induced by the managers’ risk-taking behaviour, are mitigated by the quality of the firm’s financial reporting. The third essay demonstrates that since the risky behaviour of its managers increases the firm’s probability of bankruptcy, managers compensate their employees for their expected human capital losses. Overall, this thesis shows that managerial risk-taking behaviour is a vital component that should be taken into consideration in the context of SMEs, especially toward other stakeholders.
... -ve -ve Agency cost Hypothesis Growth Opportunities (GROWTH) Percentage change in total assets (Heyman, Deloof, & Ooghe, 2008;Orman & Köksal, 2017). ...
This study investigated the moderating role of macroeconomic factors in the relationship between CFV and DMS by considering a sample of 380 listed non-financial firms of Pakistan over a period from (1999-2018). For empirical analysis, advanced econometric techniques have been used in this study such as ordered probit regression, two-way fixed effect, and generalized method of moments (GMM). In addition, this study analyzed the conditional effects of cash flow volatility on debt maturity structure at different levels of macroeconomic factors. The results of the study highlight that the role of macroeconomic factors weakens the CFV relationship with DMS. The results of conditional effects indicate that when inflation, money supply, and interest rate move from a low to higher level, cash flow volatility inversely affects the maturity structure of debt. However, when GDP growth moves from a low to higher level, cash flow volatility positively affects the debt maturity structure. Based on the estimated results, this study suggests the subsequent recommendations: firstly, when firms face a variation in the earning level, they may mitigate their financial distress and cost of bankruptcy by choosing short-term maturity debts. Secondly, financial managers should consider the role of macroeconomic factors in the decision-making process as it effects the firms' DMS. Finally, non-financial firms, banks, financial institutions, if face high CFV, they may reduce their risk of non-performing loans by limiting their financing.
... A firm's size will affect its tendencies to implement environmental innovation, where small and medium-sized firms may face more difficulties with the complexities of environmental innovation (De Marchi, 2012). Corporate size is measured by the natural logarithm of total assets (Heyman et al., 2008). ...
Although it is well recognized that environmental labeling certification (ELC) is becoming an increasingly important voluntary environmental regulation worldwide, the evidence regarding its role in environmental innovation remains unknown. This study examines the impact of ELC on corporate environmental innovation (CEI) from both external and internal perspectives via the combination of legitimacy theory and the resource management perspective. Based on panel data of listed Chinese manufacturing firms from 2008 to 2014, it is found that ELC improves CEI. However, this relationship is also regulated by two contextual factors: the positive impact of ELC on CEI is found to be stronger for non-state-owned enterprises (non-SOEs) than for state-owned enterprises (SOEs), and it is stronger for firms in regions with a low degree of local government intervention than for firms in regions with a high degree of local government intervention. This study makes important theoretical contributions and has extensive practical value.
... (2013) adopted entrepreneurial theory to examine SME behavior in response to the support extended for SMEs through government policies, whereas Howell (2019) examined the linkages between ethnicity, finance, and entrepreneurship in China and Miglo and Miglo (2019) compared traditional financing with crowdfunding using the same theory. Besides that, the figure also highlights the prominence of finance theory, which can be applied to study the capital structure of SMEs (Heyman et al., 2008;Psillaki & Daskalakis, 2009). In addition, SME financing is highly governed by agency (conflicts) and pecking order (Rao et al., 2019), as the inaccessibility of funds by SMEs is often a result of conflicting interests between lenders and SME owners, and thus, SMEs prefer internal financing to obviate the need for such funds, where possible (López-Gracia & Sogorb-Mira, 2008;Newman et al., 2012;Degryse et al., 2012). ...
Small and medium-sized enterprises (SMEs) are a significant source of employment for many people in developing and developed economies. However, one of the significant constraints that SMEs face is limited access to finance. Governments and financial institutions need to understand how SMEs access finance so that financial access for SMEs can be better promoted. In this vein, this paper conducts a systematic literature review to present a one-stop, state-of-the-art understanding of the extant literature on SME financing. The review encapsulates 280 papers from five top journals in the area of "small business management" between 1986 and 2020. The review is holistic as it explores the diversity of SME financing research and evaluates it in terms of publication trends (productivity, region), theoretical setup (theory building, application, elaboration, testing), methodological design (research design, data collection and analysis techniques), and themes (evolution, network). The paper concludes with proposals for future SME financing research. KEYWORDS Small and medium-sized enterprises (SMEs); small business management; SME financing; systematic literature review 2
... Firms' industry affiliation is likely to influence firm goals and product/service features, thereby influencing firms' innovation strategies (Kortmann et al., 2014). As firm size and firm age may affect the resource base and resource acquisition of firms in innovation processes (Verwaal et al., 2010;Mueller et al., 2017), we measured firm age using the number of years since firms were founded and measured firm size as the natural logarithm of their total assets (Heyman et al., 2008). ...
Existing literature increasingly identifies the effect of CEO passion on firm innovation. However, the understanding on how and when CEO passion promotes firm innovation remains limited. We examine the role of the top management team (TMT) creativity as the intervening mechanism in the link between CEO passion and firm innovation, and explore the different roles of flexibility-oriented and control-oriented cultures as contingencies. By using survey data of 245 firms in China, we find that flexibility-oriented culture positively moderates the relationship between CEO passion and TMT creativity, but negatively moderates the relationship between TMT creativity and firm innovation. By contrast, control-oriented culture negatively moderates the relationship between CEO passion and TMT creativity, and insignificantly moderates the relationship between TMT creativity and firm innovation. We also discuss our theoretical contributions and provide some practical implications.
... This situation implies that creditors will require guarantees from SMEs in return for the granting of medium and long-term debt (Michaelas, Chittenden, & Poutziouris, 1999;Rao & Kumar, 2018). Consequently, these firms are dependent on short-term debt as a source of external financing (Heyman, Deloof, & Ooghe, 2008;Scherr & Hulburt, 2001). ...
The objective of this study was to analyze the determining factors that explain the capital structure decisions of small and medium-sized enterprises (SMEs) in the province of Cabinda, Angola. In this study, debt maturity was also analyzed and, therefore, total indebtedness was broken down into short, medium, and long-term debt ratios. This study is motivated the poor number of studies on the determinants of the capital structure of SMEs in developing countries, more specifically in Cabinda, Angola. This research is relevant for Corporate Finance, particularly regarding the capital structure of SMEs located in a developing country like Angola. Also, it corroborates previous studies on the applicability of the principles of the pecking-order theory to SMEs in developed countries. This research present contributions to Corporate Finance, as it identifies the determinants of the capital structure of SMEs in a developing country - considering the debt maturity -, through the analysis of total debt ratios-, short-, medium- and long-term debt. Based on a sample of 73 SMEs for the period between 2011 and 2016, we used panel data models (pooled OLS, fixed and random effects). The results of this study show that tangibility, age, liquidity, and non-debt tax shield are determining factors in the decisions of the capital structure of SMEs in the province of Cabinda, Angola. Furthermore, they suggest that these firms follow the principles of pecking-order theory in capital structure decisions. The research contributes to increase studies in Corporate Finance, particularly concerning the determinants of the capital structure of SMEs located in a developing country.
... According to Chaganti et al., (1995) due to the assumption of rational economic behavior and perfect market conditions of the MM irrelevance theory, argues that it is not applicable in SMEs. SMEs differ from large companies in various aspects and they apply different funding decisions (Heyman et al., 2008).The SMEs have limited access to external financing unlike large companies and, this has caused that these businesses are encouraged to rely more on self-generated funds (own resources) or on short-term debt. Abor (2007) evaluated the relationship between the capital structure and the performance of SMEs in South Africa and Ghana, found a significantly negative relationship of the financial leverage measured by the ratio of short-term debt, and positively significant with the long term debt. ...
The small and medium-sized enterprises (SMEs) generally present capital structures poorly planned, and appeal to financial sources both internal and external that while allow them to operate, often neither represent the best available options nor the most appropriate for maximizing their economic performances. The objective of this empirical study is to determine the effects of the capital structure in the performance of the SMEs, specifically; the work was done with a sample of 221 manufacturing SMEs located in Aguascalientes State in Mexico. The obtained results through the empirical testing of a structural equation modeling (SEM) provide empirical evidence that the internal financing sources influence significantly and positively the performance. Similarly, it was found that the external sources of financing have a positive influence, but not significantly in performance, which draws attention to the importance of these companies carefully plan their capital structure, giving preference to the internal financing sources.
... Previous studies mention that funding choices to SMEs are either limited or non-existent, particularly as compared with the choices available to large and publicly traded firms (Abor and Biekpe, 2006;Estwick, 2013;Briozzo et al., 2016). In general, SMEs' financing tends to depend on internally generated sources of capital such as the redeployment of profits or short-term debts (Heyman et al., 2008). Most early-stage funding originates with the founder or founding team (Gartner et al., 2012). ...
Purpose
This paper aims to investigate how ethnic diversity and finance options impact the survival of small- and medium-sized enterprises (SMEs) in New Zealand.
Design/methodology/approach
This study incorporates survey data and secondary data from the public domain. The surveys were conducted across six sectors of the economy categorised into four main ethnic groups involving six nationalities. This study adopts regression analysis using Probit, Logit and linear probability.
Findings
The financing choices of the entrepreneurs were consistent with pecking-order theory. The evidence suggests that information asymmetries are prevalent in New Zealand, as SMEs’ owners perceive significant risk from expanding businesses internationally. There is no relationship between ethnicity bias and the survival of firms.
Originality/value
This study provides a contribution to the literature on factors relating to business survival and guides the policymakers to use the benefits of potential factors to increase the survival rate of SMEs.
... Since each loan in our sample is extended to a particular company or entrepreneur, we match the postal address of the business entity's headquarters with one of the 29 administrative districts, and then each district with one of the 16 courts based on the court jurisdiction. 9 Further, we follow Heyman et al. (2008) and remove all observations involving firms with 0-2 employees to eliminate the influence of companies founded predominantly for fiscal optimization motives. This removal also Footnote 5 (continued) financing. ...
There is plenty of evidence that judicial efficiency reduces credit rationing and increases lending. In contrast, inefficient courts may lead to borrowers’ opportunistic behavior and, as a result, decrease loan performance and the availability of credit. We combine caseload data from commercial courts in Serbia with micro-data on company loans to study the impact of judicial efficiency on loan performance. We document the presence of a robust negative relationship between the clearance rate and the number of days in arrears for companies from the districts under corresponding court jurisdictions. We use financial ratios, industry dummies and time fixed effects to control for the usual determinants of payment ability.
... However, credit constraints and their returns on firms' productivity are affected by various firmlevel characteristics (Beck et al. 2005;Heyman et al. 2008;Psillaki and Daskalakis 2009;Brown et al. 2011;Degryse et al. 2012;Coluzzi et al. 2015). Firm size seems to play a crucial role in this respect as, overall, larger firms have easier access to credit than smaller ones (Andrieu et al. 2018). ...
This paper examines the relationship between credit constraints − proxied by the investment‐to‐cash flow sensitivity – and firm‐level economic performance − defined in terms of labor productivity – during the period 2009‐2016, using a sample of 22,380 manufacturing firms from 11 European countries. It also assesses how regional institutional quality affects productivity at the level of the firm both directly and indirectly. The empirical results highlight that credit rationing is rife and represents a serious barrier for improvements in firm‐level productivity and that this effect is far greater for micro and small than for larger firms. Moreover, high‐quality regional institutions foster productivity and help mitigate the negative credit constraints‐labor productivity relationship that limits the economic performance of European firms. Dealing with the European productivity conundrum thus requires greater attention to existing credit constraints for micro and small firms, although in many areas of Europe access to credit will become more effective if institutional quality is improved.
This article is protected by copyright. All rights reserved.
... Shorter loans allow banks to monitor more frequently the firms' performance and, if necessary, vary the terms of the contracts before losses have accumulated (Hernández-Cánovas and Koëter-Kant 2008:2). Heyman, et al. (2007) pointed out that the length of a SME's debt depends on the maturity matching between the debt and the life of the assets. ...
... Note that this case needs lumpy investment, long-time to build, and low earnings than interests at the same time to induce such financial behavior. Ooghe et al. (2008) argue that firms are likely to pay more attention to assets and liability management because it can reduce the risk of future cash flow maybe not adequate to pay off the debt. Debt with shorter maturity than in-build-assets are risky whenever profit is not generated enough to cover interest payment. ...
The purpose of this study is to investigate the impacts of firms' characteristics on leverage ratio in emerging countries with the case of real estate listed enterprises in Vietnam. We have employed panel data analysis for regression, with short-term debt ratio (STDTA), long-term debt ratio (LTDTA), and total debt ratio (TTDTA) as the response variables. Based on the sample of 32 real estate companies listed on both Hanoi Stock Exchange (HNX) and Ho Chi Minh Stock Exchange (HOSE) during the period from 2010 to 2018, the estimated results from these three models are quite different. The results show that short-term leverage is influenced by firms' profitability, size, growth opportunities, risk, age, and liquidity. However only risk and liquidity have an impact on long-term leverage. Total leverage is affected by firms' size, risk, age, and liquidity. Also, a remarkable result from the regression models is that tangibility and non-debt tax shield do not have any influence on leverage ratio. Firms' liquidity has a significant reverse effect on short-term leverage and total leverage. However, liquidity has a significant positive impact on long-term leverage. Accordingly, the authors propose some discussions for firms to choose an optimal capital structure to maximize the firm's value. We suggest that real estate firms should not rely heavily on debt finance. They should be financed through several channels which are funds, insurance funds, and venture capitals rather than rely heavily on banks. While profitable firms could use retained earnings to cover most of their investments without publishing information to outsiders, high forecast growth but low profitability firms could use debt financing.
... During the last two decades, however, an increasing number of studies (e.g., Bhaird & Lucey, 2010;Cassar & Holmes, 2003;Daskalakis et al., 2017;Hall et al., 2004;Heyman et al., 2008;Mateev et al., 2013;Michaelas et al., 1999;Serrasqueiro & Nunes, 2014;Sogorb-Mira, 2005) have extended the discussion on capital structure theories and its determinants to small and medium enterprises (SMEs). Indeed, given the critical role SMEs play in the economies around the world relating to the provision of job opportunities, wealth creation, as well as being the engine of growth in most economies (Mateev et al., 2013;Newman et al., 2013;Wu et al., 2007), the study of how these firms make their financing decisions is essential. ...
The objective of this study was to examine the theoretical predictions of the pecking order theory and the trade-off theory to establish which of the two competing theories better explains the financing decisions of small and medium enterprises (SMEs). The study examined 187 SMEs in Ghana using the panel data methodology. The results reveal that the explanatory power of both theories apply and are pertinent to Ghanaian SMEs. The results also show that profitability, age, liquidity, growth, size, and tangibility of assets all have a significant impact on SMEs’ capital structure. In addition, the findings show that risk plays no vital role in how SMEs choose their capital structure. Broadly, the results provide evidence to back the pecking order theory, indicating that Ghanaian SMEs’ funding decisions exhibit the theoretical predictions of the pecking order theory.
... One refers to the contribution of debt and equity in the capital structure of a company. The proxy for capital structure is 'Debt Ratio' (DR) which is calculated by dividing long term debt to total assets, similar to the one used by Heyman, Deloof and Ooghe, (2008), Sheikh and Wang (2012), Vakilifard, Gerayli, Yanesari and Ma'atoofi (2011), and Ibrahim and Lau (2019). The second part of the financing decision is 'Debt Maturity Ratio' (DMR), which is measured by the ratio between long term debt and total debt (Barclay & Smith, 1995;Orman & Bu¨lent , 2015). ...
We examine the relationship between growth opportunities and insolvency risk in a mediating
framework through financing decisions for 330 listed firms on the Pakistan Stock Exchange (PSX)
This study covers a data period of five years ranging from 2013 to 2017. Financing decisions used
in this study involve capital structure decision and debt maturity decision. We applied robust
clustered panel OLS regression to the data and found a negative relationship between growth
opportunities and insolvency risk in all samples consisting of overall, large and small firms.
Growth opportunities have a negative impact on the capital structure, but debt maturity was
influenced positively. Financing decisions influenced the insolvency risk positively. We used
Baron and Kenny’s (1986) approach to detect the intervening effects of financing decisions.
Further, Sobel’s test used to check the significance of mediation. Partial mediation was found for
the debt maturity ratio in the large and overall sample of firms. However, the capital structure did
not mediate the relationship between growth opportunities and insolvency risk in this study.
O presente artigo analisa o impacto da alteração fiscal 2019 no endividamento das empresas em Portugal. Esta alteração, previsto no artigo 67.º do Código do Imposto sobre o Rendimento das Pessoas Coletivas (CIRC) regulamentada pela Lei n.º 32/2019, expandiu o conceito de gastos de financiamento e transformou o EBITDA num verdadeiro EBITDA fiscal. A análise foi realizada com base em dados de 37 empresas cotadas na Euronext Lisbon, extraídos da base de dados SABI. Os resultados indicam que a rentabilidade, a tangibilidade e a dimensão das empresas, bem como a alteração do regime fiscal de 2019, são fatores determinantes na política de endividamento. A tangibilidade e a dimensão estão positivamente relacionadas com o nível de endividamento, em consonância com a teoria do trade-off, enquanto a rentabilidade apresenta uma relação negativa, em linha com as previsões da teoria da Pecking Order. Adicionalmente, o estudo revela que, após as alterações fiscais de 2019, as empresas reduziram, em média, os seus níveis de dívida. A referida alteração fiscal teve um impacto negativo nas empresas com baixa dívida, levando à sua redução, e um impacto positivo nas empresas altamente endividadas, resultando num aumento do seu endividamento.
Penelitian ini bertujuan menganalisis apakah terdapat pengaruh dari firm size (SIZE), Sales Growth (GROWTH), Return on Asset (ROA), Likuidity (LIQ), Asset Structure (AS) terhadap struktur modal (DER). Teknik sampling yang digunakan adalah proposive sampling dengan jumlah sampel sebanyak 14 dari 43 untuk perusahaan MNC dan 44 dari 101 untuk perusahaan DC. Teknik analisis yang digunakan adalah analisis regresi berganda dan uji hipotesis menggunakan t-statistik untuk menguji koefisien regresi parsial dan F-statistik untuk menguji pengaruh secara bersama-sama atau keseluruhan dari koefisien regresi dengan level of significance 5% serta chow-test untuk menguji perbedaan pengaruh dari koefisien regresi antara perusahaan multinasional dan perusahaan domestik. Dari hasil analisis menunjukkan bahwa data Size berpengaruh negatif signifikan, Sales Growth berpengaruh positif dan tidak signifikan, ROA, LIQ dan AS berpengaruh negatif dan signifikan terhadap DER pada perusahaan MNC. Sedangkan untuk perusahaan DC Size dan Sales Growth berpengaruh positf dan signifikan, ROA, LIQ dan AS berpengaruh negatif dan signifikan terhadap DER. Hasil pengujian menghasilkan nilai chow test F sebesar 17,016. Nilai F-tabel diperoleh sebesar 2,267. Dengan demikian diperoleh nilai chow test (17,016)>(2,267). Hal ini berarti terdapat perbedaan pengaruh yang signifikan dari pengaruh 5 variabel bebas tersebut terhadap DER pada perusahaan MNC dan DC.
This research aims to analyze the effect of profitability, sales growth, and company size on capital structure. This research is conducted by using 125 sample data of manufacturing companies in the infrastructure, utility, and transportation sub-sectors listed in Indonesia Stock Exchange in the period 2015-2019. This sampling method is using purposive sampling method and processed using EViews 11 program. The results showed that the profitability variable has a negative and significant effect on the capital structure, the sales growth variable had a positive and significant effect on the capital structure, the firm size variable had a negative and significant effect on the structure capital.
This paper analyses the impact of growth opportunities on default risk of nonfinancial listed firms in Kenya. The study employ panel data analysis to study the 31 nonfinancial listed firms between 2011 and 2020. Default risk is estimated by Merton’s (1974) distance to default, while growth opportunities is measured by the ratio of market to book value. The study employs the ordinary least squares to test the hypotheses, and both the fixed effect and random effect regression for robustness test. The results show that the growth opportunities has a negative and statistically significant effect on default risk. Furthermore, tangibility, institutional ownership, firm size, firm profitability and leverage were also found as exerting a significant effect on default risk. Managers may consider financing this growth opportunities using equity financing, which may lower the likelihood of default risk.
This research investigates how taxation affects the financial structures of companies. This study utilized quarterly data from 12 publicly traded companies listed on Borsa Istanbul, which had conducted cash capital increases both before and after the implementation of tax reduction in 2015. The data spanned the period from 2010 to 2022. The tax effect in the study was considered concerning the tax reduction applied in cash capital increases. The dates of cash capital increases for the companies analyzed in the study were treated as dummy variables. In addition to the tax effect, specific factors of the companies, such as the current ratio, accounts receivable turnover ratio, asset profitability ratio, net sales growth rate, and asset growth rate, were examined in the literature review to determine the companies’ capital structures. The econometric method application involved conducting the Extended Dickey-Fuller and Phillips-Perron unit root tests to ascertain the stationary degrees of the variables Subsequently, the ARDL boundary test method was employed to examine the long-term cointegration relationship between the variables. The long-term and error correction coefficients were estimated in the last step using the ARDL method. As a result of the study, a statistically significant and negative relationship was observed between the financial leverage ratio of the three companies included in the study and the control variable. A statistically significant and positive association has been observed between a company's leverage ratio and the tax variable. In other companies, It was found that contrary to the literature and general expectation, there was no statistically significant connection. Finally, policy recommendations were made to reduce the financial leverage ratio, thus contributing to the financial system's functioning and impacting the country's economy.
The theme of capital structure has always causes a lot of discussions between researchers. Manag-ers should take into account various and contradictory factors presented in the studies when they make financial decisions. It is difficult to achieve an optimal capital structure taking into the specifics of com-panies in the small business segment. There is no model of optimal capital structure that can be accessed by all equally. Therefore, it is important to know the factors affecting the capital structure. The aim of this paper is to test how firm characteristics affect agricultural small busines’ capital structure in Kazakhstan. It discusses the effect of selected determinants on the capital structure of businesses, expressed by way of three categories of indebtedness. The analysis of the determinants of capital structure is conducted by way of panel regression. The panel data for the article were acquired from the Agency of statistics data-base. Specifically, the data used were those from accounting statements for the years 2015 – 2017 for the agricultural businesses of legal entities. In total, the object of examination was 50 small businesses. The results show that financial decisions correspond to the Pecking-order theory and in some cases to the Agency theory. Most of the factors considered in empirical studies are not significant. It is established that for all periods of debt, the impact of profitability on the small businesses capital structure is statistically significant, as well as the impact of the asset tangibility and the firm size in short-term debt.
Capital structure is a combination of capital and debt so that it is very influential on the company's financial position. To finance operations, companies can use funds from debt or capital. However, the company's management must know whether the company is able to bear the financial risks or costs of these funds to prevent the company's bankruptcy. The purpose of this research is to analyze the factors that influence the capital structure. The independent variables are corporate tax rates, non-debt tax savings, investment opportunity sets, sales growth, and profitability. The sample data tested were obtained from the annual reports of companies listed on the Indonesia Stock Exchange (IDX). The reporting period used in this study was five years and amounted to 2,210. The data obtained were then processed through the SPSS 25 and Eviews 10 systems. The results revealed that corporate tax rates and profitability have a significant negative effect on capital structure. There is a significant positive effect of the investment opportunity set variable and sales growth on the owned capital structure. Another finding is that non-debt tax savings have no significant effect on capital structure.
We conduct a systematic review of the international research on the determinants and consequences of debt maturity structure in the accounting, finance, and corporate governance literature. Our review reveals that a large volume of empirical research has been conducted on the determinants of debt maturity structure, and we categorize these determinants into the following five factors: (1) firm specific; (2) tax; (3) corporate governance; (4) country-level institutional; and (5) macroeconomic. The literature on the consequences of debt maturity structure is relatively scant and generally focuses on the effect of debt maturity structure on financial reporting quality and investment and financing decisions. We consider endogeneity as one of the major concerns in the reported empirical studies that, unless addressed satisfactorily, may render some of the findings untenable. Based on the review, we also provide several future research directions.
Die deutsche Wirtschaft und ihre international anerkannten Qualitätsstandards sind insbesondere von einer hohen Anzahl an kleinen und mittleren Unternehmen (KMU) geprägt. Diese Unternehmen sind gekennzeichnet von hoher Spezialisierung, traditionsreichen Unternehmensgeschichten mit familiärem Hintergrund und einer regionalen Verwurzelung, aber ebenso auch von begrenzten Ressourcen, limitierter Infrastrukturanbindung, Fachkräftemangel sowie Nachfolgeproblemen. Vor dem Hintergrund der stetig voranschreitenden internationalen Nachhaltigkeitstransformation, die sowohl auf gesellschaftlicher, finanzieller als auch regulatorischer Ebene stattfindet, wird diese Unternehmensgruppe vor große Herausforderungen gestellt. Dennoch liegen hinsichtlich der KMU-Unternehmensgruppe nur begrenzt wissenschaftliche Arbeiten vor, die sich empirisch mit der Integration von nachhaltigen Finanzierungsformen und -zwecken auseinandergesetzt haben. Der vorliegende wissenschaftliche Beitrag ging unter Durchführung einer theoretischen Literaturrecherche und einer empirischen Unternehmensbefragung von 100 deutschen KMU der Frage nach, inwiefern Hemmnisse hinsichtlich der Integration nachhaltiger Finanzierungsformen und -zwecke bestehen. Des Weiteren wurde untersucht inwiefern die Integrationsbereitschaft in Zusammenhang mit charakteristischen Unternehmensmerkmalen wie u. a. der Unternehmensgröße und dem Alter der Unternehmensführung bzw. Ausprägungsmerkmalen von nachhaltigen Finanzierungsformen wie u. a. deren Verständlichkeit und finanzielle Rentabilität stehen. Im Rahmen der empirischen Untersuchung wurden deskriptive Auswertungsformen, Korrelationsanalysen sowie die multiple lineare Regression angewendet. Es konnte festgestellt werden, dass hinsichtlich der Unternehmensmerkmale ausschließlich das Alter der Unternehmensführung und die Bedeutung des öffentlichen Unternehmensimages signifikant in einem Zusammenhang mit der Integrationsbereitschaft standen. Ausprägungsmerkmale nachhaltiger Finanzierungsformen konnten hingegen kaum in Zusammenhang mit der Integrationsbereitschaft gesetzt werden, was vermutlich auf den bisher eher gering ausgeprägten diesbezüglichen Kenntnis- und Erfahrungsstand in den Unternehmen zurückgeführt werden kann. Anhand dieser Ergebnissen kann abgeleitet werden, dass in der aktuellen Situation besonders niederschwellige Beratungs- und Informationsangebote sowie eine politische Dialogkultur, die sich an den individuellen Rahmenbedingungen von KMU orientieren, förderlich sein können, um den Wissensstand und die Integrationsbereitschaft auszubauen. Ebenso könnten die gezielte Ansprache durch Finanzpartner sowie wirtschaftliche Anreize in Verbindung mit nachhaltigen Finanzierungsformen und -zwecken dazu führen, dass das Thema stärker in den Unternehmensfokus gerückt werden kann.
Purpose
The International Accounting Standards Board (IASB) has justified the simplification of International Financial Reporting Standards (IFRS) for small- and medium-sized enterprises (SMEs) in several ways, but no effective justification for this simplification has been made based on the information needs of users. This study aims to provide empirical evidence of the decision usefulness of IFRS for SMEs from a prominent user group of SME financial statements – the banks.
Design/methodology/approach
This study uses a mixed-method approach. First, a survey was conducted on commercial bank lending officers to assess the usefulness of different disclosure items included in the SME financial statements. Second, semi-structured interviews were conducted with commercial bank lending officers to gain an in-depth insight into the appropriateness and economic consequences of the requirements of IFRS for SMEs on their lending decisions.
Findings
The findings show that commercial bank lending officers did not consider all the disclosure requirements presented to them to be equally important. Hence, to facilitate the actual needs of the users’ decision usefulness, it is imperative that when given the opportunity, users participate in the development of accounting standards.
Originality/value
The findings of this study will be of interest to accounting regulators for evaluating the successful implementation of IFRS for SMEs and planning the next review of IFRS for SMEs. The IASB and SME Implementation Group are presently considering ways to increase user involvement for the next review of IFRS for SMEs, and the findings of this study signify the need for user involvement in the standard setting process.
Access to external finance is essential for firms to engage in innovation processes and to grow. The regulatory environment plays a vital role in facilitating this access. We explore the role of employment protection legislation in the probability that firms obtain bank credit. We propose that restrictions on structuring employees’ work schedules and dismissing employees reduce access to credit by increasing the credit risk incurred by lenders. Our findings are based on 21,332 observations (European Central Bank SAFE dataset and World Bank Doing Business dataset) and reveal that a higher level of employment protection legislation is negatively related to the probability of firms obtaining bank credit. These results are robust to confounding, endogeneity, and selection bias, as well as to alternative specifications.
The purpose of this study is to analyze the financing behaviors of young and old small knowledge-intensive service (SKIS) firms, giving particular attention to the relationship between owner loans and the level of indebtedness and to the effect of owner loans on rebalancing the capital structure of such firms. Using dynamic panel data, this study used two samples, one with 421 young SKIS firms and another with 1,353 old SKIS firms. Based on the findings, the financing behaviors of both the young and old firms closely resembled the predictions of the pecking order theory. However, the young SKIS firms attempted to rebalance their capital structure, being able to renegotiate credit under favorable terms, while the old SKIS firms slowly adjusted, suggesting the presence of high transaction costs. Regarding owner loans, they positively impacted the adjustment speed, with greater magnitude on the old SKIS firms.
Este trabajo examina la influencia de los financiamientos en el desempeño de las microempresas artesanales de San Bartolo Coyotepec, Oaxaca, México. Para ello, se aplicaron encuestas y entrevistas semiestructuradas a actores clave del desarrollo local y empresarios artesanales entre enero y febrero de 2017. Los resultados evidencian que, si bien los créditos contribuyen en el desempeño de las empresas, coexisten otros factores que influyen en su desempeño como la voluntad del líder y los problemas sociales y del contexto de las localidades donde se encuentran.
Bu araştırmada işletmelerin finansal yapıları teorik ve ampirik olarak araştırılmıştır. Teorik bölümde konu ile ilgili günümüze kadar ortaya çıkan sermaye yapısı teorileri açıklanarak araştırma ile ilgili olarak finans yazınında gerçekleştirilen bilimsel araştırmalarda ortaya çıkan sonuçlara da yer verilmiştir. Çalışmanın ampirik bölümünde ise Borsa İstanbul’da işlem gören BİST imalat sektöründeki şirketlerin 2014-2019 yılları arasındaki finansal tabloları kullanılmıştır. Buna göre ilk olarak imalat sektöründe yer alan alt sektörler ve bu sektörlerin finansal yapıları arasındaki ilişki Anova analiziyle test edilmiştir. Daha sonra imalat sektöründeki şirketler finansal yapılarına göre kümeleme analizi yoluyla kaldıraç gruplarına bölünmüştür. Bu gruplara göre büyüklükle finansal yapı arasındaki ilişki yine Anova analizi ve çoklu ayrışım analizi ile araştırılmıştır. Anova analizi sonuçlarına göre özvarlık / toplam varlık oranları 2014-2019 yılları arasında sektör gruplarının hiçbirinde farklılık göstermemiştir. Ortalama toplam varlık ve ortalama toplam satış kriterine göre 2014-2019 yılları arasında imalat şirketlerinin finansal yapılarının farklılık gösterdiği belirlenmiştir. Toplam varlık ve toplam satış kriterine göre ise genel anlamda şirketlerin kaldıraç grupları veya finansal yapıları anlamlı düzeyde farklılık göstermemiştir.
This chapter analyses the relationship between ownership structure and leverage, providing an integrated theoretical approach that combines traditional financial theories, agency theory, and recently developed theories relating to non-financial preferences. The results show that, after controlling for endogeneity, being a family firm has a positive effect on the propensity to incur debt. These findings add to the existing body of literature and underline the need for a multi-theoretical approach when explaining the capital structure of family firms. The authors apply panel data methodology to control for individual heterogeneity of family firms. The chapter uses a sample of Spanish firms operating in the tourism industry.
The purpose of this study was to determine the effect of tax avoidance and company size on the capital structure of cosmetic companies in 2015-2019. This type of research is quantitative using secondary data from the financial and annual report data of cosmetic companies for the years 2015-2019. The research sample was obtained from 6 companies from 2015-2019, thus 30 research samples were found. The data analysis technique uses statistical analysis from SPSS software such as descriptive statistical analysis, correlation coefficient, coefficient of determination, significant F test and t test, classical assumption test and multiple linear regression analysis. The results showed that there was a significant influence between tax avoidance and firm size on capital structure as seen from the F-count value of 2.521 at p value <10% (Sig. 0.099).
This paper investigates whether municipalities in Poland use their municipal companies to increase debt capacity beyond the limitations imposed by the fiscal debt rules. The article presents corporate governance and agency problems on the example of relations between local government units and affiliated companies. We review and link literature on corporate finance, in particular capital structure, and public finance-debt liabilities of municipalities. We analyse a sample of 2,019 observations of municipalities and their municipal companies using the Ordinary Least Squares (OLS) method, where explanatory variables were taken from the public and corporate finance (leverage and its determinants). Results show that long-term debt of municipalities is positively associated with the leverage and size of municipal companies, but it is negatively related to their profitability.
El objetivo del artículo es analizar los efectos de la estructura de capital en la innovación de las pequeñas y medianas empresas (Pymes) de un país emergente. Para ello se realizó una investigación empírica con un enfoque cuantitativo, de tipo explicativo y corte transversal a 230 pymes manufactureras mexicanas, usando el método de ecuaciones estructurales por mínimos cuadrados parciales (PLS-SEM). Los resultados revelan que las fuentes de financiamiento internas y externas influyen positiva y significativa en la innovación. Una limitación del estudio es que los resultados se delimitan a Pymes manufactureras de Aguascalientes, sugiriendo estudios que consideren otros sectores. La originalidad del trabajo consiste en la metodología utilizada, la cual permitió identificar la importancia y desempeño que tienen las fuentes de financiamiento en la innovación de Pymes de economía emergente. Los hallazgos demuestran que el financiamiento interno tuvo un mayor impacto significativo en la innovación de este tipo de empresas.
In this work, we examine whether earnings management affects the debt maturity structure of Italian non-SMEs. We employ accruals quality as a proxy for earnings management. We measure the accrual quality as the absolute value of residual reflects the accruals that are not related to cash flow realized in the current, following or previous year. We measure the debt maturity in two ways. First, we consider it as a dummy variable that takes the value equal to 1 if some of the debt is long-term (exceeding one year), and 0 otherwise. Second, we compute the debt maturity as the ratio of long-term debt to total debt. We employ a quantitative approach, carrying out several regressions (probit, logit, and tobit) analyses to investigate the effect earnings management on debt maturity structure, using financial statement data of 1,001 Italian non-SMEs sampled over the period 2011-2017. This paper provides theoretical and practical findings that support the literature on earnings management. First, the study confirms that accrual quality can use as a proxy of earnings management by the academic community. Then the findings show that earnings management is negatively associated with the possibility to access to long-term debt, and with a proportion of long-term debt in total debt. This evidence may support the managers when they have to plan the financial structure, the lenders and the creditors in their decision-making processes, and the policymakers when they have to set programs aimed to make easier the access to external financial resources.
The authors examine the empirical determinants of debt maturity structure using a maturity structure measure that incorporates detailed information about all of a firm's liabilities. They find that larger, less risky firms with longer-term asset maturities use longer-term debt. Additionally, debt maturity varies inversely with earnings surprises and a firm's effective tax rate but there is only mixed support for an inverse relation with growth opportunities. The authors find strong support for the prediction of a nonmonotonic relation between debt maturity and bond rating; firms with high or very low bond ratings use shorter-term debt. Copyright 1996 by University of Chicago Press.
This paper provides new evidence on the financial structure of small firms by emphasizing the role played by financial distress. We specify a model of debt adjustments that allows us to investigate the specific nature of the adjustment process towards target debt levels in small firms, which is then extended to account for the effect of financial distress on financial structure decisions. Our models were estimated by the Generalized Method of Moments on a data panel of small Portuguese firms during a period of recession, in which a substantial proportion of the companies analyzed faced a financial distress situation. We find that small firms do adjust their debt ratios towards target levels, the speed of adjustment being faster in the shorter term. Our results also indicate that there are major differences in the determinants of long-term and short-term debt, highlighting the role played by debt maturity in explaining a firm’s financial structure. Finally, random behavior is observed in financially distressed firms, who seem to be disoriented when making their financial structure decisions. Copyright Springer 2006
The authors provide an empirical examination of the determinants of corporate debt maturity. Their evidence offers strong support for the contracting-cost hypothesis. Firms that have few growth options, are large, or are regulated have more long-term debt in their capital structure. The authors find little evidence that firms use the maturity structure of their debt to signal information to the market. The evidence is consistent, however, with the hypothesis that firms with larger information asymmetries issue more short-term debt. The authors find no evidence that taxes affect debt maturity. Copyright 1995 by American Finance Association.
The report argues that aid volatility is an important source of volatility for the poorest countries. Following a method already applied by the Agence Française de Développement, the report argues that loans to LICs should incorporate a floating grace period, which the country could draw upon when hit by a shock. The definition of a shock should include aid uncertainty, along with others such as commodity shocks and natural disasters. The idea is calibrated to a key IMF policy instrument towards Low-Income Countries, the Poverty-Reducing and Growth Facility (PRGF).
Le rapport montre que l’aide aux pays pauvres contribue à accroître la volatilité de ces pays. Suivant une méthode déjà élaborée par l’Agence Française de Développement, l’article propose d’accorder des crédits aux pays pauvres, qui incorporent un droit de grâce flexible, utilisable par le pays, lorsqu’il est confronté à un choc négatif, quelle qu’en soit la cause : choc d’aide, de prix des matières premières ou catastrophe naturelle. Il montre comment l’instrument utilisé par le FMI à destination des pays pauvres, le PRGF, pourrait être modifié pour ce faire.
This article analyzes the economics of small business finance and the private equity and debt markets in which these businesses raise funds. The framework used is a financial growth cycle paradigm, in which the optimal choice among capital structures differs over the cycle. We also show the actual capital structure of small business and how this structure varies with the size and age of the firm. In addition, we analyze a number of research and policy issues, review the relevant literature, and suggest topics for future research.
When capital market investors and firm insiders possess the same information about a company's prospects, its liabilities will be priced in a way that makes the firm indifferent to the composition of its financial liabilities (at least under certain, well‐known circumstances). However, if firm insiders are systematically better informed than outside investors, they will choose to issue those types of securities that the market appears to overvalue most. Knowing this, rational investors will try to infer the insiders' information from the firm's financial structure. This paper evaluates the extent to which a firm's choice of risky debt maturity can signal insiders' information about firm quality. If financial market transactions are costless, a firm's financial structure cannot provide a valid signal. With positive transaction costs, however, high‐quality firms can sometimes effectively signal their true quality to the market. The existence of a signalling equilibrium is shown to depend on the (exogenous) distribution of firms' quality and the magnitude of underwriting costs for corporate debt.
We examine the economics of financing small business in private equity and debt markets. Firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle. We show the sources of small business finance, and how capital structure varies with firm size and age. The interconnectedness of small firm finance is discussed along with the impact of the macroeconomic environment. We also analyze a number of research and policy issues, review the literature, and suggest topics for future research. The opinions expressed do not necessarily reflect those of the Board of Governors or its staff. The authors thank for help with the article. Please address correspondence to Allen N. Berger, Mail Stop 153, Federal Reserve Board, 20th and C Sts. NW, Washington, DC 20551, call 202-452-2903, fax 202-452-5295, or email aberger@frb.gov.
We investigate what determines the maturity of lines of credit (L/Cs) to small businesses. Our evidence suggests that, because detailed debt covenants are typically harder to enforce when dealing with small firms, lenders use shorter maturities to induce more frequent renegotiation of contract terms and close monitoring of informationally opaque and risky borrowers. We find that maturity is shorter for firm owners that have poor credit histories, are older, and less experienced, for firms that are more informationally opaque, and for L/Cs whose purpose is more difficult to monitor. We also find that maturity is longer when the lender is a finance company than when it is a bank, is negatively related to the interest rate, and positively related to the up-front fees paid and collateral pledges. We do not find any relation between maturity and stronger borrower-lender relationships.
As demonstrated by Boyce and Kalotay (1979) and Brick and Ravid (1985), the use of long-term debt may be preferred because of tax-related advantages. Brick and Ravid show that if there exists a tax advantage to debt and nonstochastic interest rates, long-term debt will increase the present value of the tax benefits of debt if the term structure of interest rates, adjusted for risk of default, is increasing. A decreasing term structure, on the other hand, calls for short-term debt. The present paper extends the tax-induced argument of Brick and Ravid to allow for the presence of stochastic interest rates. Once interest rates are uncertain, pricing even under risk neutrality becomes a complex issue. We analyze the debt maturity decision under two competing pricing equations: the return to maturity expectations hypothesis and the local expectations hypothesis. (This terminology is used in Cox, Ingersoll, and Ross (1981) and Campbell (1986).) Under uncertainty, a debt capacity factor will create an additional incentive to issue long-term debt. Our other results may be interpreted to indicate that if the term premium, the difference between the implied forward interest rate and the future expected spot rate, is positive (sufficiently negative) then long-term (short-term) debt maturity strategy is optimal.
This paper provides an empirical examination of the determinants of corporate debt maturity structure. A partial adjustment model is estimated by GMM estimation procedure using data for an unbalanced panel of UK firms over the period 1983-1996. The evidence is consistent with the hypothesis that firms with more growth opportunities in their investment sets tend to have more shorter-term debt. There is also strong evidence for a positive impact of size on debt maturity structure. The results also provide strong support for the maturity-matching hypothesis that firms match the maturity structure of their debt to that of their assets. The findings are inconsistent with the signalling hypothesis that firms use their debt maturity structure to signal information to the market. We find no evidence that taxes affect debt maturity structure. Our results suggest that firms have long-term target ratios and they adjust to the target ratio relatively fast, which might suggest that the costs of being away from their target debt maturity ratios are significant.
We survey 392 CFOs about the cost of capital, capital budgeting, and capital structure. Large firms rely heavily on present value techniques and the capital asset pricing model, while small firms are relatively likely to use the payback criterion. A surprising number of firms use firm risk rather than project risk in evaluating new investments. Firms are concerned about financial flexibility and credit ratings when issuing debt, and earnings per share dilution and recent stock price appreciation when issuing equity. We find some support for the pecking-order and trade-off capital structure hypotheses but little evidence that executives are concerned about asset substitution, asymmetric information, transactions costs, free cash flows, or personal taxes.
This paper reviews the theory and evidence on the process by which corporations raise debt and equity capital and the associated effects on security prices. Findings from related transactions are used to test hypotheses about the stock price patterns accompanying announcements of security offerings. Various contractual alternatives employed in security issues are examined; for example, rights or underwritten offers, negotiated or competitive bid, best efforts or firm commitment contracts, and shelf or traditional registration. Finally, incentives for underpricing new issues are analyzed.
We explore the idea that financial distress is costly because free-rider problems and information asymmetries make it difficult for firms to renegotiate with their creditors. We present evidence that Japanese firms with financial structures in which these problems are likely to be small perform better than other firms after the onset of distress. In particular, we show that firms in industrial groups — those with close financial relationships to their banks, suppliers, and customers — invest more and sell more after the onset of distress than nongroup firms. We find similar results for nongroup firms that nevertheless have strong ties to a main bank.
In this paper, a model of corporate leverage choice is formulated in which corporate and differential personal taxes exist and supply side adjustments by firms enter into the determination of equilibrium relative prices of debt and equity. The presence of corporate tax shield substitutes for debt such as accounting depreciation, depletion allowances, and investment tax credits is shown to imply a market equilibrium in which each firm has a unique interior optimum leverage decision (with or without leverage-related costs). The optimal leverage model yields a number of interesting predictions regarding cross-sectional and time-series properties of firms' capital structures. Extant evidence bearing on these predictions is examined.
Many corporate assets, particularly growth opportunities, can be viewed as call options. The value of such ‘real options’ depends on discretionary future investment by the firm. Issuing risky debt reduces the present market value of a firm holding real options by inducing a suboptimal investment strategy or by forcing the firm and its creditors to bear the costs of avoiding the suboptimal strategy. The paper predicts that corporate borrowing is inversely related to the proportion of market value accounted for by real options. It also rationalizes other aspects of corporate borrowing behavior, for example the practice of matching maturities of assets and debt liabilities.
Extant literature suggests that bank lending results in greater information production and control over corporate borrowers. We show that bank lending creates positive externalities in that it improves the contracting environment for other public debt providers. Focusing on the maturity structure of Japanese corporate debt issues, we provide evidence that a higher proportion of bank debt results in public debt of longer maturity. More importantly, the sensitivity of the debt maturity to bank debt ratio is significantly higher for independent firms compared with that of keiretsu-affiliated firms. The evidence is consistent with keiretsu firms having less agency costs of debt compared with independent firms.
The proof of Proposition I in the work of Modigliani and Miller (MM) (19581.
Modigliani , F. and
Miller , M. H. 1958. The cost of capital, corporation finance, and the theory of investment. American Economic Review, 48: 261–97. [Web of Science ®]View all references) is based on the mechanism of arbitrage. Two cases are considered: first, the case where the value of the levered firm is larger than that of the unlevered one; second, the case where the value of the levered firm is smaller than that of the unlevered one. The first case involves the investor engaging in personal borrowing. This article shows that the amount borrowed is greater than the amount envisaged by MM, and that the proof of Proposition I is slightly altered.
This paper analyzes debt maturity structure for borrowers with private information about their future credit rating. Borrowers'
projects provide them with rents that they cannot assign to lenders. The optimal maturity structure trades off a preference
for short maturity due to expecting their credit rating to improve, against liquidity risk. Liquidity risk is the risk that
a borrower will lose the nonassignable rents due to excessive liquidation incentives of lenders. Borrowers with high credit
ratings prefer short-term debt, and those with somewhat lower ratings prefer long-term debt. Still lower rated borrowers can
issue only short-term debt.
This article investigates the financial structure of small firms with an emphasis on growth and access to capital markets. Neo-classical economic, life cycle, pecking order and agency theory perspectives are reviewed in order to formulate testable propositions concerning levels of long-term, short-term and total debt, and liquidity. Up-to-date financial data were collected from the U.K. Private+ database for a large sample comprising of both listed and unlisted small firms. Regression results indicate significant relationships between financial structure and profitability, asset structure, size, age and stock market flotation but not growth except when rapid and combined with lack of stock market flotation. Analysis of stock market flotation as an interactive dummy reveals major differences between listed and unlisted small firms. The results indicate that the variety of financial structures observed in practice may reflect rational trade-offs of various costs on the part of small firm owner-managers but that the over-reliance on internally available funds and the importance of collateral, in the case of unlisted small firms, are likely to be major constraints on economic growth.
In this paper, the relevance of some debt ratio determinants from the recent theory of finance is empirically investigated in a small business sector. The data used in this study consist of average financial data of 27 shoptypes in 20 different years, covering a period of 24 years. The panel character of the data facilitates the use of analytical techniques aimed at reducing or avoiding the biasing effect of omitted variables on the outcomes. The main conclusion is, that the theoretical determinants appear indeed to be relevant for the small business sector investigated here, but the influences encountered in the analyses are far less straightforward than the hypothesized effects in the theory. Influences on total debt are frequently found to be the net effects of opposite influences on long and short term debt and some variables show large time and industry specific effects. Further, distinct patterns in the time specific effects were found.
This article utilises up-to-date financial panel data, and investigates the capital structure of small and medium sized enterprises (SMEs) in the U.K. Different capital structure theories are reviewed in order to formulate testable propositions concerning the levels of debt in small businesses, and a number of regression models are developed to test the hypotheses.
The results suggest that most of the determinants of capital structure presented by the theory of finance appear indeed to be relevant for the U.K. small business sector. Size, age, profitability, growth and future growth opportunities, operating risk, asset structure, stock turnover and net debtors all seem to have an effect on the level of both the short and long term debt in small firms. Furthermore, the paper provides evidence which suggest that the capital structure of small firms is time and industry dependent. The results indicate that time and industry specific effects influence the maturity structure of debt raised by SMEs. In general terms, average short term debt ratios in SMEs appear to be increasing during periods of economic recession and decrease as the economic conditions in the marketplace improve. On the other hand, average long term debt ratios exhibit a positive relationship with changes in economic growth.
Small firms differ from large firms in taxability, ownership, flexibility, industry, economies of scale, financial market access, and level of information asymmetry. We investigate the determinants of small firms’ choice of the maturity structure of debt. We find that small firms’ maturity of assets, capital structure, and probability of default are statistically and economically important in the choice of debt maturity. We find little evidence that small firms’ growth options, level of asymmetric information, and tax status affect debt maturity choice.
We test the implications of Flannery's (1986) and Diamond's (1991) models concerning the effects of risk and asymmetric information in determining debt maturity, and we examine the overall importance of informational asymmetries in debt maturity choices. We employ data on over 6,000 commercial loans from 53 large U.S. banks. Our results for low-risk firms are consistent with the predictions of both theoretical models, but our findings for high-risk firms conflict with the predictions of Diamond's model and with much of the empirical literature. Our findings also suggest a strong quantitative role for asymmetric information in explaining debt maturity. Copyright 2005 by The American Finance Association.
Realized growth can be viewed as a proxy for the unobservable investment opportunity set (IOS) of the firm, and provides a benchmark against which IOS proxy variables can be compared. Results from such a comparison indicate that many of the variables from earlier studies, including book-to-market measures and capital expenditure to assets ratios are consistently correlated with subsequently realized growth. However, R&D intensity and E/P ratios do not exhibit any consistent association with subsequent growth indicating that they may not be valid IOS proxies. Copyright Blackwell Publishers Ltd 1999.
We examine firm debt maturity in 30 countries during the period 1980–1991. In countries with active stock markets, large firms have more long-term debt. Stock market activity is not correlated with debt levels of small firms. By contrast, in countries with a large banking sector, small firms have less short-term debt and their debt is of longer maturity. Variation in the size of the banking sector is uncorrelated with the capital structures of large firms. Government subsidies to industry are positively related and inflation is negatively related to the use of long-term debt. We also find evidence of maturity matching.
This paper provides a model of how borrowers with private information about their credit prospects choose seniority and maturity of debt. Increased short-term debt leads lenders to liquidate too often. It also increases the sensitivity of financing costs to new information, although better-than-average borrowers desire information sensitivity. The model implies that short-term debt will be senior to long-term debt, and that long-term debt will allow the issue of additional future senior debt. The model also has implications on the structure of leveraged buyouts and on how various types of lenders respond to potential defaults.
The authors document the determinants of the term to maturity of 7,369 bonds and notes issued between 1982 and 1993. Their main finding is that large firms with investment grade credit ratings typically borrow at the short end and at the long end of the maturity spectrum, while firms with speculative grade credit ratings typically borrow in the middle of the maturity spectrum. This pattern is consistent with the theory that risky firms do not issue short-term debt in order to avoid inefficient liquidation, but are screened out of the long-term debt market because of the prospect of risky asset substitution. Copyright 1996 by American Finance Association.
This paper considers a firm that must issue common stock to raise cash to undertake a valuable investment opportunity. Management is assumed to know more about the firm's value than potential investors. Investors interpret the firm's actions rationally. An equilibrium model of the issue-invest decision is developed under these assumptions. The model shows that firms may refuse to issue stock, and therefore may pass up valuable investment opportunities. The model suggests explanations for several aspects of corporate financing behavior, including the tendency to rely on internal sources of funds, and to prefer debt to equity if external financing is required. Extensions and applications of the model are discussed.
In this paper, we present a tax‐induced framework to analyze debt maturity problems. We show that under some modifications of the existing U.S. tax code, debt maturity is irrelevant even in the presence of taxes and bankruptcy costs that yield an optimal capital structure. If this restrictive structure is relaxed, and assuming the Miller [15] equilibrium does not prevail, tax reasons would usually imply the existence of an optimal debt maturity structure. If there exists a gain from leverage, then an increasing term structure of interest rates, adjusted for default risk, results in long‐term debt being optimal. A decreasing term structure, under similar circumstances, renders short‐term debt optimal. In the absence of agency costs, a Miller [15]‐type result emerges at equilibrium and irrelevance prevails. We also argue that agency costs could again reverse the irrelevance and imply a firm‐specific optimal debt maturity structure.
The rise of managed healthcare organizations (MCOs) and the associated increased integration among providers has transformed US healthcare and at the same time raised antitrust concern. This paper examines how competition among MCOs affects the efficiency gains of improved price coordination achieved through integration. MCOs offer differentiated services and contract with specialized and complementary upstream providers to supply these services. We identify strategic pricing equilibria under three different market structures: overlapping upstream physician-hospital alliances, upstream-downstream arrangements such as Preferred Provider Organizations, and vertically integrated Health Maintenance Organizations. The efficiency gains achieved depend not only on organizational form but also on the toughness of premium competition. We show that, contrary to popular thinking, providers and insurers do not earn maximum net revenue when they are monopolies or monopsonies, but rather at an intermediate level of market power. Furthermore, closer integration of upstream and downstream providers does not necessarily increase net revenues.
debt. The debt maturity decision involves a consideration of both cost and risk elements. This paper will explore one dimension of the risk associated with different maturity policies: the effects of bond maturity upon the variance of net income, and subsequently on the firm's cost of equity capital. One element of the risk of borrowing is the risk that the firm's cash inflows will not be sufficient to cover the fixed outflows necessary to service the debt. One way in which firms attempt to deal with this risk is to follow a hedging policy whereby the maturity of the debt is chosen so as to approximately equal the life of the asset. By matching debt maturity to asset life the costs of financing the asset are known over the life of the asset, and it is expected that the cash flows generated by the asset will be sufficient to service and retire the debt by the end of the asset's life.2 Debt of maturity shorter than asset life is considered more risky since there is some possibility the asset will not have generated sufficient cash flows by the maturity date to retire the debt. This possibility exists for longer maturities, but it is less likely and has the advantage of pushing the possible "crisis at maturity"3 further into the future. Debt of maturity longer than the asset life is considered risky due to the uncertainty of the source and volume of the cash flows which are necessary to service the debt after the asset is retired.
The interests and incentives of managers and shareholders conflict over such issues as the optimal size of the firm and the payment of cash to shareholders. These conflicts are especially severe in firms with large free cash flows--more cash than profitable investment opportunities. The theory developed here explains 1) the benefits of debt in reducing agency costs of free cash flows, 2) how debt can substitute for dividends, 3) why diversification programs are more likely to generate losses than takeovers or expansion in the same line of business or liquidation-motivated takeovers, 4) why the factors generating takeover activity in such diverse activities as broadcasting and tobacco are similar to those in oil, and 5) why bidders and some targets tend to perform abnormally well prior to takeover.
Maksimovic 1999 Institutions, Financial Markets, and Debt Maturity
- A Demirgüc-Kunt
- A. Demirgüc-Kunt
ÔOn Financial Con-tractingÕ
- C W Smith
- J B Jr
- Warner
Smith, C. W., Jr. and J. B. Warner, 1979, ÔOn Financial Con-tractingÕ, Journal of Financial Economics 7, 117-161.
- M J Barclay
- C W Smith
- Jr
Barclay, M. J. and C. W. Smith, Jr, 1995, ÔThe Maturity
Structure of Corporate DebtÕ, Journal of Finance 50, 609631.