High Leverage Research Articles

Improved Least Squares Support Vector Machine Model Based on Grey Wolf Optimizer Algorithm for Predicting CO2–Crude Oil Minimum Miscibility Pressure

The minimum miscibility pressure (MMP) is an important reference parameter in the study of CO2 oil drive systems. In response to the problems of time‐consuming and costly prediction of MMP by conventional experimental methods, an improved least squares support vector machine (LSSVM) model based on grey wolf optimizer (GWO) algorithm is proposed to predict the CO2–crude oil MMP. Based on Pearson correlation analysis, reservoir temperature, C5+ molecular weight, intermediate component mole fraction, and volatile component mole fraction are selected as independent variables of the model, and MMP is the dependent variable. A total of 51 MMP experimental data are collected, of which 35 are used to fine‐tune the model's parameters and 16 are used to verify the model's reliability. The high leverage point method is used to detect anomalies in all experimental data to check the reliability of the model, and the abnormality of only one piece of experimental data is identified. Finally, a comparison of the model with other intelligent models is found. The absolute relative deviation of the GWO‐LSSVM model is 2.24% for the training data and 3.48% for the test data, which provides high adaptability and accuracy.

Capital Structure: Capital Buffer, Return On Equity, Capital Adequacy Ratio In Go-Public Banking In Indonesia

Banking companies may be faced with adjustment costs (cost of capital adjustment) to obtain optimal capital ratios. These costs arise when banks increase or obtain new external capital so that capital adjustments can lead to excess or shortage of capital which can have a negative impact and cause banks to be reluctant to react quickly when capital shocks occur. This research explores the most significant factors that influence bank capital policy choices in Indonesia. This study examines the financing choices of 8 banks for the 2013-2022 period using panel data regression analysis techniques with STATA.17. The results of the Random Effect Model Estimation research where bank companies in Indonesia have high leverage support the fact that the nature of bank business is different from non-banking companies. The significant negative relationship of the capital buffer is in line with the too big fail theory, packing order theory and agency theory, as well as the Retrun On Equity and Capital Adequancy Ratio variables which have a significant positive relationship at an accuracy level of 85.01%, so in other words banking companies can use debt to finance the company on the basis of agency or managerial policies and strategies, thereby proposing pecking order theory with the assumption that there is information asymmetry and agency costs that are relevant both in the long term.

Capital Structure: Capital Buffer, Return on Equity, Capital Adequacy Ratio in Go-Public Banking in Indonesia

Banking companies may be faced with adjustment costs (cost of capital adjustment) to obtain optimal capital ratios. These costs arise when banks increase or obtain new external capital so that capital adjustments can lead to excess or shortage of capital which can have a negative impact and cause banks to be reluctant to react quickly when capital shocks occur. This research explores the most significant factors that influence bank capital policy choices in Indonesia. This study examines the financing choices of 8 banks for the 2013-2022 period using panel data regression analysis techniques with STATA.17. The results of the Random Effect Model Estimation research where bank companies in Indonesia have high leverage support the fact that the nature of bank business is different from non-banking companies. The significant negative relationship of the capital buffer is in line with the too big fail theory, packing order theory and agency theory, as well as the Retrun On Equity and Capital Adequancy Ratio variables which have a significant positive relationship at an accuracy level of 85.01%, so in other words banking companies can use debt to finance the company on the basis of agency or managerial policies and strategies, thereby proposing pecking order theory with the assumption that there is information asymmetry and agency costs that are relevant both in the long term.

Cultural determinants of capital structure in Indonesian banking

Capital structure decisions play a crucial role in shaping the financial landscape of companies, especially in developing countries. This study examines the cultural determinants of capital structure in Indonesian banking within the macroeconomic context from 2013 to 2022. The capital structure represents the mix of various company funding methods, impacting its value and influencing stakeholders. The debate on how the interplay of debt and assets affects a company's value continues, with the determining factors of capital structure still being explored in financial studies. Using STATA V.17, this research analyzes 30 banking companies listed on the Indonesia Stock Exchange, with leverage as the dependent variable. Financial ratios, including liquidity ratio, profit volatility, growth opportunities, bank size, and external macroeconomic variables such as inflation and Gross Domestic Product (GDP), are examined as potential influencers on the capital structure. The results reveal high leverage in Indonesian banks, with variations in financial approaches. Return on assets, growth opportunities, and inflation exhibit a positive and significant relationship with leverage, while profit volatility, tangibility, bank size, and GDP show a negative and significant relationship. The research suggests limitations in scope, recommending including all Indonesian banking companies and additional external macroeconomic variables like exchange and interest rates.

Corporate cash holdings and industry risk

AbstractI conjecture that a firm's sensitivity to industry shocks escalates its need to retain a cash buffer. Consistent with this conjecture, I find that a 1 SD increase in a firm's industry risk exposure increases cash holdings by 10%. In fact, industry risk has a greater effect on corporate cash holdings than does economywide and idiosyncratic risk in my sample. The effect of industry risk exposure on corporate cash holdings is greater for firms in highly competitive industries, as well as for firms with high leverage, a greater fraction of short‐term debt, and few tangible assets.

T distribution-based robust semiparametric mixture regression model

Semiparametric mixture of regression (SMR) models provide a popular and flexible framework for modeling heterogeneous data that violates some of the parametric assumptions assumed in traditional finite mixture of regressions models. The majority of applications of SMR models assume normality for their error terms. As is well known, Gaussian distribution is sensitive to outliers or heavy-tailed distribution. In this article, we propose a more robust approach of SMR by modeling the error distribution as t distributions. By combining the EM algorithm and kernel density estimator, two algorithms are proposed to fit the robust SMR models and are proven to monotonically increase the likelihood function. We further investigate a modified version based on trimming for high leverage outliers. In real applications, a data adaptive mechanism is discussed to choose the degrees of freedom. A simulation study and three real data analyses show the superiority of the new methodology.

The Impact of Firm Characteristics on Earnings Management: A Study of Firms Listed in India

This study examines the impact of firm characteristics on earnings management (EM) using a sample of listed non-financial firms in India. First, we take a comprehensive perspective to estimate EM focusing on total accruals, current accruals and specific accruals. Second, we examine firm characteristics such as size, leverage, performance, growth opportunities and industry membership that are potentially related to accruals EM. We find that: 1) Large firms and firms with high performance have higher accruals quality. 2) Firms with higher growth opportunities have lower accruals quality. 3) Firms with high leverage use accruals EM to avoid violation of debt covenants. These findings indicate that investors and regulators should take into account both: the abnormal accruals over a period of time and the variability of abnormal accruals to analyse the quality of financial reporting of large firms, firms with high performance and highly levered firms.

Study on Deleveraging and Downshifting of Real Estate Enterprises in the Context of Artificial Intelligence

Abstract With the decrease in the heat of the real estate market, the structural problems of real estate enterprises have become increasingly prominent, which are mainly reflected in high inventory, high leverage and high cost. After analyzing the types and underlying factors of financial risks faced by real estate enterprises, this paper explains the “three red lines” policy of the deleveraging mechanism for real estate enterprises. Based on artificial intelligence technology, an intelligent financial data processing platform has been established, and PCA and K-Means algorithms are used to process financial data. The association rule mining was introduced to analyze the financial data. The deep meaning of the financial data was mined through the weighted Apriori algorithm. The deleveraging strategy of real estate enterprises was established in combination with the financial decision-support process. The application effect of Group W’s deleveraging strategy was analyzed by selecting it as the research object. In 2021, the current ratio was 0.03 times different from the industry average, the asset-liability ratio decreased to 75.69%, and the overall cash balance at the end of the period increased by 11.2 times. After 2018, the “three red lines” indicators were all met, and it successfully ranked among the green enterprises, with the highest cumulative excess rate of return reaching 5.46%. Based on intelligent financial data processing, it can provide decision-making support for real estate enterprises to optimize their structure and realize the deleveraging, downshifting, and efficiency increase of real estate enterprises.

Leverage and profitability of newspaper publishers: A financial analysis of the portuguese industry (2008-2019)

As is the case with any economic activity, the challenge of guaranteeing the economic and financial sustainability of the newspaper industry is recurrent, and the challenge is redoubled in periods of industry transformation, as has occurred in the media business, where there are various levels of disruption, particularly in terms of the financing model (insufficient traditional sources of revenue: reader revenue and advertiser revenue) and forms of product access and distribution (insufficient physical support and newsstands). The migration to digital media necessarily implies new management strategies and practices in order to optimize costs and diversify the revenues that can be earned by newspaper companies. In this context, this article examines the recent evolution of the financial profitability of the newspaper publishers in Portugal. Financial profitability depends on both the economic profitability and the financial structure (i.e., leverage) of companies. Newspaper companies accumulated very high levels of debt because of the sector crisis. The financial analysis in this article reveals that almost a half of newspaper publishers benefited from positive leverage effects, recording higher financial profitability than economic profitability. Companies that benefited from positive leverage effects were the more leveraged. High leverage was positive for those newspaper companies that made investments whose returns offset their debt costs.

Company ownership structure in leverage control as optimization of financial fraud supervision: A board of directors outlook

High leverage will cost the company to achieve its given targets. So, the target that is not completed will make the management meet the target by various ways, namely by financial fraud. This study aims to identify the effect of ownership structure on leverage and financial fraud. The ownership structure in this study stands for foreign, managerial, and institutional ownership. Leverage is used with debt to total asset proxies, while financial fraud uses the categorization of 0 for a non-manipulator, and 1 for a manipulator with a Beneish M-score model. This research uses manufacturing companies registered in Bursa Efek Indonesia for 2016–2020. The sample used was 40 companies with 200 observational data. The method used is purposive sampling, and SPSS software is used to analyze the data with linear regression models and path analysis. The findings showed that foreign ownership did not significantly affect leverage. Managerial and institutional ownership had a significant effect on leverage. In contrast, indirect leverage did not mediate foreign and institutional ownership against financial fraud and mediated significantly between managerial ownership and financial fraud.

Analysis of banking credit distribution using the vector error correction model

The business model and consequently, the bank’s risk exposure significantly depends on the source of capital (Riabichenko et al., 2019). This research uses vector error correction model (VECM) data analysis to investigate the influence of capital adequacy ratio (CAR), non-performing loans (NPL), loan to deposit ratio (LDR) on the level of credit distribution at commercial banks in Indonesia. Using secondary data, research data was processed using the EViews 12 application with the research population being banking companies listed on the Indonesia Stock Exchange in 2019–2021. The research results show the variables CAR, NPL, and LDR have a significant effect on long-term credit distribution. In addition, the NPL variable significantly influences the credit distribution variable in the short term. The Granger causality test result shows that there is no two-directional causality relationship between the independent variables CAR, NPL, and LDR on the credit distribution variable. The results of this research are in accordance with financial intermediation theory, where the theory explains that savings and loans with high leverage can reduce the possibility of default (payment failure).

Capital Structure, Board Characteristics and Firm Performance of Listed Non-Financial Companies

This exploratory research investigates the complex dynamics among capital structure, board characteristics, and financial performance in listed non-financial companies in Nigeria. Utilizing purposive sampling, the study focuses on 67 companies, primarily non-financial, renowned for consistently providing accessible data. Annual reports from 2012 to 2022 serve as the data source, covering metrics related to capital structure (Debt to Assets Ratio and Leverage Ratio), board characteristics (CEO Duality, Board Size, and Board Gender Diversity), and financial performance (Return on Assets, Dividend per Share, and Earnings per Share). Employing panel data econometrics techniques, including fixed and random effects pooled regression models, the study analyzes these relationships. The findings reveal a statistically insignificant negative impact of capital structure on financial performance, indicated by Debt to Assets Ratio and Leverage. CEO duality shows a negative effect on Earnings per Share without statistical significance. In contrast, Board Size and Board Gender Diversity significantly positively influence Earnings per Share, underscoring their importance in enhancing firm performance. Regarding Dividend per Share, higher Debt to Assets Ratio and Leverage are associated with lower firm performance, while CEO duality’s impact lacks statistical significance. Larger board sizes and greater board gender diversity, however, positively affect Dividend per Share, emphasizing their positive contributions to financial performance. The study concludes with recommendations, including the importance of companies striving for an optimal capital structure, enhancing board diversity, evaluating CEO and Chair role separation, and carefully assessing risk factors when considering higher leverage. Nonetheless, limitations, such as the statistical insignificance of some relationships, the limited data period, and the omission of external factors, highlight avenues for future research.

PENGARUH LEVERAGE, LIKUIDITAS, FIRM SIZE DAN CAPITAL EXPENDITURE TERHADAP CASH HOLDING PADA PERUSAHAAN YANG TERDAFTAR DI BURSA EFEK INDONESIA

Abstract - Cash holding or commonly referred to as cash and cash equivalents owned by the Company which is used to finance operational activities such as purchasing raw materials or merchandise, purchasing capital goods, paying salaries or wages, paying off debt obligations, paying dividends and other transactions required by the company. Cash Holding plays a very important role in determining whether a company is healthy or not, often associated with ownership as the dependent variable. The aim of this research is to obtain empirical evidence regarding the influence of leverage, liquidity, company size and cost of capital on cash flow in real estate and real estate companies listed on the Indonesia Stock Exchange (BEI) from 2019 to 2021. Technical sampling used in this research was a purposive sampling technique. Data processing uses the Eviews 13 program. The research results show that the independent variable Leverage has a negative and significant influence on Cash Holding where hypothesis 2 is not rejected, Liquidity has a positive and significant influence on Cash Holding where hypothesis 2 is not rejected, Firm Size has a positive influence but not significant on Cash Holding where hypothesis 3 is rejected, and Capital Expenditure has a positive and significant influence on Cash Holding where hypothesis is rejected. From the empirical evidence above, the implication obtained in this research is that companies that have high leverage need sufficient reserve funds to avoid financial distress, so that the company's activities can run smoothly. In order to cover short-term financing needs, companies really need good liquidity, meaning there is sufficient reserve funds. The bigger a company, the bigger the transactions will be too. Here it is necessary to have reserve funds to be used to meet financing needs so that the company's operations are not disrupted. Capital expenditures made by a company in making investments should use internal funds so that they do not add additional burden. If capital expenditure uses external financing or debt, it will reduce the Company's liquidity level because it has to pay interest or other expenses.
 Keywords: Capital Expenditure; Cash Holding; Firm Size; Leverage; Liquidity

Leverage Effect between ROA and ROE During the Covid-Crisis Based on a Hungarian Company Database

This paper is devoted to examining two extremely popular financing principles in the practice of Hungarian companies during the Covid-crisis. The leverage effect explains how the Return on Equity can be improved compared to the Return on Assets, the risk matching principle states that the risky assets should be financed mostly from equity and the secure assets should be financed mostly from debt. The Covid-crisis is an excellent opportunity to study the relevance of these principles. The validity of these principles is examined in a sample containing about 30.000 company financial reports. The most important findings are the following: The profitability does not determine the leverage, but the high leverage determines the low profitability. The profitability is the consequence of former decisions about the debt-equity relationship, the debt/equity ratio would be the consequence of the profitability. The risk matching principles cannot be justified by the used sample.

REIT Leverage Puzzle

Real Estate Investment Trusts (REITs) utilize significant financial leverage, with a typical REIT employing around 40 percent of debt financing. For non-taxable entities like REITs, the absence of tax benefits raises questions about the optimal level of financial leverage. This study explores the effects of leverage on shareholder returns in REITs and provides empirical evidence supporting the trade-off theory of capital structure. Our findings indicate that some REITs may have reached their optimal level of financial leverage, beyond which the marginal benefit diminishes. Additionally, the study reveals that high leverage can create agency conflicts between managers and shareholders, leading to a market penalty on REITs with excessive financial leverage. Importantly, we also find that the impact of financial leverage on REIT performance varies depending on the economic context, showing divergent trends pre- and post-financial crisis and during the COVID-19 pandemic recovery phase. The implications of these findings are critical for understanding REITs’ governance and financial management.

Too Big To Fall: Bankruptcy of Lehman Brothers Holdings Inc. in 2008

The research background is Lehman Brothers Holdings Inc. (Lehman Bro.) sending Chapter 11 bankruptcy protection application due to extremely high leverage and liquidity lacking towards New York Court in the Subprime Lending Crisis, 2008. This research illustrates the events economic background, three critical factors to final bankruptcy and practical solutions from Macro and Micro perspectives. This research adopts the typical case analysis method and concludes that mismatching capital structure with high insolvency risk, not be acquired or purchased for its qualified and inferior assets by other financial institutions or provided timely adequate capital support by American Federal Reserves, agency problem as conflicts of interests between the chief executive officer and his employment's shareholders in risk preference, and finally inappropriate accounting policies without complete disclosure of misconducting Repo105 to reduce debt-equity ratio for external investors are essential reasons account for Lehman Bro. Bankruptcy in 2008 with concrete illustrations in this case analysis research papers.

‘Vital and irreplaceable facilities’: explaining leverage when states host great powers’ spying operations

ABSTRACT Great powers use others’ territory for spying. Existing work shows that hosts of spying sometimes enjoy high leverage over great powers in exchange for their cooperation. At other times, hosts wield less leverage. Why? This paper points to the quality of intelligence that great powers glean from a host’s territory and the availability of alternatives to account for this variation. In U.S. spying on the Soviet Union from Iran, changes in these factors during the 1960s caused Iran’s leverage over the United States to increase. U.S. concessions enabled the Shah’s excesses. But the United States retained access to extraordinary intelligence.

The Earnings Management Strategy of Indebted Non-Listed Firms: The Case of Italy

Design/methodology/approach: For a sample of Italian non-listed firms that file full financial statements, we conduct a cross sectional regression analysis to determine whether the managers of indebted firms complement real activity-based (REM) with accrual-based (AEM) earnings management. To model each technique, we estimate OLS regressions with robust standard errors to avoid heteroscedasticity problems.Purpose: This research analyses whether the managers of highly indebted Italian non-listed firms, financed mainly by bank-loans, are likely to undertake real activity-based earnings management (REM) and accrual-based earnings management (AEM) as complementary activities to boost the impact of earnings management (EM) on reported earnings and achieve desired earnings targets.Findings: Consistent with the extant literature, we find that indebted firms are likely to complement REM with AEM to enhance their creditworthiness. We also provide evidence that high-quality audit companies constrain neither REM nor AEM initiatives. Finally, firms suffering from financial problems are less likely to engage in either initiative as they are under greater scrutiny from lenders.Originality: The paper investigates the complementary use of accrual-based and real activity-based earnings management techniques in non-listed firms, suffering from a high pressure from lenders in the case of indebtedness.Practical implications: This research should be of interest to banks, managers, and standard setters as it highlights the earnings management strategy employed by firms with a high leverage ratio and provides evidence on the relative costs associated with each earnings management technique.

Educators’ Perceptions of Professional Growth Plans in the Context of Professional Learning Communities

Professional Growth Plans (PGPs), a model of professional development for educators, were completed in the context of Professional Learning Communities (PLCs) as part of a grant from a state Professional Educator Standards Board. Participants were in the Pacific Northwest of the United States and represented different educator roles in two urban elementary schools. The PGP process was introduced in PLCs and focused on the implementation of High Leverage Practices (HLPs) for inclusive classrooms (McLeskey et al., 2019). In a collaborative effort with university facilitators, educators engaged in tenets of Participatory Action Research (PAR) through enactment of the PGP process to implement and reflect on outcomes related to their use of HLPs. Educators selected PGP goals focused on areas of instructional growth and improvement of student performance. PAR was enacted in the context of educators’ individual instructional settings through implementation of PGPs. The purpose of the grant was to familiarize and support educators in the PGP process. The purpose of the study was to identify educators’ perceived benefits and challenges with the implementation of PGPs within the context of a collaborative PLC.

High Leverage Practices for Environment Corps (E-Corps) Courses

The Environment Corps (E-Corps) program emerged out of our goal to reciprocally serve undergraduate students and communities as they engage with faculty across E-Corps courses in collaborative environmental sustainability pursuits. Currently, the three E-Corps courses focus on brownfields, stormwater, and climate. The E-Corps program is a unique two semester sequence of coursework anchored in high leverage practices (HLPs) that we have collaboratively developed and worked to refine over the last several years. In this article, we describe the E-Corps program, our HLPs, and how these HLPs are used across the three courses.