Corporate Capital Structure Research Articles

Carbon Assurance, Corporate Capital Structure, and Debt Maturity: Global Evidence

This study used a cross-country sample of firms from 47 nations that participated in the Carbon Disclosure Project (CDP) questionnaire over the years 2011 and 2020, to examine whether the verification of carbon emissions information by an independent third party affects corporate capital structure and debt maturity decisions. Using alternative methods and robustness checks, we explore that carbon assurance importantly shapes both corporate capital structure and debt maturity. In particular, firms that are involved in independent carbon assurance have significantly higher leverage in their capital structure compared to non-assured firms. Further, assured firms have better access to long-term debt compared to non-assured firms. The outcomes of this study are attributed to the notion that the verification of carbon information increases the creditability of a firm's voluntary reporting and reduces its informational asymmetry between corporations and lenders.

Corporate credit risk modeling under carbon pricing uncertainty: A Knightian uncertainty approach

This study examines the financial implications of carbon pricing policies within the Knightian uncertainty framework. Employing a dynamic behavioural credit risk model driven by Lévy jump-diffusion, we scrutinise how carbon pricing uncertainty influences default probability and securities value. We explore investors' strategic responses to ambiguity and assess their impact on their investment decisions. Our findings reveal that carbon pricing uncertainty exacerbates the margin of default risk, has a moderating effect on stock value, and makes investors more cautious, thereby altering corporate capital structures. This study contributes to the discourse on carbon credit risk assessment and sustainable finance by addressing policy-driven uncertainties in the financial markets.

Corporate capital structure in BRICS economies: An integrated analysis of ESG, firm, industry, and macroeconomic determinants

Corporate capital structure in <scp>BRICS</scp> economies: An integrated analysis of <scp>ESG</scp>, firm, industry, and macroeconomic determinants

Non-controlling large shareholders and dynamic capital structure adjustment in China.

Using the sample of Chinese A-share listed firms from 2010 to 2020, this study examines the impact of non-controlling large shareholders (NCLSs) on corporate capital structure adjustment. The results show that NCLSs significantly increase the dynamic capital structure adjustment speed and reduce capital structure deviation. NCLSs have an asymmetric influence on capital structure adjustment speed for different deviation directions, i.e. compared to the speed of upward adjustment after a downward deviation of the capital structure, the effect of NCLSs on the speed of downward adjustment of the capital structure after an upward deviation is stronger. Whether in state-owned enterprises (SOEs) or non-state-owned enterprises (NSOEs), NCLSs significantly increase the dynamic capital structure adjustment speed. However, compared with SOEs, NCLSs in NSOEs have a more significant positive impact on the dynamic capital structure adjustment speed. The mechanism analysis suggests that reducing agency costs and mitigating financing constraints serve as the important channels through which NCLSs influence the dynamic adjustment of capital structure. This paper not only enriches and improves the theoretical basis of dynamic capital structure adjustment, but also helps to deepen the understanding of dynamic capital structure adjustment of Chinese listed firms.

Impact of Monetary Policy on Corporate Capital Structure Adjustment in a Financial Development Environment

This study aims to investigate the impact of monetary policy on the adjustment of corporate capital structure within the environment of financial development, focusing on listed companies at the Shenzhen Stock Exchange. Utilizing data from 2011 to 2021, the research employs regression analysis and generalized method of moments (GMM) to explore how quantity-based and price-based monetary policies influence capital structure adjustments. The findings indicate that changes in monetary policy significantly affect corporate capital structure adjustments. Specifically, quantity-based monetary policies accelerate these adjustments, though their impact is moderated by the level of financial development. In contrast, price-based monetary policies consistently exert a positive influence on capital structure adjustments. This study contributes to the understanding of monetary policy's role in corporate finance, providing empirical evidence from China's evolving financial market.

Contribution of corporate capital structure on compliance to forestry law in Cameroon

Contribution of corporate capital structure on compliance to forestry law in Cameroon

Personal bankruptcy costs, union bargaining power, and capital structure

We document that employee bankruptcy costs affect corporate capital structure decisions via their impact on the bargaining power of labor unions. We employ difference-in-differences and triple-difference research designs surrounding a major bankruptcy reform that increased personal bankruptcy costs. Our results suggest that, on average, this reform reduced unions’ bargaining power, resulting in a decrease in the financial leverage of unionized firms relative to nonunionized firms. Our results provide new evidence for a relatively unexplored determinant of capital structure—personal bankruptcy costs.

Peer effects, industry concentration and capital structure: evidence from emerging market economies

ABSTRACT This study investigates the relationship between peer effects and corporate capital structure with the intervening effect of industry concentration. The methodology involves instrumental variable approach in the regression results from OLS and two-stage least squares (2SLS) with fixed effects. Empirical evidence shows that peers’ leverage decisions are significant determinant for a firm’s leverage decisions. Moreover, peers matter more when firms are operating in the competitive environments and same is not true for firms belonging to concentrated environment. These findings imply that the financial policymakers may device customized policies for competitive and concentrated markets to restrict the downside risk of debt financing.

The impact of the Bank of Japan’s exchange traded fund and corporate bond purchases on firms’ capital structure

AbstractThis study examines how the Bank of Japan’s (BOJ’s) exchange-traded fund (ETF) and corporate bond (CB) purchases affect the capital structure of Japanese listed firms. The results first suggest that the BOJ’s ETF purchases reduced the equity risk premium for firms included in the purchases, thereby lowering their cost of equity. These firms issued more stocks and became less dependent on bond debt and bank loans than control firms, resulting in a lower level of leverage. On the other hand, the BOJ’s CB purchases lowered the risk premium of bonds eligible for such purchases, which implies a decline in the cost of bond debt. Firms eligible for CB purchases issued more bonds, while reducing bank debt but to a smaller extent, thus having higher leverage than firms not eligible for CB purchases. Categorizing firms into four groups based on whether their stocks were included in ETF purchases and/or their bonds were eligible for CB purchases further shows that the policy impacts on firm financing have differed depending on which group a firm fell in. These results indicate that the BOJ’s ETF and CB purchases have had a considerable impact on the cost of capital, securities issuance activities, and corporate capital structure.

Factor Determinant Profitability and Financial Distress of Non-Financial Sector Companies in Indonesia

This study aims to examine the determinants of financial distress of non-financial sector companies in Indonesia during the Covid 19 pandemic and test whether company profitability can mediate financial performance on the possibility of financial distress. The sampling technique was purposive sampling, namely non-financial sector companies that experienced negative operating profit during 2020 and 2021. The analysis technique used is panel data regression analysis. The results showed that sales growth has a positive impact on profitability and DER has a negative impact on profitability. While TATO has a positive effect on Financial Distress. This study also shows that profitability cannot mediate financial performance on financial distress. This study contributes to the testing of signalling theory, where information on sales growth and corporate capital structure affects the company's profitability. In addition the company's very limited ability to manage its assets during Covid 19 conditions affects the possibility of financial distress.

How oil price uncertainty influences corporate capital structure: evidence from BRIC countries

ABSTRACT This paper examines how corporate capital structures in emerging markets – Brazil, Russia, India, and China (BRIC) – were impacted by oil price uncertainty (OPU) from 2007 to 2019. We find that the relationship between OPU and firm leverage in BRIC markets is nonlinear and U-shaped. The extent to which OPU affects both short- and long-term leverage varies across nations. These findings are robust to endogeneity tests. Furthermore, while the OPU effect on corporate leverage is lessened in high-growth enterprises, it is strengthened in materials and energy companies. From an OPU perspective, this paper contributes intriguing knowledge of the corporate finance field.

The Impact of Digital Transformation on the Dynamic Adjustment of Corporate Capital Structure

The Impact of Digital Transformation on the Dynamic Adjustment of Corporate Capital Structure

Impact of Corporate Capital Structure on Corporate Performance: An Empirical Study of Emerging Market Using GMM Estimation Technique

This study aims to check the impact of capital structure on nonfinancial firm's performance, which are listed on the Pakistan Stock Exchange. This study used panel data from 06 years of 289 nonfinancial firms from 2017 to 2022 to achieve the goal. This study used two-step Generalized Methods of Moments (GMM), a dynamic analysis model. Five measures are used for firm performance, while two are used for capital structure. This study proved that a mixed result, such as TDR, has a significant and inverse relation with four measures of firm performance, such as ROA, GPM, NPM, and SP, while statistically, there is no relation with ROE. LTDR is only significant with NPM at a 5% level and has an inverse impact on NPM. This study is significant because it examines, in a single investigation, the effects of leverage on various performance metrics. This study is particularly well-weighed because it has many ramifications for potential stakeholders. The study's practical implications will benefit top-level management in strategic management, the government in enacting laws and other regulations, and investors in making investment decisions based on various environmental and factor considerations. A lower leverage ratio, for instance, is a sign of improved performance because managers will strategically plan to keep it low. On the other hand, lower leverage ratios are also advantageous to stockholders because they allow them to invest in companies with lower debt-to-equity ratios and increase their wealth.

Capital Structure Dynamics: Evidence from the Korean Listing Market

This study analyzes how the trade-off theory, capital financing priority theory, and market timing hypothesis impact corporate capital structure for sustainable growth. Using a panel regression and system generalized method for moment analyses with balanced panel data for 1636 listed firms in the Korean stock market and KOSDAQ from 2011 to 2021, we discovered that the level of and change in capital structure are determined through a complex mechanism in which the target debt ratio adjustment speed, previous year’s debt ratio, target debt ratio divergence, funding shortage situation, and market timing hypothesis interact complementarily. This indicates that the capital structure decisions of Korean listed firms are characterized by a complex mechanism that is difficult to explain with a single theory. The findings of this study have practical implications for understanding the capital structure decisions of Korean firms and for designing efficient capital-raising strategies. Additionally, by revealing the complementary relationship between the two theories, this study provides directions for future research on corporate capital structure.

The Impact of Capital Structure on Performance in SMEs: The Saudi Parallel Financial Market

This study aims to analyse the effect of corporate capital structure on the financial performance of small and medium enterprises (SMEs). Despite the importance of SMEs for economic growth and technology advancements and the vital role of capital structure on financial performance, there is a scarcity of studies that investigate SMEs. This study focuses on SMEs that were listed in the Saudi Parallel Market (Nomu) for the period of 2017–2022. To the best of our knowledge, this is the first study that examines this relationship for Saudi SMEs. Our research utilises secondary data and employs descriptive statistics and Pooled OLS regression analyses. This study finds that the firm’s capital structure impacts its financial performance. In particular, we find that there is a positive significant relationship between total debt and return on equity. However, when we distinguish between long-term and short-term debt, we find that positive effect is mainly attributed to long-term rather than short-term debt. This study employs several robust tests. Based on the findings of this study, the authors provide several practical recommendations for corporate boards, executives, decision-makers, and regulators whose interest is the growth and sustainable performance of SMEs. KEYWORDS corporate finance, financial performance, leverage, Nomu exchange, Saudi firms, shareholder’s equity

Analysis on the Path of Enhancing Corporate Value through the Development of Digital Inclusive Finance

At present, the information industry revolution driven by technological progress has led to the rapid development of digital finance, and its effectiveness in enhancing corporate value has been highlighted. However, there is still little discussion on the specific path to enhance corporate value. Based on this, this study follows the basic logic of the development of digital inclusive finance and sorts out the mechanism path of promoting corporate value enhancement from six aspects: digital technology innovation, corporate social responsibility, financial flexibility, corporate risk-taking, corporate capital structure, and corporate financing constraints, in order to provide an effective reference for promoting the deep integration of digital inclusive finance and corporate value shaping.

Legal Dynamics and Financial Strategy: Understanding Corporate Responses to Global Regulatory Environments

This paper examines the complex interplay between regulatory compliance, legal frameworks, and corporate finance strategies within a global context. Through a detailed exploration of the impacts of regulations on corporate financing, the role of corporate governance in shareholder value maximization, the strategic use of cross-border investment and legal arbitrage, and the intricacies of financial reporting standards and corporate accountability, this study sheds light on how legal considerations shape corporate financial decision-making. Specific attention is given to the effects of debt financing and bankruptcy laws, equity financing and securities regulations, and the classification and regulatory treatment of hybrid financing instruments on corporate capital structure and financial flexibility. By integrating academic insights and practical examples, this paper contributes to the understanding of the symbiotic relationship between legal frameworks and corporate finance, highlighting the strategic responses of corporations to legal challenges and opportunities. The findings underline the importance of a sophisticated understanding of legal and regulatory environments in crafting effective corporate finance strategies, offering valuable insights for academics, practitioners, and policymakers.

Application of Trade-off Theory in Real-Life Corporate Capital Structure Adjustments

Application of Trade-off Theory in Real-Life Corporate Capital Structure Adjustments

Do Peers and National Culture Matter for Capital Structure Decisions of Emerging Market Corporations?

The study investigated how national culture acts as a mediating factor in the connection between peer effects and corporate capital structure in enterprises from emerging market nations. The methodology employs a two-stage least squares technique, incorporating fixed effects and an instrumental variable approach, to analyze the regression results obtained from ordinary least squares. The results indicate that the level of influence exerted by peers is significant for a firm when determining its own level of leverage. Furthermore, it has been noted that enterprises tend to adopt similar cultural traits as their peers, such as minimal power distance, high uncertainty avoidance, individualism and masculinity. Hence, managers may consider their peers’ decisions on leverage in the industry while making assessments about the appropriate level of leverage for their own company. Furthermore, as emerging economies often encounter perplexing and uncertain circumstances, obtaining reliable information from peers’ financial decisions can potentially mitigate the duration and cost associated with making this crucial decision.

A Review of Empirical Capital Structure Research in Different Industries

The choice of capital structure is an important aspect of a firm's financial decision-making, and the differences between industries make it challenging for firms to develop a capital structure strategy. The right capital structure is critical to a firm's financial position, competitiveness, risk management, and strategic development. Existing capital structure theories provide different perspectives to understand the choice and impact of a firm's capital structure. However, the proposed assumptions are all ideal and irrational, differing significantly from the real capital market situation. By reviewing existing empirical research, this paper aims to analyze the variability of corporate capital structure choices under different industries and the influencing factors behind them. Based on the analysis of industry-specific factors affecting capital structure choices, industries are broadly categorized into three major groups: capital-intensive industries, labor-intensive industries, and innovative industries. Through case studies and empirical research on each industry, it explores how different industries' unique economic and operational characteristics shape enterprises' strategic choices in capital structure.