Financial Characteristics Of Firms Research Articles

Determinants of Financing Constraints: A Bibliometric Analysis

Financing constraints are difficulties and limitations a company encounters in obtaining the capital for investment and operations. Financing Constraints may cause negative effects, including restricting corporate growth, reducing production efficiency, increasing financial risk, and undermining financial stability. As a result, this study aims to review the determinants of Financing Constraints in order to provide better financing options, optimise corporate governance, and enhance risk management by mitigating Financing Constraints. In this study, the Scopus database is adopted to collect 360 pieces of empirical journal articles from 1993 to 2024. Furthermore, VOSviewer software and R studio software are adopted to conduct bibliometric analysis. Consequently, the result shows that innovation, digital finance, sustainable development, emission control, firm financial characteristics, R&D, uncertainty, and supply chain management are the common determinants for influencing Financing constraints. Hence, this study is expected to provide insights for researchers to recognise the literature gaps and provide accordance for policymakers and practitioners to mitigate financing constraints.

Firm Financial Characteristics and Leverage of Listed Commercial and Allied Companies in Nairobi Securities Exchanges

Firm Financial Characteristics and Leverage of Listed Commercial and Allied Companies in Nairobi Securities Exchanges

Determinants of Sukuk credit rating: evidence from issuing firms in Malaysia

PurposeThis study aims to examine the determinants of Sukuk credit ratings of issuing firms in Malaysia, and the rating changes from lower to higher rating and vice versa.Design/methodology/approachA total of 328 Sukuk issuances and 1,110 Sukuk rating announcements from 2009 to 2014 were analysed using generalized ordered logit regressions approach. Firm financial characteristics, corporate governance attributes, macroeconomic factors and Sukuk structures (debt or equity based) were among the important determinants used to explain the different Sukuk credit ratings.FindingsThe results indicate a positive association of Sukuk credit rating with issuing firm’s financial information, governance attributes and the Sukuk structure whilst the macroeconomic factors did not explain the changes in the Sukuk credit rating. Specifically, firm size, profitability and leverage characteristics had significant positive effect on Sukuk credit rating for listed firms whilst only firm’s profitability had a positive effect on Sukuk credit rating by unlisted firms. With regard to governance, the board structure which includes board size, board independence and CEO/Chairman non-duality is associated with positive Sukuk credit rating for listed firms. Only financial report audited by big four auditors is associated with positive Sukuk credit rating for unlisted firms. Equity-based Sukuk are associated with positive Sukuk credit rating for listed firms while for unlisted firms only the Ijarah Sukuk had a positive Sukuk credit rating.Research limitations/implicationsData on credit rating is scarce and had to be hand-collected from published reports. Furthermore, issues on the lack of standardisation of Islamic contracts in different geographical areas could constrain on the comparability of findings on determinants of ratings in different jurisdictions.Practical implicationsThe findings provide some guide to the rating agencies to objectively assess the issuer’s creditworthiness that could mitigate default risk. Mitigating the default risk will boost investors’ confidence and credibility of credit rating agencies.Originality/valueThis study examines the determinants of Sukuk credit rating of issuing firms in Malaysia, which include not only the listed firms but also the unlisted firms.

Characteristics of firms that issue redeemable convertible preferred stock: Evidence from South Korea

Purpose: The issuance of redeemable convertible preferred stock (RCPS) has been steadily increasing in Korea since the revision of the Commercial Act, which allows firms to issue various types of stocks, in 2010. This study aims to verify equity financing behavior by examining the characteristics of firms that issue RCPS.
 Design/methodology/approach: Using a sample of 12,768 firm-year observations of Korean listed companies from 2011 to 2018, this study conducts univariate and multivariate analyses to examine the factors that affect firms' decisions regarding RCPS issuance. For multivariate analysis, logistic regression analysis is used.
 Findings: This study shows that firms issuing RCPS have higher debt ratios and lower operating cash flows than non-issuing firms. It is also found that firms issuing RCPS are smaller and younger than non-issuing firms. These findings indicate that firms with higher costs of financial distress, lower internal cash flow, and lower credibility/reputation are more likely to issue RCPS because they are constrained by debt capacity.
 Research limitations/implications: According to pecking order theory, firms prefer debt over equity if external funds are required. The results of this study support the pecking order theory by providing evidence that firms rely on hybrid securities financing like redeemable preferred stock, a priority after debt when they are constrained by debt capacity.
 Originality/value: This study sheds light on financing decisions related to the issuance of hybrid securities from the perspective of pecking order theory. It also contributes to broadening the scope of research on hybrid securities by providing empirical evidence on the financial characteristics of firms that issue RCPS.

Defined benefit pension de-risking strategy: determinants of pension buy-ins

ABSTRACT Many firms have sought to de-risk their pension provision by closing or freezing their defined benefit (DB) pension plans. This shifts future pension risk onto employees, but it does not de-risk the firm’s existing obligations. Pension buy-ins and buy-outs, which are a form of insurance, have become an established option for de-risking such obligations in several developed economies. This paper investigates the influence on pension buy-in transactions of the degree of risk associated with a firm’s DB pension obligations and, because of the substantial costs involved, the sponsor firm’s financial position. We employ hand-collected data between 2007 and 2017 to examine how pension fund and firm financial characteristics are related to both the occurrence and timing of buy-ins. Using probit analysis of UK FTSE 350 firms and a wide range of robustness checks, the findings show that firms that sponsor riskier DB pension funds, associated with higher investment risk and longer investment horizon, are more likely to engage in a pension buy-in transaction. We also find evidence that firms with greater financial slack are more likely to engage in buy-ins. Survival analysis reveals that those characteristics also tend to be significant influences upon the timing of buy-in transactions. Our study contributes to the literature on risk management in general and the literature on pension de-risking in particular, and it paves the way for research on pension buy-ins and buy-outs in other countries. Implications for firms with DB pension obligations and the insurance companies that offer pension buy-ins are identified.

Performance, Risk, and Cost of Capital: Trends and Opportunities for Future CSR Research

The information within this study reviews the financial management literature focusing on proponents and opponents of corporate social responsibility (CSR). We review how CSR affects different areas of corporate finance. This study’s core objective is to explore the last 20 years (2000–2019) of CSR top-tier literature to develop and theoretically support CSR and environmental management. Twenty years of publications provide a considerable amount of evidence on CSR’s impacts on firm financial characteristics and some paradoxical findings. The majority of our insights support the argument that doing good is good for business. This study also highlights existing gaps in the literature. Based on our findings, we highlight three areas to further explore in the context of CSR and corporate finance: (1) Does CSR improve specific information contents in stock prices? (2) Does CSR mitigate financial distress risk? and (3) Is CSR good for firm trade credit?

Combining E, S, and G Scores: An Exploration of Alternative Weighting Schemes

How an overall rating is constructed can have a significant impact on its usefulness to investors. In this study, we tested two approaches: equal weighting and backward optimization. Equally weighting E, S, and G pillar scores across sectors showed less financial significance than the stand-alone G pillar score—that is, without E and S scores—over the 13-year study period. Although backward optimization showed greater significance than the stand-alone G scores, this approach may underestimate the importance of ESG indicators to financial results over longer periods of time. These results suggest that investors seeking to combine E, S, and G into an aggregate ESG score should proceed with caution. A naive approach such as equal weighting could introduce noise that decreases financial significance and a backward-optimized approach may ignore the importance of different time frames in how ESG risks unfold. Our findings illustrate the historical value in prospectively adjusting the selection and weighting of ESG Key Issues industry by industry to capture companies’ exposure to dynamic and emerging risks. TOPIC:ESG investing Key Findings • Environmental (E), social (S), and governance (G) scores have shown different relationships with financial characteristics of firms. Historically, governance has provided the strongest significance, social the weakest. • A combination of E, S, and G scores that maximized historical financial significance did not lead to a signal with superior long-term stock-price effect. • The weighting of E, S, and G issues in aggregating a composite score may better reflect the dynamically changing ESG landscape, aiming to capture unfolding, emerging risks.

Institutional Shareholdings and Financial Characteristics of Malaysian Listed Companies

This study attempts to investigate the extent to which the financial characteristics of firms are related to institutional shareholdings. The primary motivation to carry out the study comes from an earlier paper by Hessel and Norman (1992), which showed that seven financial ratios discriminated between strongly-held and institutionally-neglected firms. As an extension of the study, the present study seeks to investigate the seven financial ratios among Malaysian companies by identifying differences in the means of the seven ratios between a group of companies with substantial institutional shareholdings against another group of companies with negligible institutional shareholdings. The findings, from a sample of KLSE listed companies, broadly support the findings by Hessel and Norman (1992), in which firms with significant institutional shareholdings exhibited a significantly higher profitability ratio against firms that were neglected by institutional investors.. This suggested that institutional investors placed greater emphasis on a firm's short-term results. Our evidence also did not indicate institutional shareholders' direct involvement in ensuring a firm's long-term growth and competitiveness, as shown by the insignificant differences in the mean of growth ratio between firms that had significant institutional shareholdings and those that were neglected by institutional investors.

The Financial Characteristics of Firms Using Accrual Based Earnings Management

The Financial Characteristics of Firms Using Accrual Based Earnings Management

Influence of Firm Financial Characteristics on Leverage of Non-Financial Listed Companies in Nairobi Securities Exchanges

In financial management, an organization is always concerned about four major issues which are sources of finance, use of finance, investment decisions, and working capital management. Financial decisions have an influence on the ability of a corporation to remain a going concern since the wrong mix of debt and equity has short term and long-term implications. It is against this the current study examined the influence of firm financial characteristics on the leverage of agricultural companies. Panel regression modelling revealed the positive influence of firm size and negative influence of tangibility, profitability and growth opportunities on the leverage of agricultural listed companies. Operating cash flows moderated the influence of firm financial characteristics on the leverage of agricultural listed companies.

Good news for environmental self-regulation? Finding the right link

We investigate the stock market response to firm disclosure of positive environmental information and the link from that information to environmental outcomes. We classify environmental media releases by informational content and value relevance, and assess the abnormal stock returns of each type of event. While announcements of future environmental activities lead to the largest favorable stock market reactions, there is no guaranteed link from this type of information to environmental outcomes. Further analysis of the abnormal returns shows that the magnitude of the stock market reaction depends on firm financial characteristics across all event types rather than on firm environmental performance. Our results indicate that the ability for voluntary environmental information disclosure to induce environmental self-regulation is limited to the extent that firms are able to follow through with their announcements of planned environmental activities.

The effect of audit quality on the pension risk – cost of equity relation

PurposeThe purpose of this paper is to empirically investigate how audit quality affects the cost of equity (COE) defined benefit pension risk relation. As an antecedent to these tests, this study first uses implied COE measures and their pension intensity risk predictors to examine the relation between a defined benefit plan (DBP) firm’s implied COE and pension intensity risk. Then, using these measures, the authors provide new evidence on how audit quality affects this relation.Design/methodology/approachUsing panel data over fiscal years 1999–2014, fixed effects models regress dependent variable, implied the COE on controls and proxies that measure pension intensity risk and pension intensity risk conditional on the quality of the audit.FindingsThis study documents that audit quality attenuates the positive relation between a sponsoring firm’s COE and pension risk. The authors rationalize these findings by asserting that the positive relation between a sponsoring firm’s COE and pension intensity risk reflects increased financial risk associated with higher pension obligations but the quality of the auditor attenuates this risk. This paper further documents that these findings are robust to a sponsoring firms’ level of financial distress.Research limitations/implicationsA limitation of this research is that the sample is limited to DBPs companies only. Although results of the tests show similar results for controls that are used in other COE-related studies that include DBP and non-DBP firms, the generalizability of the findings may be limited to the extent that the financial characteristics of firms without defined contribution plans differ from the sample.Practical implicationsResults of this study suggest that while pension intensity risk has COE implications, managers may be able to mitigate these effects by managing their plans and utilizing high-quality auditors.Originality/valueUsing implied COE and pension intensity risk measures, this study provides new information on the favorable effect that high-quality audits have on the COE – pension risk relation.

Fair Employee Treatment and Financial Characteristics of Firms

Present paper investigates the interactions between firm’s key financial decisions and its fair employee treatment and welfare policies. Fair employee treatment has two components—measurable and unmeasurable. Certain ratios like employee compensation to sales, employee compensation to total assets, and total employee welfare to sales are computed to capture the measurable part of fair employee treatment. To envisage the unmeasurable component, a dummy variable for fair employee treatment is used which is based on the listing of the firm in India’s Best Companies to Work for 2017: The complete List prepared by Great Place to Work and published by Economic Times. Linear multiple regression analysis is conducted using firm’s leverage, price to book value, and enterprise value to EBDITA as dependent variables, and fair employee treatment, and employee compensation to sales as independent variables. Results indicate a negative relationship between employee compensation and firm valuation, and confirm that high leverage firms are more likely to cut-down on employee compensation but ensure better and fair treatment of employees. The result of binary logistic regression model predicts that firm’s dividend policy, employee stock options, and firm leverage positively impact the probability of fair employee treatment.

A Study on the Prediction of the Level of Tax Avoidance Using Financial Characteristics

기업의 재무적 특성과 조세회피 관련성에 관한 기존의 연구들은 실질적으로 조세회피 결정요인에 관한 재무적 특성에 관하여 연구하여 왔으며, 조세회피 수준에 따른 재무적 특정변수를 예측한 연구는 없었다. 만약 기업의 조세회피 수준에 따른 유의적인 재무적 특성변수를 찾아낼 수 있다면 사전적으로 적정기업과 비적정기업간 재무적 특성비율 차이를 확인하여 기업의 부실예측에 유용한 지표로 활용할 수 있다. 즉, 재무제표를 활용한 재무비율(Financial Ratio)은 기업의 미래의 가치평가, 신용평가, 대출심사기준 등 다양한 의사결정의 기초자료로 활용할 수 있기 때문에 재무비율을 통한 조세회피 수준 예측은 비적정기업의 부실예측에 추가적인 하나의 지표로서 활용할 수 있기 때문에 본 연구에서는 조세회피에 유의적인 영향을 미치는 재무비율을 통한 조세회피 수준예측에 관하여 판별분석을 통해 알아보고자 한다. 본 연구는 기업의 정보가치를 가장 쉽게 제공해주는 재무비율을 이용하여 기업들의 조세회피수준 예측을 해 보고자 조세회피 수준이 높은 집단과 낮은 집단을 구분하였다. 기업의 조세회피수준이 높은 집단과 낮은 집단으로 구분한 후 재무적 특성을 나타내주는 재무비율을 대상으로 판별분석을 다음과 같이 수행한다. 조세회피 수준 예측은 전체표본을 두 집단(판별함수 추정시 사용할 집단 (집단1)과 추정된 판별함수를 통해 조세회피 수준 예측치와 실제치를 비교할 집단 (집단2))으로 구분하여 (1) 집단1을 이용해 판별분석을 통한 조세회피 수준 예측치에 영향을 미치는 재무비율변수와 판별계수를 찾아내고, (2) 집단1을 이용해 (1)을 통해 확인된 판별함수를 집단2에 적용하여 조세회피 수준 예측치를 산출한 후 집단2의 실제 조세회피 수준 예측치의 값과 비교함으로써 어느 정도 예측정확성을 가지는지를 살펴보고자 한다. BTD는 이익조정행위인 재무보고이익의 증가나 또는 조세회피행위인 세무이익의 감소를 나타내는 대용치로 활용할 수 있기 때문에 조세회피수준 예측을 이용한 재무비율분석은 적정기업과 비적정기업으로 구분하여 파산예측에 이용될 추가적인 하나의 지표로서 활용할 수 있을 것으로 기대된다. 판별분석의 결과 20개의 재무적 특성변수 중 다단계측정방식으로 구하여진 대표 재무적 특성변수는 재고자산대유동자산(IACA), 현금구성비율(CSR), 순이익대총부채(NPTD), 노동장비율(LER)로 나타났다. 집단1을 통하여 선별된 재무적 특성변수의 예측치가 78%전후로 예측정확성이 높은 것 을 알 수 있으며, 이렇게 추정된 재무적 특성변수를 집단2에 대입해 본결과 89%의 높은 예측정확성을 나타내는 것을 알 수 있다. 본 연구는 신용기관, 채권자 및 투자자 등 회계정보 이용자들에게 중요한 의미를 갖는 재무제표를 중심으로 조세회피 수준 예측을 이용한 재무비율분석은 적정기업과 비적정기업으로 구분하여 부실예측에 이용될 추가적인 하나의 지표로서 활용할 수 있을 것으로 기대된다. 기존의 선행연구와는 달리 재무비율을 통한 조세회피 수준 예측이 실제 기업의 조세회피 수준이 유의한 재무적특성을 판별해 내어 비적정기업의 부실예측에 활용될 수 있음을 알 수 있다.Previous studies on tax avoidance delve into the financial characteristics of firms that conducting tax avoidance, yet studies predicting the level of tax avoidance with financial characteristics are scarce. Financial ratios can be used as a source of information for various decisions including valuation of firm, credit assessment, and screening for lending decision, and which can be employed as a useful indicator of firm insolvency. The methodology is summarized as follows: first, firms are categorized into high tax avoidance firms and low tax avoidance firms. We predict tax avoidance by dividing the total sample into two groups; the first group is used to estimate the discriminant function, and this function is used in the second group to estimate corporate tax avoidance, which is then compared to actual tax avoidance. In other words, we find the discriminant coefficients and significant financial ratios that influence corporate tax avoidance from the first group, then we use these values to estimate corporate tax avoidance in firms of the other groups. This estimated tax avoidance and actual tax avoidance are compared to measure the accuracy of the prediction of discriminant analysis result. The results demonstrate that among financial characteristics, Inventory Assets to Current Assets (IACA), the Cash Structure ratio (CSR), Net Profit to Total Debt (NPTD), and the Labor Equiptment Ratio (LER) are found significant from our multi-step estimation method. Estimation using the selected financial characteristics can accurately forecast tax avoidance about 78% in the first group. When we implement the same variables in the second group, the predictions yield a substantially accurate prediction rate of 89%. This study contributes to the literature by proposing an additional index to predict tax avoidance, the insolvency of a firm. We examine the difference in financial characteristic ratios between firms with levels of corporate tax avoidance to predict future corporate tax avoidance through a discriminant analysis.

The Changes in Financial Characteristics of Firms with Internal Control Deficiencies after the Adoption of K-IFRS

The Changes in Financial Characteristics of Firms with Internal Control Deficiencies after the Adoption of K-IFRS

Understanding the Decision Making Process of Sovereign Wealth Funds: The Case of Temasek

Sovereign wealth funds (SWFs) have been increasingly active over the past decade, raising concern from governments regarding their actual motives and potential cross-border stakes in national strategic sectors. The aim of this paper is to contribute to the existing literature to understand better the decisions taken by this new class of investors. the whole process of investment decision strategy is complex in the sense where it combines several dimensions that may potentially interact. For that, we investigate the economic determinants of SWF's cross-border stakes while considering the whole sequence of choices involved in this decision: (i) the decision to invest abroad or not, (ii) the decision to invest in a listed versus unlisted firm, and (iii) the decision to make large versus small investment in target company. Using a nested logit approach on one of the biggest SWF, the Singaporean fund Temasek over the 1990 to 2010 period, we provide clear evidence of dependence in the three considered levels of decision. In addition, we show that Temasek's cross-border investment probability increases with the excess of FX reserves, tends to target unlisted firms when asymmetry of information is low between the target and the home countries and involves in large stakes depending on firm financial characteristics.

Financial Characteristics and Cancelling Treasury Shares Events

Background/Objectives: This study explores the incidence of cancelling treasury shares events in Malaysia and examines the financial characteristics of companies that are more likely to cancel their shares. Methods/Statistical Analysis: The study utilizes descriptive analysis to assess the incidence of cancelling treasury share events among non-financial and nonutility Malaysian companies. Tobit regression analysis is used to gauge the relationship between firm financial characteristics and the incidence of cancelling treasury share events. Findings: There were a total of 175 events of cancelling treasury shares occurred between the years 2001 and 2012. This study finds that profitability positively and significantly affects the decision to cancel treasury shares, while excess cash flows negatively influence a firm’s decision to cancel treasury shares. Furthermore, smaller size companies are more likely to engage in cancelling their shares. Application/Improvements: The study finds that smaller firms are more likely to cancel their treasury shares as these companies may have severe information asymmetry problems.

Entrepreneurship and business survival in times of crisis: The case of Barcelona

Objeto: El trabajo que se presenta en este articulo es la primera parte de un estudio sobre las estrategias llevadas a cabo por las empresas en epocas de crisis. Este primer articulo analiza las caracteristicas financieras de las empresas creadas en Barcelona en los inicios de la crisis y que han sobrevivido durante la misma. Este estudio pretende contrastar las caracteristicas financieras de las empresas analizadas con las medidas llevadas a cabo para mantener su rentabilidad en epocas de crisis y determinar si existen patrones de comportamiento distintos entre empresas creadas en sectores industriales y no industriales. Diseno/metodologia: Analisis estadistico-descriptivo de las medias y variaciones de los principales indicadores financieros y de recursos humanos que se relacionan con las medidas tomadas por las empresas en epoca de crisis. La base de datos utilizada ha sido el SABI y el periodo de referencia 2008-2013. Aportaciones y resultados: Las empresas creadas en Barcelona en los inicios de la crisis y que han sobrevivido presentan algunos rasgos comunes: muestran un EBITDA positivo, los recursos propios constituyen una fuente relevante de financiacion, tienden a reducir su nivel de endeudamiento o se disminuye inversion. Los ratios de la rentabilidad financiera son muy bajos ya que el patrimonio neto de la empresa es alto y la deuda es baja. Referente a los indicadores de recursos humanos, nos indican la importancia de las empresas de nueva creacion en la generacion de empleo y sus tasas de productividad son altas. Valor anadido: Determinar las caracteristicas financieras de las empresas creadas en los inicios de la crisis y que sobreviven en Barcelona en epoca de crisis para determinar si siguen medidas para mantener su rentabilidad. La existencia de un conjunto de medidas estadisticamente significativas puede servir de guia a los emprendedores del futuro asi como de las politicas publicas de apoyo a los emprendedores.

An empirical framework to predict idiosyncratic risk in a time of crisis

Purpose The purpose of this study is to invoke prospect theory to construct an empirical framework to predict idiosyncratic risk, and argue that when a firm performs better than its benchmarks, the firm tends to play safe by avoiding firm-specific risk to maintain its satisfactory performance level, but when a firm performs worse than its benchmarks, the firm may become aggressive with taking more risks to achieve an increased level of performance. Design/methodology/approach This study tested the relationships between restaurant firms’ future idiosyncratic risk and the proposed firm financial characteristics. Heteroscedasticity- and autocorrelation-consistent (HAC) standard errors (Newey and West, 1994) were used to deal with potential problems of autocorrelations and heteroscedasticity. The standard error of residuals from the Fama-French three-factor model (Fama and French, 1993) was estimated to proxy for restaurant idiosyncratic risk. Findings The main analysis reveals that five financial characteristics are significant predictors for restaurant firms’ future idiosyncratic risk in accordance with the proposed, negative relationship based on the prospect theory. Practical implications Managers may predict their competitors’ future risk-taking behaviors using the current study’s findings, which will provide competitive advantage in a highly competitive business environment that we have now. Also, in practice, restaurant investors may consider findings of this study in forecasting future risks of their portfolio to help evaluate and revise their portfolios. Originality/value First, this is a new endeavor of its kind dealing with the restaurant industry, filling the void in the literature in predicting the risk-taking behavior of restaurant firms in a time of crisis. Second, this study forms a prediction model that establishes “predictive causality” (Diebold, 2001) motivated by prospect theory. Third, building upon prior research, this study comprehensively examines relationships between the firm characteristics that capture firm-specific strategies (Ou and Penman, 1989) and the idiosyncratic risk that are “associated with firm-specific strategies” (Luo and Bhattacharya, 2009) in a restaurant setting. Finally, the findings of this study bear significant implications for practitioners and other parties of interest.

Accounting Statement Footnotes Contextual Association with Firm Financial Characteristics in the Oil and Gas Industry

Information quality of financial accounting statements is an issue for readers’ decision-making. This study investigates the association of the annual report readability with the firm’s weighted average cost of capital (a key ratio used in firm valuations and investments). The study focuses upon the oil and gas industry in order to include an analysis of “successful efforts” versus “full cost” accounting methods. Prior studies find that as the level of useful information increases in the financial statements, the corresponding firm’s information asymmetries decrease, resulting in a company’s lower cost of capital (Francis, J. et al. 2008, and Barth M. et al. 2013). The current study findings indicate that the accounting readability of annual reports does associate with weighted average cost of capital. This study extends readability research into this financial ratio footnote and MD&A area. The study also finds the accounting choice of “successful efforts” versus “full cost” affects readability of annual report information, but no association is apparent of the method with the weighted average cost of capital.