Debt Decisions Research Articles

Debt is Not Always Bad Even in Difficult Economic Conditions

The problem faced by the company is the use of debt that is not according to plan. The purpose of this study is to determine whether debt policy affects company performance. This study was conducted on manufacturing sector companies listed on the Indonesia Stock Exchange in 2018–2023 with a population of 296 companies, the sample used was 73 companies for six years. Thus, the number of samples used in this study was 438. The company performance variable is proxied by (ROE) while the independent variables in this study are debt policy proxied by (DER and DER*KE), investment decisions (KI), managerial ownership (MNJR), and economic conditions (KE). The data analysis method uses multiple linear regression methods with SPSS software version 26. The results of the study show that the debt policy variable (DER) has a negative and significant effect on company performance (ROE) and the debt policy variable*economic conditions (DER*KE) has a positive and significant effect on company performance (ROE). This means that when economic conditions are supportive, companies that use debt to finance operational activities or business expansion tend to experience increased performance. Funds obtained from debt can be used for investment, new product development, or market expansion. Proper use of debt can increase a company's return on equity (ROE), as long as the rate of return on the investment financed by debt is higher than the cost of debt. Timing the debt decision is crucial. In improving economic conditions, companies can take advantage of low interest rates and increase production capacity.

A rule-based decision model to support technical debt decisions: A multiple case study of web and mobile app startups

ContextSoftware startups are immature software organizations that focus on the development of a single software product or service. This organizational context accumulates a lot of technical debt to cope with constraints such as limited resources and product-market fit uncertainty. While some research has explored technical debt in startups, there is no study that investigates how software startups should make technical debt decisions throughout the startup evolution stages. ObjectiveThe objective of this study is to understand how technical debt decisions are made, and how such decisions should have been made in hindsight. MethodWe conducted a multiple embedded case study to investigate technical debt decisions in five web/mobile app startups. For each case, we interviewed the case founder and developer (a total of 17 participants across cases). In addition, we collected some public documents about the five startups. The data were analyzed using qualitative data analysis techniques. ResultsWe developed a rule-based decision model that summarizes the logic to effectively make technical debt decisions throughout the startup evolution stages. In addition, we evaluated the model by conducting follow-up interviews with three participants. ConclusionThe study provides a decision model that reflects actual practice, and is designed to help software teams in startups when making technical debt decisions throughout the startup evolution stages.

The Role of Dividend and Debt Policy in Increasing Firm Value in the Food and Beverage Subsector: An Empirical Analysis on the Indonesia Stock Exchange

This study was conducted to determine how debt decisions and dividend policies impact the value of companies in the food & beverage industry listed on the Indonesia Stock Exchange. The sample selection used a purposive sampling method with the criteria of 35 companies in the food & beverage sub-sector that distributed cash dividends from 2018 - 2022. To perform this analysis, Eviews 12 was used. This includes estimating panel data regression equation models, classical assumption testing, statistical analysis, and hypothesis testing. This study finds that debt policy has a negative and significant impact on company value, while dividend policy has a positive and significant impact

Tantangan dan Peluang: Dinamika Keuangan Bisnis Mikro Dalam Budaya Patriarki UMKM Semarang

This research aims to explore the influence of business characteristics and entrepreneur characteristics on the independence of formal debt decision making, by considering the moderating role of patriarchal culture. This study also aims to examine the impact of formal debt decision-making independence on business performance. The research was conducted through a survey of 248 female entrepreneurs in the food and beverage processing sector in Semarang. The research method uses descriptive and inferential analysis, with hypothesis testing carried out using Structural Equation Modeling Partial Least Square (PLS). The findings show that business characteristics and entrepreneur characteristics have a positive and significant influence on the independence of formal debt decision making. In addition, patriarchal culture is proven to play a moderating role, influencing the relationship between business characteristics/ entrepreneur characteristics and the independence of formal debt decision making. In other words, patriarchal culture modifies the influence of business characteristics and entrepreneur characteristics on formal debt decisions. The analysis also shows that independence in formal debt decision making has a positive impact on business performance. Thus, the results of this research imply the importance of independence in making formal debt decisions for female entrepreneurs in the food and beverage industry in Semarang.

Housing Market and Household Consumption in Urban China: A Debt Perspective

Urbanization precipitates substantial economic transformations, with housing markets playing a pivotal role. The expansion of cities escalates housing demand, subsequently increasing housing debt, which is a crucial factor influencing household consumption. This study utilizes data from six rounds of the China Family Panel Studies (CFPS) spanning 2010 to 2020 to investigate the impact of housing debt on household consumption in urban China. Given the dynamics changes in housing debt status, as well as the endogeneity problems caused by reverse causality and selection bias between households’ debt decisions and consumption behavior, this study employs both the difference-in differences with multiple periods and groups (DIDM) model and the two-way fixed effects model. The results show that the average consumption expenditure of households with housing debt is 14% higher than those without. A 1% increase in housing debt size correlates with a 0.011% rise in consumption. Moreover, this positive effect is more pronounced among low-income households and those with older household heads, as well as those owning multiple properties. Compared to non-durable consumption, the impact of housing debt is more substantial on durable consumption. Further mechanism analysis reveals that the effect of housing debt on household consumption is primarily driven by an increase in housing assets, spurred by the rising housing prices. This study underscores the importance of integrating housing debt management within the framework of sustainable urban development, which not only ensures equitable access to housing but also fosters the promotion of sustainable consumption.

The influence of CEO narcissistic personality traits on the indebtedness of B3 companies

The influence of CEO narcissistic personality traits on the indebtedness of B3 companies

Determinants of Debt Financing Decision in Sri Lankan Listed Companies

The primary objective of an organization is to maximize wealth for its shareholders, and for this purpose, the finance manager makes several financial decisions. Financing for its assets is one of the significant financial decisions that concentrates financing with owners' equity or debt from external parties. Several factors influence the financing decision, even though determinant factors of debt financing decisions may differ from time to time due to the changing internal environment of organizations. Therefore, the study aims to identify the internal factors determining the debt financing decisions in Sri Lankan listed companies. Colombo Stock Exchange (CSE) consisted of 294 listed companies in 2022, and data were collected from selected 100 non-financial companies from 2008/09 to 2020/21. The dependent variables are a total debt to total assets (Debt ratio), and long-term debt to total assets, and the independent variables are profitability, non-debt tax shield (NDTS), tangibility, growth, size, reputation, liquidity, and risk. Descriptive statistics, correlation, pooled, fixed, and random effect models were used to prove the objective. The results reveal that NDTS and growth are positive, and profitability, tangibility, size, reputation, liquidity, and risk negatively influence total debt decisions. The size of the firm negatively influences the long-term debt decision. Therefore, the study concludes that internal factors are essential to determining the debt decision, and the study will benefit the finance managers for the financing decision and to select the optimum capital structure.

The Role of Behavioral Finance in Formal Debt Decisions Study of Micro Small Medium Enterprises (MSMEs) Semarang

This research is to examine behavioral finance and its effect on formal debt decisions to improve business performance in micro, small, and medium enterprises in Semarang. Many studies have been conducted related to behavioral finance, where overconfidence, the illusion of control, and availability will influence formal debt decisions. The characteristics of MSMEs in making debt decisions are strongly influenced by behavioral finance. The analytical method used is quantitative with Smart PLS. The results of the analysis of overconfidence have no significant effect on formal debt decision-making, the illusion of control and availability have a positive and significant effect on formal debt decisions, and formal debt decisions have a positive and significant effect on business performance.

Analysis Debt Outside Country In Growth Economy Indonesia

Objective drafting work scientific This is analyze review on influence foreign debt in economic development in Indonesian. Economic development can what is meant is the growth of activity in the economy that creates goods and services made in society increases so that the prosperity of citizens keep getting big. The procedure used is descriptive use approach qualitative, with a descriptive research design on the research model used. The results review displays if debt outside country share donations in economic development but would be better if government can heighten investment ability which are contained. Impact debt outside country on period short no influence in a manner significant to development economy in Indonesia. Management debt outside country it feels like can held best- good so that no burden country with collecting loan payments made, so this research reveals that foreign debt decisions need to be re-examined with various aspects of feasibility analysis of foreign debt actions

How Would Americans Respond to Direct Cash Transfers? Results from Two Survey Experiments

Universal basic income has gained renewed interest among policy makers and researchers in the United States. Although research indicates that unconditional cash transfers produce diverse benefits for households, public support lags in part because of predicted unemployment and frivolous spending. To understand how Americans would reorganize their lives around unconditional cash transfers, this article examines the relationship between the structure of cash-transfer programs and their usage. We leverage experiments embedded in two nationally representative surveys to assess relationships between payment frequency, payment amount, and respondents’ anticipated usage. Though the survey experiments presented widely varying scenarios to survey participants, we saw largely consistent responses. Respondents most commonly reported they would use their payments for regular expenses, paying debts and building savings. Increased payment amounts were positively associated with spending on economic mobility-oriented goals and savings and debt decisions, but increased payment frequencies were negatively associated with these goals.

Self-control and debt decisions relationship: evidence for different credit options

In recent years, households have become increasingly indebted, which constitutes a matter of concern. Based on a sample from the Spanish Survey of Financial Competences, this paper examines the relationship between self-control and consumer borrowing behaviour and, in so doing, it proposes a new multi-item scale of individual’s self-control in financial matters and considers several types of consumer debt, thus overcoming the main gaps identified in previous research. Empirical evidence reveals that, overall, self-control problems lead to more indebtedness. However, comprehensive analyses have demonstrated that the influence of self-control differs across an exhaustive range of credit options. In this regard, the lack of self-control increases the probability of taking out unsecured personal loans, loans from family or friends, and credit card use. Evidence suggests that individuals’ first impulse leads them to ask their social circle for a loan. Overall, individuals might be tempted to get indebted when they cannot make ends meet. However, this first impulse usually faces barriers from the supply perspective, so the evidence suggests that the effect of self-control on borrowing decisions might be shaped not only by the demand side of credit but also by the supply one.

The impact of crop insurance on farm financial outcomes

AbstractWe use data from the Kansas Farm Management Association to estimate the impact of crop insurance liability and insurance indemnities on farm debt. Subsidized crop insurance may increase farms' financial risk through a mechanism known as “risk balancing.” Previous findings in support of risk balancing may suffer from bias due to unobservable farm characteristics and simultaneity in insurance and debt decisions. Employing a simultaneous equations model with farm fixed effects, we find no statistical relationship between crop insurance liability and debt, calling into question the risk balancing hypothesis in federal crop insurance. We show that large insurance indemnity payments reduce farms' reliance on short‐term debt, but leave the total debt level unchanged.

Research on the Impact of Macroeconomic Fluctuations on the Market Value of Enterprises

This article takes China’s A-share listed companies from 2004 to 2019 as a research sample to examine the impact of macroeconomic fluctuations on the operating debt behavior of listed companies and the relationship between corporate operating debt decision-making and corporate value under the background of macroeconomic fluctuations. The results find that: During the economic downturn, companies use operating liabilities more actively during the economic downturn, and operating liabilities have a stronger effect on the promotion of corporate value; during economic downturns, companies with stronger residual operating debt capacity have higher corporate value. This paper has enriched the empirical evidence of the relationship between macroeconomic fluctuations and micro-firm financial behavior, and has certain enlightenment significance for company managers to grasp the law of macroeconomic development and make scientific and reasonable debt decisions.

ANALISIS PENERAPAN STRATEGI BERTAHAN PIZZA HUT INDONESIA & KONDISI LABA PERIODE BERJALAN SELAMA PANDEMI COVID-19

This research is expected to be useful for stakeholders both theoretically and practically in terms of choosing and implementing a survival strategy in order to save the company, especially in times of crisis. To answer the research questions, qualitative data analysis techniques were used which followed the following three stages:
 Data analysis, drawing conclusions and verification and narrative of analysis results. It can be concluded that the defensive strategy undertaken by PT Sarimelati Kencana, Tbk in the face of the Covid-19 pandemic is appropriate, because it is proven that this strategy can still print positive sales, stable cost of goods sold, positive gross profit, still operating profit positive, and stable operating expenses. However, interest and financial expenses that exceed operating profit are the cause of losses for the franchise holder of the Pizza Hut Indonesia restaurant.From this research, it can be suggested for business people in general to consider and pay careful attention to plans or debt decisions. If the business actor is already in debt, then strengthen the intention and determination to immediately pay off these debts. Good products, good product selling prices, effective promotions, strategic selling locations, and increased sales volume will be in vain when business actors are faced with debt interest expenses that exceed operating profit.

Los efectos de la deuda y la restricción financiera en el comportamiento de la inversión de las empresas brasileñas no financieras cotizadas en B3

Este estudio investigó el impacto de las restricciones financieras sobre la relación entre el comportamiento de inversión y las decisiones de endeudamiento de las empresas brasileñas cotizadas B3. Se utilizó una regresión lineal con datos de panel en una muestra de 536 empresas que cotizaron en el período de 2010 a 2017. El tamaño de la empresa, la deuda a largo y corto plazo y la estructura de la propiedad se consideraron como variables de restricción financiera. Se encontró que, en Brasil las grandes empresas y privadas, poseen mayor proporción de activos, tienen menores restricciones para endeudarse, y aun así, deciden sobre sus inversiones basándose en la oportunidad de crecimiento y en sus capacidades de generar flujo de caja. Mientras tanto, las empresas pequeñas, con una pequeña deuda bancaria a largo plazo y las estatales encuentran más restricciones financieras, en consecuencia, sólo invierten a partir de flujos de caja generados.

The Influence of Fair Value Measurement on Radical Financing of Irrational Managers Based on Fixed Effects Model and Fisher Permutation Test

Adopting fair value measurement may bring more earnings fluctuations and induce irrational psychology and radical financing behavior of managers. Based on behavioral corporate governance theory, using the sample of Chinese A-share nonfinancial listed companies during 2007–2017, this paper empirically examines the regulatory effect of fair value measurement, that is, whether fair value measurement affects the company's financing decisions when managers have irrational psychological characteristics, i.e., overconfidence. The study found that overconfident managers of the company that have fair value measurement assets will be more aggressive for debt decisions, indicating that fair value measurement has a positively regulatory effect on overconfident managers.

Leverage and firm performance: new evidence on the role of economic sentiment using accounting information

PurposeThe goal of this paper is twofold. First, to examine the role of expectations in shaping agents' behaviour within an extended time frame which incorporates a prolonged harsh downturn of economic activity. Therefore, the authors allow for an indirect impact of economy-wide expectations operating via their coexistence with firms' balance sheet factors. Second, it is tested whether the behaviour of listed firms as regards to debt follows the pecking order theory.Design/methodology/approachThe authors use the panel data methodology in the estimation of the financial structure models since unobservable heterogeneity is an important determinant towards the target leverage. A fixed effects estimation procedure, with robust intercepts allowed to vary across firms, was employed to examine the relationship between leverage and performance.FindingsThe findings offer evidence of patterns of pecking order behaviour and thus for the necessity of internal financing over external debt. The authors also extended the set of determinants by investigating the effect of macroeconomic conditions on the debt decision of firms. Contrary to the authors’ expectations, short-run beliefs of economic agents appear to play a negative role in leverage.Originality/valueThis paper contributes to the literature in a number of ways. First, following the growing literature of loan dynamics, the findings provide useful insights into corporate capital structure decisions in an economy in which businesses were almost excluded from external financing for over a decade. Second, in order to better understand corporate financing decisions, it is necessary to consider the overall economic framework in which companies and especially the listed ones operate.

FINANCING OF BRAZILIAN COMPANIES DURING FINANCIAL CRISES: COMPARATIVE BETWEEN THE CRISES OF 2002, 2008 AND 2015

ABSTRACT Purpose: The purpose of this study is to verify the financing decisions by Brazilian companies in the financial crises of 2002, 2008 and 2015, and to identify the impacts of these crises, as well as the influence of the funding sources - banking, subsidized sources and capital markets - on the leverage and maturity of companies' debts in these periods. Originality/value: Crises establish opportunities for the study of determining factors and their impacts on companies. There is no empirical evidence on the impacts of crises on the capital structure of Brazilian companies taking into account the comparison between the crises of 2002, 2008 and 2015, which motivated the present study. Design/methodology/approach: We performed descriptive analyzes and estimated regressions by panel data. Findings: The results showed a statistically positive relationship between financial crises and corporate leverage, as well as short and long-term debt. With regard to leverage, banking resources, resources from capital and subsidized markets showed a statistically positive relationship with the level of leverage of companies only in the 2008 crisis. Considering the maturity of debts, the 2002 crisis was an important determinant for companies' short-term debt decisions, in view of the predominant participation of banking resources at that time. Financing sources were important in determining companies' long-term indebtedness in the 2008 crisis.

ANALISIS HUBUNGAN INTERDEPENDENSI ANTARA KEPUTUSAN INVESTASI, HUTANG DAN DIVIDEN PERUSAHAAN- PERUSAHAAN PROPERTI GO-PUBLIC DI BURSA EFEK JAKARTA

The main objective of this study is to examine the interrelationships among investment, debt and dividend decisions as a major decision in financial management. These decisions should be made integratively as the companies could increase their value for their stakeholders. The study is focused on property companies listed in BEJ. Using SURapproach, this study shows that the relationship between investment and dividend decisions is negative andbidirectional, and the relationship between invest- ment and debt decisions is positive and bidirectional, and no relationship is found between dividend and debt decisions. Thus, the study results suggest that the inter- relationship among the three decisions are not really integratively made yet.

The decision usefulness of reported changes in fair values and fair value measurement-related disclosure for debtholders: evidence from Australian real estate industry

Purpose This paper aims to examine the information content of changes in fair values of investment property reported under international accounting standards (IAS) 40 and International Financial Reporting Standards (IFRS) 13 to debtholders. This study further examines the effect of fair value hierarchy inputs, valuer types and the quality of fair value measurement-related disclosure on the information usefulness of changes in fair value. Design/methodology/approach This paper performs a panel regression on the cost of debt capital and changes in fair value of investment properties, and fair value measurement features using data covering periods 2007–2015 from Australian real estate companies. Findings The findings suggest that changes in fair value of investment property are informative about the real estate firm’s future cash flow to debtholders. Also, the findings show that the use of unobservable inputs in an active market (Level 3 inputs) and Level 2 has no different impacts on the cost of debts. Also, this paper documents that employing the directors solely in valuation may lead to a higher cost of debts. Furthermore, this paper reports that an extensive fair value disclosure appears no additional value in the debt decision. Originality/value Collectively, the findings indicate that although the use of unobservable inputs is common in the real estate sector, information on the changes of the fair value of investment properties are informative to debtholders. The findings have important implications for accounting standard setters to consider revisiting the IAS 40 and IFRS 13 on whether the independent valuation should be required and whether the extensive disclosure requirement is worthwhile.