Financial Choices Research Articles

Carbon Footprint, Financial Structure, and Firm Valuation: An Empirical Investigation

This study aims to investigate the complex link between carbon emissions, firm value, and financial choice in regard to the GCC, a dynamic emerging economy. It also seeks to answer the question on whether the financial structure of a firm moderates the correlation between carbon emissions and firm value. We focus on analyzing data from non-financial firms registered on the GCC stock markets between 2010 and 2020. By applying the GLS technique, we assess the impact of carbon emissions on firm value and examine the manner in which a firm’s financial structure either enhances or hinders this relationship. The results demonstrate that there is a strong and adverse connection between carbon emissions and corporate value, as increased emissions translate into lower corporate value. The study then moves on to emphasize the critical role that capital financing plays in mitigating the detrimental effects of carbon emissions. This is accomplished by balancing both debt and equity in terms of their proper proportions (optimal capital structure). However, excessive borrowing could have adverse consequences in terms of carbon emissions on company value. Moreover, the GMM estimator is also applied to carry out a robustness check and the results are consistent with the main findings. This study highlights the significance of financial strategy in advancing sustainability and protecting business value. These findings are supported by both stakeholder and signaling theory, proving that companies can use their capital financing to signal their dedication to sustainability. These results could be used by GCC policymakers to create rules and regulations that encourage environmentally friendly corporate activities and efforts to lower emissions. The research expands the existing literature by examining the difficulties and opportunities faced by GCC firms when combining financial strategy with environmental objectives. It may be necessary to perform additional research in regard to various circumstances and for an extended period, because this study is restricted to non-financial sectors.

Financial Literacy for the Future: Preparing Individuals for Economic Success

Financial literacy encompasses the knowledge and skills essential for making informed financial decisions, impacting both personal and professional lives. This study explores the significance of financial literacy in navigating today's complex financial landscape, emphasizing its role in budgeting, saving, investing, debt management, retirement planning, and understanding financial products. It highlights the necessity of financial literacy for achieving financial stability, independence, and overall well-being, as well as its contribution to a stronger economy. Case studies, such as a family's successful debt reduction strategy and a business's effective budgeting process, illustrate how financial literacy leads to improved outcomes. The findings highlight the need for targeted financial education programs and policies that can bridge knowledge gaps and empower individuals to make better financial choices. The study reviews existing literature on financial literacy, noting disparities in knowledge across demographics and the challenges in translating knowledge into effective financial behavior. Ultimately, improving financial literacy is integral to enhancing economic well-being and fostering more equitable financial systems.

Bond Finance and the Leverage Ratio

Unconstrained profit maximization permits a firm to make sizeable adjustments to the share of bond finance, investment, and the leverage ratio in response to changes in its economic environment. By contrast, a binding pledgeable income constraint limits movements in investment and the leverage ratio but permits some flexibility in the choice of bond versus loan finance. Due to the existence of distress costs of bond finance in the low payoff state, the share of bond finance remains low compared to more expensive loan finance under both constrained and unconstrained profit maximization.

Unlocking Potential: Exploring Financing Choices Among Small and Medium Enterprises

This study investigates the financing preferences of small and medium enterprises (SMEs) in Pakistan and determines their adherence to the hierarchy of financing sources as proposed by the Pecking Order Theory. The study employs a robust methodology, utilizing a sample of 202 Pakistani SMEs and collecting data through structured self-administered questionnaires. Rigorous robustness checks are conducted to ensure data reliability and consistency. The findings reveal a discernible financing hierarchy within Pakistani SMEs, confirming the principles of the Pecking Order Theory. Retained earnings emerge as the overwhelmingly preferred 1st choice for financing, followed by debt financing in 2nd place and external equity in 3rd place. This hierarchy aligns with the theory's emphasis on internal equity, the intermediate role of debt financing, and the last resort nature of external equity. The study's limitations include data availability and the potential for variable changes over time. However, its findings offer valuable insights into SME financing preferences in Pakistan and their adherence to the Pecking Order Theory. The study also provides avenues for future research into additional factors that influence SME financing preferences and their effects on financial performance and growth.

Recommendation system for financial decision-making using Artificial intelligence

The rapid expansion of artificial intelligence (AI) in consumer markets presents challenges, particularly in how cognitive biases influence financial decision-making. These biases can lead to irrational spending, raising ethical concerns about AI’s role in such applications. This research explores how AI can enhance decision-making effectiveness and support consumers in making more rational financial choices. The focus is on developing an intelligent financial management system that applies modern AI algorithms to analyze financial behavior, detect anomalies, and offer personalized recommendations. The article considers a system for generating personalized financial recommendations based on large language models, which uses transaction history, predicted costs, and anomaly information to generate individual advice. Techniques include using Isolation Forest for identifying atypical financial actions and a combination of ARIMA and LSTM models for budget forecasting. The research also considers integrating these models with large language models (LLMs) to generate personalized recommendations. The methodological part of the work includes an analysis of existing models and their areas of application, defining data types and structures for processing, developing a system that integrates the available models, and testing it. The process of generating recommendations is described, which includes the stages of processing input data, forming context, generating recommendations and evaluating them taking into account user characteristics, such as risk level, financial goals and preferences. The generated recommendations are aimed at optimizing the user's financial behavior and can be adapted to different income levels. Special attention is paid to the ethical aspects of the system, which include ensuring confidentiality, fairness and transparency, as well as the importance of supporting user autonomy in making financial decisions. The system promotes responsible financial behavior by helping to avoid impulsive spending and increasing financial awareness without manipulation or imposing specific decisions.

EXPLORING DEBT FINANCING OPTION FOR SME’S : A SYSTEMATIC LITERATURE REVIEW

The development and success of small and medium-sized enterprises (SMEs) are highly dependent on accessible and suitable financing options. This article provides an in-depth review of various SME financing sources, examining the benefits, drawbacks, and impacts of each option, including fintech lending, traditional bank financing, and venture capital. The findings offer a systematic understanding of SME finance dynamics. Results indicate that while venture capital can accelerate growth, it often raises challenges related to sustainability and governance. In contrast, bank financing provides stability but is hindered by high interest rates and complex bureaucratic processes. Fintech financing offers rapid access and ease but comes with heightened security and risk assessment concerns. The study suggests that SMEs should align funding choices with their unique needs and characteristics. Additionally, regulators and stakeholders are encouraged to increase their knowledge and safeguards in response to the expanding fintech lending market. Future research could explore innovative, eco-friendly financing solutions to meet SMEs' evolving needs. This article contributes valuable insights to stakeholders, supporting the sustainable growth of SMEs. Keywords: SME Financing; Debt Financing; Fintech Lending; Bank Financing; Venture Capital

Commitment and investment distortions under limited liability

We study how frictions originating from limited liability distort firms' investment and financing choices. By financing new investments with debt, firms can use limited liability to credibly commit to defaulting earlier—allowing both firm owners and new creditors to benefit from diluting existing creditors. In a dynamic setup, this leads to time-inconsistency, increasing the cost of external funds and discouraging investment. We show that the interaction of these two forces leads to heterogeneous investment distortions, where highly-indebted firms overinvest and those with low levels of debt underinvest. Allowing firm owners to pay themselves directly from new debt issuance can mitigate overinvestment but, in the presence of repeated investment opportunities, tends to exacerbate underinvestment among low-leverage firms.

What Makes Local Planning Effective in a Megacity? The Overlapping Agendas and Scale Inconsistencies in Developing Buenos Aires’ Affordable Land Markets

In limited-resourced Latin-American cities, adapting urban regulations and capturing value offers great potential for developing affordable land. We explored what counts for the significant variance in local land management implementation within Buenos Aires Metropolitan Region. Analysed municipalities successfully developed high-quality instruments to expand affordable land markets. However, local planning effectiveness does not find limits in the quality of planning itself. Depending on the municipalities’ relative location within the metro area, the national-level pipeline infrastructure plans, the politically driven finance choices, and divergent administration protocols favour or hinder the capacity to implement an effective urban land development strategy at local levels.

The influence of peer effects, commodity prices and its hedging on corporate capital structure: Evidence from the oil and gas industry

This paper investigates the influence of peer financial choices on the capital structure decisions of European and North American listed companies in the oil and gas sector. It also examines how commodity prices, particularly oil and natural gas prices, and their corporate hedging affect capital structure policies. The findings underscore the existence of peer effects in the oil and gas industry, indicating that companies consider their peers' financial decisions when determining their capital structure. Further analysis reveals that there is significant cross-country heterogeneity in capital structure peer effects conditional on financial and institutional development, and disclosure quality. Additionally, the research highlights that oil and natural gas prices, along with the hedging against these prices exposure, impact the capital structure of oil and gas companies, providing invaluable insights for industry practitioners and policymakers.

Is Capital Structure Irrelevant with ESG Investors?

Abstract This paper examines whether capital structure is irrelevant for enterprise value and investment when investors care about environmental, social, and governance issues, which we refer to as “ESG-Modigliani-Miller” (ESG-MM). Theoretically, we show that ESG-MM holds with linear pricing and additive ESG. ESG-MM means that issuing low-yielding green bonds does not lower the overall cost of capital because it makes the issuer’s other securities browner. Hence, a firm’s incentive to make a green investment does not depend on its financing choice. We provide suggestive evidence of failure of ESG-MM, implying that firms and governments can exploit inconsistent ESG attribution or segmented markets.

Dynamics of capital structure determinants: empirical evidence from GCC countries

AbstractThe study empirically examines the factors affecting the financing decisions of non-financial listed companies in Gulf Cooperation Council (GCC) countries. Using static and dynamic two-step generalized method of moments techniques, it analyzes unbalanced panel data from 364 non-financial companies across six GCC countries from 2011 to 2021. The findings partially support optimal capital structure theories, highlighting significant internal factors such as profitability, market-to-book ratio, firm size, earnings volatility, and growth opportunities that influence financing decisions. While no single theory fully explains the financing choices, the association of internal factors with book and market leverage is consistent. The study provides robust and generalizable results, aiding financial institutions and policymakers in formulating pro-development policies and regulations. This research facilitates better coordination between corporate managers and financial institutions, supporting the region’s economic transition. It is the first study to use extensive data from GCC non-financial firms to investigate financing decisions, offering valuable insights for investors and a basis for further analysis of capital structure choices in the region and beyond.

A STUDY ON WORKING WOMEN’S FINANCIAL DECISIONS IN BANGALORE NORTH

This study investigates the financial decision-making patterns of working women in Bangalore North, focusing on the factors that influence their personal finance management and investment choices. Through a combination of surveys and interviews, the research explores the impact of demographic variables such as age, education, income level, and marital status on financial decisions. It also examines the role of societal expectations, family responsibilities, and financial literacy in shaping their ability to make informed financial choices. The findings highlight both the progress and the challenges that working women face in achieving financial independence. Despite an increasing number of women participating in the workforce, many still encounter barriers to effective financial planning, including limited access to tailored financial products and a lack of comprehensive financial education. The study concludes by recommending policies and initiatives that aim to empower working women, enhance their financial literacy, and support their pursuit of financial autonomy. KEY-WORDS: Societal Expectations, Family Responsibilities, Financial Independence, Financial Planning, Demographic Factors, Empowerment, Gender and Finance, Workforce Participation

Risk Attitudes and Sources of Finance: Evidence from Non-Farm Household Enterprises in Ghana

ABSTRACT Several theories in economics and finance suggest that risk attitudes play a vital role in economic choices, including being an entrepreneur and the choice of finance for businesses. However, there are limited empirical tests of these theories in the African context, where majority of firms are small and medium-scale enterprises. Using the 7th round of the Ghana Living Standards Survey (GLSS 7), this study estimates the effect of risk attitudes on the decision to own a household enterprise and the choice of finance by owners of household enterprises. The study finds no significant impact of risk aversion on household enterprise ownership. We find risk aversion to significantly influence the use of self-financing as start-up capital; however, after controlling for access to finance, this effect reduces. We also did not find a significant relationship between risk aversion and the use of loan financing as working capital. The findings from this study shed light on the risk management strategy of household enterprise owners and suggest that access to finance is an important determinant of sources of financing. Hence, to spur growth of these critical household enterprises, the essential role of access to finance should be addressed by policymakers.

From power to financial risk: The mediating role of cognitive flexibility and risk perception

Risky decisions made by powerful individuals have significant financial implications for businesses and society. Understanding the factors influencing these decisions is crucial. Research indicates that people with a high sense of power are more prone to take investment and gambling risks, yet the role of individual differences remains underexplored. This study (N = 245) investigates cognitive flexibility as a potential mediator between power and financial risk-taking. Results reveal that a sense of power enhances cognitive flexibility and reduces risk perception in both investment and gambling contexts. Consequently, powerful individuals exhibit an increased propensity for risky financial behaviors. Furthermore, a serial mediation effect was identified, showing that cognitive flexibility and risk perception together mediate the relationship between power and risky financial choices. These findings offer novel insights into how cognitive flexibility can explain the link between power and financial risk-taking, highlighting its role in shaping risk perception and decision-making processes.

The Role of Nudges and Behavioral Interventions in Financial Decision Making

Financial decision-making, both at individual and institutional levels, plays a critical role in determining economic outcomes. Traditional economic theory posits that individuals are rational agents who make decisions based on complete information and a consistent set of preferences. However, behavioral economics has challenged this notion, highlighting cognitive biases, heuristics, and social influences that can drive suboptimal decisions. Nudges and behavioral interventions have emerged as tools to guide individuals toward better financial choices without restricting their freedom of choice. The purpose of this research is to present a descriptive investigation of behavioral interventions and nudges in financial decision-making. The main cognitive biases influencing financial behavior are first described, and then several nudge kinds and their applicability in diverse financial contexts— retirement savings, debt management, spending control, and investment decisions—are explored. Along with reviewing empirical data on nudges' efficacy, the paper addresses the ethical issues surrounding their application and pinpoints the variables that affect their effectiveness. This study aims to educate consumers, financial institutions, and policymakers about the potential advantages and constraints of behavioral interventions by providing a thorough overview of how nudges might impact financial decision-making. Keywords: Nudges, Behavioral Intervention, Financial Decision-Making, Cognitive Biases, Financial Literacy.

Evidence‐based practices and US state government civil servants: Current use, challenges, and pathways forward

AbstractLeveraging a three‐state survey of 323 civil servants and 36 interviews, representing blue and red states, this university‐government‐nonprofit collaborative research project aims to better understand how civil servants access and use evidence in their decision‐making process. Our findings show that 54% of respondents find evidence‐based practices (EBPs) useful in making budget, policy, and contracting decisions, with 68% of civil servants anticipating future benefits from evidence use. Our hypothetical funding choice experiment indicates that civil servants prefer programs that are more recent and in their state, identify outcomes over outputs, demonstrate effectiveness for diverse demographic groups, and are evaluated by independent research entities. The main challenges in using EBPs include time constraints, resource limitations, decision‐making fragmentation, and lack of evidence for certain communities. Qualitative interviews provide valuable strategies for overcoming these challenges. We conclude this article by offering practical insights for improving the integration of EBPs in state government decision‐making processes.

Understanding Financial Constraints: Causes, Effects, and Strategies for Overcoming Economic Limitations

In developing countries like Nigeria, the development and sustainability of people, companies, and economies were greatly impeded by economic and financial limitations. The main causes of these constraints included the limited availability of financial resources, high interest rates, rigorous regulatory regimes, and volatile economic situations. The most severe obstacles were encountered by small and medium-sized firms (SMEs) and marginalised people, who frequently struggle to get the required funds for growth and development. The ramifications of financial limitations were extensive, resulting in less investment, hindered economic expansion, more joblessness, and worsened wealth disparity. These constraints may also sustain societal instability, thereby further eroding economic resilience. Successfully managing financial limitations requires a holistic strategy that addresses both the supply and demand dimensions of money. A crucial aspect of the supply side was enhancing loan accessibility by creating novel financial products and services specifically designed for small and medium-sized enterprises (SMEs) and marginalised groups. Both microfinance organisations and fintech solutions have shown potential for offering alternative financial methods, especially in rural regions. By improving financial literacy, people and companies may make well-informed financial choices and efficiently allocate resources on the demand side. Government actions, such as implementing regulatory changes and stabilising macroeconomic factors, are crucial for establishing a more favourable financial climate. This research aimed to acquire knowledge on the factors, consequences, and approaches for surmounting financial limitations in Nigeria. Therefore, it emphasised the need for customised solutions that took into account the distinct economic, social, and cultural circumstances of the area. By conducting a comprehensive examination of peer-reviewed literature and empirical research, this study identified significant obstacles and suggested practical suggestions to improve financial accessibility, stimulate economic growth, and guarantee sustainable development. The results emphasised the importance of implementing targeted policies and regularly assessing current methods to tackle the changing financial environment in Nigeria. Keywords: Economic limitations, Financial limitations, Developing countries, Sustainability, Small and medium-sized enterprises (SMEs).

Accessibility of Demand Housing Finance Loan by Public Sector Workers in Ghana: The Income Challenge

Purpose - Despite many efforts by the government of Ghana and the key players to boost the housing industry, it remains in its infancy. The purpose of this study is to identify the knowledge gap within the housing industry by analysing the income levels of public sector workers. Design/methodology/approach – Mixed methods research is the right choice as three hundred and eighty-four (384) public sector workers were surveyed using a comprehensive questionnaire completed with information gathered from qualitative sources. Findings—A significant 68.7% of public sector workers surveyed say their income influences their choice of demand housing finance. The test found that a review of public sector workers' salaries is likely to boost their affordability of housing demand finance; hence, the null hypothesis is rejected. Practical Implications — Lessons are learned from successful examples like the INFONAVIT of Mexico and the Central Provident Fund (CPF) of Singapore, where provision was made for workers to contribute towards acquiring a property with the support of their employers. Originality/value — This is the first time in Ghana that public sector workers have been surveyed comprehensively in relation to demand for housing finance loans. This research did not follow the existing trends of focusing on the availability of banking products but the expectations of the majority of public sector workers. This knowledge raises many questions as to why the existing demand housing finance schemes have been unsuccessful in Ghana.

The aspects of behavioral finance with new insights: an analysis of individual investors at Pakistan Stock Exchange (PSX)

PurposeThe cognitive biases exhibited by investors could hinder their capacity for logical reasoning and impact their perception and reaction to information when making financial choices. So, this study was done to identify the behavioral biases that hinder investors' sound decision-making at the Pakistan Stock Exchange (PSX).Design/methodology/approachA cross-sectional study was undertaken employing a causal research design approach. Questionnaires were administered to individual investors of the PSX as the data collection methodology. The data were subsequently analyzed through the utilization of the Smart PLS Structural Equation Modeling (SEM) technique.FindingsThe results suggest that information factors and cognitive biases, namely home bias, geographical bias, investor sentiment, salience, and over/under reaction have a positive association with the investors' choices at PSX.Research limitations/implicationsThe study’s emphasis is on the impact of behavioral biases on individual investors only, even though such biases also influence the investment decisions of institutional investors.Practical implicationsThe study holds implications for scholars engaged in the field of behavioral finance as well as professionals involved in the stock market, particularly those interacting with individual investors and personal finance. Additionally, the current study will take into account investors, financial advisors, practitioners, policymakers, investment experts, stakeholders or target groups, etc. to support various groups in their professional activity and to help them overcome such biases that influence their sound decision-making power.Originality/valueThe innovative aspect of this research is its ability to advance the understanding of the conceptual underpinnings and social structure of behavioral biases by critically analyzing the body of prior research and adding value to the existing body of literature on behavioral finance in Pakistan by investigating the combined impact of never-studied variables, i.e. geographical bias and information variables, understudied behavioral variables, i.e. home bias and salience and studied variables, i.e. investor sentiment and over/under reaction on individual investor investment decisions at PSX.

The Simultaneity of Strategic Financial Decisions: Evidence from PSX listed Firms

This study investigates the interrelationships among financing, dividends, and the investment choices of non-financial firms listed on PSX. Unlike previous research, which primarily focused on developed nations with well-developed financial markets and investor protection laws, this study examines businesses in a developing economy characterized by fragile corporate governance, precarious investor protection laws, and political instability. The aim of this study is to shed light on the unique decision-making processes of managers operating in such contexts. This study employs a framework of simultaneous equations considering the flow of funds identity and utilizes the 3SLS estimation technique, which addresses the limitations of single-equation estimation methods. The findings reveal significant interdependencies among corporate financing, dividends, and investment decisions. Financing decisions positively influence dividend decisions and vice versa. Similarly, financing decisions positively impact investment decisions and vice versa. Moreover, dividends and corporate investments have been shown to be competing uses of funds. The results highlight the sensitivity of all three financial decisions to internal cash flows. Additionally, leverage and internally generated cash flows are identified as alternative sources of funds, while investment and dividend decisions are constrained by both internal funds and external debt. These findings align with the flow of funds approach and provide valuable insights for corporate managers and investors to understand the dynamics of financial choices in non-financial firms. This study contributes to the literature by filling a gap in knowledge regarding the interactions among financing, dividends, and investment decisions in emerging markets.