Company Financial Leverage Research Articles

Study on the Debt Repayment Ability of Real Estate Enterprises: Taking Jiangsu Tianyuan as an Example

With the changing economic situation in recent years, real estate companies, as the backbone of the industry in China, face increasingly fierce market environments. In order to ensure long-term survival, accurately predicting the future development and trends of the company is crucial. The ability to repay debts plays a vital role in this regard. This paper primarily analyzes and summarizes the debt repayment issues of Jiangsu Tianyuan Real Estate in its current operational development phase. Specifically, it addresses the problems of low financial leverage, unreasonable debt structure, and inadequate short-term debt repayment plans. To address these issues, recommendations are proposed, including increasing the company's financial leverage, planning the debt structure rationally, and developing reasonable short-term debt repayment plans. It is hoped that these suggestions can provide a theoretical basis for enhancing the debt repayment ability of real estate companies in the future

Hubungan Risiko Bisnis dengan Financial Leverage

This study aims to test the relationship between business risk and financial leverage in manufacturing companies listed on the Indonesia Stock Exchange in 2017-2021. The data analysis method in this study uses multiple linear regression to predict the influence of independent variables. The population in this research is a manufacturing company listed on the Indonesia Stock Exchange from 2017 to 2021. The sampling method in this study is the purposive sampling method. The results showed a relationship between business risk and financial leverage; this shows that the higher the business risk, the higher the company's financial leverage, so the company will be more careful in using sources of funds from debt.

The Influence of the Gender of the Chairman and CEO on the Company's Financial Leverage

The number of female CEOs reached a historic high in 2014. It shows that women have a greater impact on a company, and more and more studies have explored the impact of female executives in a company. This study investigates how the gender of chairmen and CEOs affects corporate leverage in Taiwan through regression analysis with fixed effects. We especially focus on whether the firms operated by female chairpersons and female CEOs have more conservative financial policies or corporate leverage than the firms operated by male chairpersons or male CEOs’. Leverage and volatility are common measures of corporate risk-taking. The firms with higher leverage and volatility are regarded as the firms which are risky and more willing to take the risk. The firms with lower leverage and lower volatility are taken as the more stable firms. The empirical results show that the firms operated by female chairpersons have higher leverage and volatility. It indicates that female chairpersons are more aggressive than their male counterparts. However, the empirical results of CEOs are different from chairmen. The results show that the firms led by female CEOs have lower leverage. The figures show that female CEOs in Taiwan are more conservative than male CEOs. The empirical results also show that female chairpersons have more impact on corporate leverage and volatility.

Impact of cash surplus on firm’s capital structure: validation of pecking order theory

PurposeBuilding on pecking order theory, this study seeks to understand the various financial factors that influence top management's decision regarding the company’s capital structure. The authors attempt to understand and analyse whether the capital structure of mid‐ and small‐cap firms is affected by cash surplus scaled to total assets. Along with other determinants of capital structure such as liquidity, profitability, tangibility, market capitalisation and age, this is considered one of the major factors. Cash surplus is calculated using data from the cash flow statement. It is defined as the difference in cash from operating activities and that from investing activities and is scaled to total assets. To the best of the authors’ knowledge, this is the first study to regress cash surplus scaled to total assets and other determinants over leverage to examine the impact on mid‐ and small‐cap firms. The pecking order theory was found to hold for firms earning cash surplus.Design/methodology/approachData were collected from the CMIE Prowess database of all firms listed on the NIFTY Small cap 250 index and NIFTY Midcap 150 index. The data of non-financial firms belonging to the midcap and small-cap sector, listed on the National Stock Exchange of India from 2012 to 2019 were considered. After cleaning the data, an unbalanced panel of 171 companies totalling 1,362 observations for the NIFTY Small-cap 250 index and another panel of 96 companies with 761 observations for the NIFTY Midcap 150 index was created. Panel data regression analysis was used to determine the effect of cash surplus scaled to total assets on the firms' capital structure.FindingsThis study demonstrates how small- and midcap firms' behave differently in taking capital structure decisions. Pecking order theory was found to hold for firms earning cash surplus as a proportion of total assets (Surplusta).Research limitations/implicationsThe study was conducted through data available on secondary sources and database. The study can be better conducted by conducting a primary survey too. Further study may be conducted with a blend of secondary and questionnaire method. The results can be compared to check the similarity in findings.Practical implicationsManagers can benefit from the findings when making decisions on long- and short-term loans. This study can help managers in terms of the financial variables that have a role to play in the financial leverage of the company. The decision of the managers of midcap or small-cap firms would be different. Factors influencing short- and long-term borrowings are different. Academics can discuss whether there is any difference in the influence of capital structure variables of small- and midcap companies and the reasons for such differences. Judicious decisions on capital structure will create wealth for the shareholders as the right decision about leverage would result in a proper cost of capital. The findings also add to the existing literature on the Pecking order theory.Social implicationsAcademics can discuss whether there is any difference in the influence of capital structure variables of small- and midcap companies and the reasons for such differences.Originality/valueThe study extends the existing literature by demonstrating that the capital structure of mid and small-cap firms is affected by cash surplus scaled to total assets. The pecking order theory was found to hold for firms earning cash surplus. This study can inform the practitioners about the financial variables that have a role to play in the company's financial leverage. As the results and significance of the variables of the midcap or small-cap firms are different, the decisions of the managers of these firms would be separate for the capital structure of their firms. The study also infers that the factors influencing short and long-term borrowings are different. The study determines whether managers' decision-making in such companies is different in terms of raising short- and long-term loans. The study attempts to guide managers in considering the different variables that would influence their capital structure decisions, particularly the decision to include debt in the capital. Financial variables need not be of equal importance for managers belonging to small- and midcap companies.

Tax management: analysis of the influence on the equity cost of Brazilian companies

Purpose: The present study sought to investigate whether tax management influences the equity cost of Brazilian companies listed in Brazil, Bolsa e Balcão (B3) from 2014 to 2018.
 Methodology: The study included the analysis of Proxie Book-Tax Differences (BTD) as a tool for identifying tax management, as suggested in the work of Moreira e Silva (2019), as well as the control variables, which are the return on equity (ROE), market value (QTOBIN), company size (LNAT) and company financial leverage (ALV). For data collection, the Bloomberg® database and the Reference Form available on the B3 website were used. For that, it was used the Multiple Linear Regression of the data type in balanced panel, resulting in a final sample formed by 630 observations.
 Results: Through BTD proxie, referring to the difference between accounting profit and tax profit, and used to capture tax management in this research, it was not possible to identify any relationship with the equity cost. Thus, for the purposes of this research, the theoretical adequacy and the statistical models used did not show that good tax management practices have a positive or negative effect on the equity cost.
 Contributions of the Study: It is observed that Brazilian studies did not analyze the effect of tax management on the equity cost in Brazilian companies using the Book-Tax Differences (BTD) indicator as a tool for identifying tax management and its influence on the cost of capital. So, this research followed the recommendation suggested by Moreira e Silva (2019), to analyze this cost with another indicator, in this case, Book-Tax Differences (BTD). According to the results, it was not possible to identify any relationship with the equity cost, thus contributing to the consolidation of the findings by Goh et al. (2016) and Moreira e Silva (2019) who present CashETR as the best metric for tax management, given that the results presented using the variables ETR and BTD, demonstrated that the cost of capital required by investors was unrelated to the fiscal aggressiveness of companies.

Cash Holding Levels, its Adjustment Speed and Financial Leverage Ratio in Tehran Stock Exchange (TSE)

The liquidity of a firm can be defined as the access to cash in times of need. Companies that are faced with a deficit or surplus cash, both will face many potential problems. Therefore, in this study, the optimal cash have been identified and then adjusting the cash speed companies to optimize cash was tested. Then, the speed of adjustment with regard to the Company's financial leverage was investigated. For this purpose, financial information for 2011 to 2016, 120 companies have been studied. The results show that, companies below optimal cash, compared to above optimal cash, Move more rapidly toward the optimal cash. In addition, the result show that When leverage in the model used, the speed of adjusting optimal cash for below, is much higher than that of above optimal cash companies.

Study of the effect of short-term and long-term institutional shareholders on the capital structure of companies listed in the Tehran Stock Exchange

Managers when making decisions regarding capital structure, look for a way of financing so that it can add to the company's value. Many researches have been done and different theories have been emerged to explain the best model to justify the formed capital structure. It is expected that institutional shareholders, because of their supervisory mechanism, affect decisions regarding the financing and somewhat decrease problems of representativeness; therefore, the aim of this study was to investigate the effect of short-term and long-term institutional shareholders on the capital structure. Methodology: In this regard, the level of financial leverage was used to examine changes in the capital structure. In order to analyze data, multiple linear regressions in the panel data were used. For this purpose, financial information of 98 listed companies in the Tehran Stock Exchange during the years 2010 to 2014 was collected. Results: The results suggested a positive and significant effect of the percentage of short-term institutional shareholders on financial leverage. Conclusion: Moreover, the percentage of long-term institutional shareholders had a significantly negative impact on the company's financial leverage.

DETERMINAN PENGUNGKAPAN CSR DAN PENGARUHNYA TERHADAP NILAI PERUSAHAAN

The purpose of this study to test whether the slack resources, the company's financial leverage, firm size, and board size can be said as the determinant of the disclosure of Corporate Social Responsibility (CSR), and its influence on the value of the company. Results of a study of manufacturing companies indicates that slack resources, firm size, and board size affect the disclosure of CSR that are detrimental to the disclosure of CSR, and the company's financial leverage does not affect the disclosure of CSR. The test results also show that the direct effect of slack resources, the company's financial leverage, firm size, board size, and disclosure of CSR affect the value of the company. Results of testing analysis does not directly support the indirect effect of slack resources, company size, and the board size to corporate value through CSR, but the CSR was not able to mediate the effect of leverage on firm value. The results of this study support the stakeholder theory, slack resource theory, and good corporate governance theory DOI : https://doi.org/10.26905/jbm.v4i2.1701

Analyzing the Effects of Leverage and Hedging on the Equity Valuation of Oil and Gas Producers in the Current Commodity-Price Cycle

Summary Although a severe drop in commodity prices was expected to adversely affect a financially leveraged producer, the variability of this effect across the universe of exploration and production (E&P) companies during the current downturn, which began in Autumn 2014, surprised industry participants. What factors caused the effect to be magnified for certain companies and muted for others? In examining 71 public E&P companies, we found a moderate correlation between a company's financial leverage and the loss of its equity value. Our study confirms that leveraged producers are exposed to the risk of debt-induced value loss in a downturn. Two other factors were studied for their influence on equity performance: the economics of a company's resource portfolio and the extent of its commodity-price hedging. To examine the effect of resource economics, we analyzed the finding-and-development (F&D) cost of producers and noticed statistically significant differences by hydrocarbon-producing regions. When controlled for the regional effect, the correlation between a company's financial leverage and the loss of its equity value substantially improved. The offsetting effect of a superior resource economics on the debt-induced value loss was evident. For example, the producers operating in the Permian Basin outperformed their similarly leveraged peers operating in the Williston Basin, a less-profitable region. A subset of financially leveraged companies significantly outperformed their similarly leveraged peers. These outperformers, termed here as “Leaders,” showcase a strong alignment between their financing and hedging activities. We observed evidence of the use of a continuous-hedging program through the price cycle by the Leaders. They responded soon to changes in their hedge positions, such as hedge roll-offs, rather than hedging when it is advantageous to do so. A key benefit of such a continuous-hedging program is the dollar-cost averaging of hedged prices, which appears to be an implicit goal of the Leaders. We contend that a leveraged producer must coordinate its hedging and financing policies to maintain an alignment between the hedged volume and the debt load. Endogeneity arises in the relationship between debt and hedges, with each influencing the other. An alignment can be achieved through the implementation of a continuous-hedging program factoring in annual production, operating cashflows, financial leverage, and hedged volumes. This paper takes the hedging debate for a leveraged producer beyond the realm of “to hedge or not to hedge” and addresses the question of “how much to hedge.”

Estrutura de capital e remuneração dos funcionários: evidência empírica no Brasil

Este artigo analisa se uma empresa com maior alavancagem financeira implica que seus funcionários demandem maiores salários dado o risco de financial distress. Utilizando o modelo de Berk, Stanton e Zechner (2010), foi aplicada uma regressão de dois estágios para uma amostra de 250 empresas não financeiras listadas na BOVESPA de 2007 a 2009. De fato, encontrou-se que, para cada 1% de alavancagem financeira incremental, a remuneração dos funcionários aumenta em 0,26%, mesmo controlando para o perfil do Chief Executive Officer (CEO).

The Impact of Personal and Corporate Taxation on Capital Structure Choices

This paper empirically analyses whether both personal and corporate taxation have an impact on companies' capital structure decisions. We investigate the effect of the difference in taxation of debt and equity financing on capital structures. Our empirical results, based on a comprehensive panel of European firm-level data, suggest that a higher tax benefit of debt has the expected significant positive impact on a company's financial leverage. Particularly, we find evidence that the capital structures of smaller companies respond more heavily to changes in the tax benefit of debt. Additional analysis confirms that not only corporate taxes are relevant for corporate financial planning, but variation in capital income tax rates at the shareholder level implicates significant capital structure adjustments as well. Moreover, we find substitutive relationships between non-debt tax shields and the effect of the corporate tax rate on capital structures.

The Impact of Personal and Corporate Taxation on Capital Structure Choices

This paper empirically analyses whether both personal and corporate taxation have an impact on companies' capital structure decisions. We investigate the effect of the difference in taxation of debt and equity financing on capital structures. Our empirical results, based on a comprehensive panel of European firm-level data, suggest that a higher tax benefit of debt has the expected significant positive impact on a company's financial leverage. Particularly, we find evidence that the capital structures of smaller companies respond more heavily to changes in the tax benefit of debt. Additional analysis confirms that not only corporate taxes are relevant for corporate financial planning, but variation in capital income tax rates at the shareholder level implicates significant capital structure adjustments as well. Moreover, we find substitutive relationships between non-debt tax shields and the effect of the corporate tax rate on capital structures.