Financial Leverage Risk Research Articles

Periodic information enhancing and controlling stability of complex corporate financial systems

We explore the mechanism and control behavior of how periodic information affects the stability of complex corporate financial systems from two viewpoints: the corporate life cycle and the stability of financial leverage risk. A complex corporate financial system model with correlated noise and periodic driving is proposed. Furthermore, two stability indicators are proposed to measure the stability of the corporate life cycle and the risk of corporate financial leverage. Stochastic simulation results show that enhancing the intensity and frequency of controllable periodic information can improve system stability. The stability of complex corporate life cycles and financial leverage risks exhibits opposite behaviors in terms of noise correlation. In addition, it is observed that there are specific threshold values of system parameters, and the relationship with the intensity of periodic information shows non-monotonic characteristics, manifesting peculiar phenomena and transition behaviors. Finally, by comparing with actual financial data, the proposed model is verified to be superior to the benchmark model.

Financing Risks and Preventive Measures for E-Commerce Corporates

The e-commerce industry has achieved tremendous development in the past decade. However, in this rapid development process, there are some problems that have caused huge hidden dangers, and financing is the most important one among them. Therefore, the topic of this article is the dangers and prevention methods of e-commerce corporations under different financing methods. The method of this paper is as follows: first, segment the financing models of e-commerce corporates, then combine the financing situation of several well-known e-commerce corporates in China, analyze relevant data, and discuss the possible problems under these financing models separately. The research shows that the short-term debt payment risk, financial leverage risk and investment decision risk are the major risks that have influences on the firms’ financing, and the first two have a greater impact. To resolve these dangers, e-commerce firms can adjust debt structure, diversify financing channels and establish a sound risk prevention mechanism.

Morning Sustainalytics: Environmental, Social, Governance and Financial Leverage Risk Ratings on the Financial Performance of Mining Companies in Indonesia

This research investigates the influence of Environmental, Social and Governance (LST) Risk Ratings on the Financial Performance of mining companies in Indonesia. The financial performance of this research is focused on return on assets (ROA). This research design uses associative quantitative. The population of this research is mining companies in Indonesia, which are listed on the Indonesian Stock Exchange (BEI). The sample from the population was selected using a selection approach, namely mining companies that had complete disclosure of ESG Risk Rating information from Morning Sustainalytics and comprehensive financial reports and did not record losses in consecutive financial reports in the 2019-2022 period. Statistical research results show a 95% confidence level that both ESG Risk Rating and Financial Leverage negatively impact financial performance (ROA) in mining companies in Indonesia. ROA is influenced by Risk Rating ESG, which implies that a mining company implements sustainable practices or has a P Risk Rating. Good ESG _ or low tends to achieve better financial performance. The finding that there is a statistically significant influence between ESG assessments and the economic success of general mining companies in Indonesia indicates that environmental, social and corporate governance factors have a measurable impact on the financial performance of these mining companies.

Is quantifying performance excellence really profitable? An empirical study of the deployment of the Baldrige Excellence Measurement Model in Indonesia

Numerous studies continue to debate the financial benefits of employing the Baldrige Excellence Measurement Model (BEM) for a business. This paper aims to explore this issue by studying the implementation of BEM in Indonesian State-Owned Enterprises (SOEs) in 2013–2019 (t). More specifically, we analyze the relationship between the BEM in the current year (t) and the financial performance in the previous year (2012–2018/t-1) and the following year (2014–2020/t+1) using non-financial performance as a mediating variable. This method is intended to discover whether measuring the results for the current year considers the company's performance from the previous year and stimulates progress in the following year. This quantitative study is based on a sample of 174 firms and 3654 observational data points. Employing partial least square–path modeling (PLS-PM), we find that BEM deployment is strongly related to non-financial performance as measured by corporate social responsibility activities, customer satisfaction, workforce quality, and total productivity. Nevertheless, this relationship does not predict financial success for the company, as measured by profitability, financial leverage risk, and shareholder return. Other findings indicate that the BEM on SOEs is not implemented properly, as evidenced by an unbalanced weight score between financial and non-financial performance, non-independent examiners, and political interests at the leadership level. Hence, SOEs are unlikely to gain financially from BEM deployment. A more specific explanation is presented in the discussion and implication sections.

A Multistage Stochastic Programming Model with Multiple Objectives for the Optimal Issuance of Corporate Bonds

Large corporations usually cover their capital and operating expenses by issuing bonds with fixed rates and different maturities. This paper proposes a multistage stochastic programming (MSP) model with multiple objectives to optimize bond issuance by satisfying the three common objectives of corporate managers, as follows: (i) Minimizing expected discounted cost under cash liquidity and financial leverage risk constraints. (ii) Minimizing financial leverage risk under expected discounted cost and cash liquidity risk constraints. (iii) Minimizing cash liquidity risk under expected discounted cost and financial leverage risk constraints. We measure liquidity risk as conditional payment‐at‐risk (CPaR), according to the corporation’s financial characteristics. Financial leverage risk is captured by conditional financial leverage‐at‐risk (CFLaR), which we design based on conditional value‐at‐risk (CVaR). Through empirical analysis of a company in China, we explore the efficient frontier curves for the three above objectives and provide the corresponding issuance compositions of an optimal bond portfolio. Our MSP model offers guidance for corporations on achieving a trade‐off between cost and risk when issuing corporate bonds.

Accounting Disclosure for Financial Instruments: Financial Leverage Risk and Liquidity and their impact on Earnings per Share and Dividends Yield

Accounting disclosure for financial instruments through analyzing the actual accounting data are used as a vital market measures for financial leveragerisk (debt and fixed costs) and assist in decision making as adding financial leverage always adds risk to both the levered company and investor. Degree of financial leverage is an important factor in determining financial risk level and it has direct effect on dividends policy, as it causes intensification of the change in earnings per share percentage because if degree of financial leverage is larger, it may be negative by slight decrease in profit before interest and taxes. The main objectives of this research are to examine the association between financial leverage and liquidity and their impact on earnings per share and dividends yield respectively. The sample taken is 114 listed companies across different industries in Egyptian Stock Exchange for the period from year 2014 to 2019. The Ordinary Least Square regression analysis is used to find the relations betweenThe Financial Leverage Risk (FLR) and Liquidity (LQ) as independent variables and Earnings per Share (EPS) and Dividends Yield (DY) as dependent variables for this research, using Profitability (ROE) and Industry type (IND) as control variables. Financial leverage is fundamental as it affects a firm that needs to increase its growth opportunity, because of the need to maximize stakeholders rate of return and also because such decisions impact greatly the ability of firms to deal with the surrounding competitive financial environment. Findings indicate that according to the correlation coefficients among the research variables, both earnings per share and dividends yield are negatively strong correlated with leverage and strong positively correlated with profitability, and has insignificant negative correlated with liquidity level, at 0.05 significant level. This reveals that financial leverage and financial performance influences the dividends policy.

Managing market risk for financial performance: experience from micro finance institutionin Kenya

Purpose The purpose of this study was to investigate on managing market risk and financial performance, experience from microfinance institutions (MFIs) in Kenya. Design/methodology/approach This study used positivism philosophy and used explanatory non-experimental research designs. The targeted population was all the 13 registered deposit-taking MFIs in Kenya and a census approach was used. The study used secondary data which was collected and analyzed from microfinance Institutions annual audited financial reports for the period between 2014 to 2018. This study was anchored on two theories, namely, resource-based value theory and extreme value theory. Findings The results indicated that interest rate and financial leverage risk had a positive significant effect on the financial performance of MFIs in Kenya. Foreign exchange risk was found to have a negative significant effect on the financial performance of MFIs. However, inflation rate risk was found to have no significant effect on the financial performance of MFIs. Research limitations/implications This study recommended that the chief executive officers of MFIs should use the mechanism of identifying market risk variables, especially Interest rate, financial leverage and foreign exchange risks to enable them to put the necessary measures to mitigate those risks and enhance the financial performance of MFIs in Kenya. Originality/value This study is unique as it touches the microfinance industry which has a steady fast growth in assisting accessibility of financial services to small and medium enterprises. Most of the previous study concentrated on other industry in the financial sector.