Higher Cash Flow Research Articles

Kebijakan Cash Holding Pada Perusahaan Sektor Consumer Cyclicals di Indonesia

This research aims to determine the effect of cash flow, dividends, market to book ratio, net working capital, leverage and Z-score on cash holding in consumer cyclicals sector companies listed on the Indonesia Stock Exchange for the 2018-2022 period. The type of data used is quantitative data sourced from secondary data. The population is consumer cyclical sector companies listed on the Indonesia Stock Exchange from 2018 to 2022. The sampling technique used purposive sampling and 23 companies were obtained as samples. The research results show that cash flow, market to book ratio, net working capital have a significant and positive effect on cash holding. High cash flow indicates that cash inflow is greater than cash outflow, thus allowing the company to hold cash and use it to finance its operational activities. The market to book ratio indicates investment opportunities for the company, opens up easy access to capital markets and allows for easy acquisition of additional funds. Excess funds saved by the company will increase cash holdings. An increase in net working capital indicates an increase in cash balances because companies with high liquidity will generally hold large amounts of cash. On the other hand, the Z-score shows a significant and negative influence on cash holding. A high Z-score value indicates that the company is in a safe zone and does not need to hold a lot of cash because its financial condition is stable. Meanwhile, dividends and leverage do not show a significant influence on cash holding.

Geopolitical conflict and firm bankruptcy risk

This study examines the impact of geopolitical risk on corporate bankruptcy. We utilize a global dataset of 36,802 firms from 42 countries covering 2004-2022. Our baseline result indicates that geopolitical risk increases firm bankruptcy risk. Our results remain robust after controlling for endogeneity using 2SLS, propensity score, and entropy balancing techniques, as well as using alternative proxies. Our analysis shows that high cash flow and strong creditor rights help mitigate bankruptcy risk, while high leverage and aggressive earnings management stimulates it. Our findings provide insights for policymakers and industry practitioners to formulate effective strategies to mitigate bankruptcy risk in globalization.

Aqueous extracts of composted oil refinery sludge and their possible environmental impacts

ABSTRACT Oil refinery sludge (ORS) management is a global concern, yet information on its low-cost biotransformation possibility is fairly limited. We present a novel approach for ORS mitigation by Eisenia fetida and Eudrilus eugeniae and aerobic composting (AC) in producing clean aqueous extracts (compost teas). Detailed physicochemical characterization, phytotoxicity assays, economic feasibility comparisons, and mathematical equation-based environmental and human health hazard prediction studies were done for all the earthworm and non-earthworm processed compost teas. The E. eugeniae-compost tea reduced Cr, Pb, Cu, Cd, and Zn contents by 52.7, 61.2, 41.8, 80, and 93.8%, respectively. The earthworm-sourced teas showed lower ecological risk (<300) than their aerobic counterparts. Seed germination in Pisum sativum and Cicer arietinum was 2–2.5 folds higher with vermi-derived tea application. Economic assessments illustrated the superiority of E. eugeniae-based biotransformation with higher cash flow and a lower payback time of 1.53 years. The mathematical predictions on human health showed no alarming status for any of the vermi/aerobic compost teas. Overall results implied that vermicomposting is safer and more beneficial than AC in the ORS bioconversion. However, this study warrants further research in exploring the efficiency of other earthworm species, feedstock selection, or seasonal variability in ORS management.

Why companies have low debt? An empirical evidence in Korea

The aim of this study is to examine the reasons why companies have been borrowing less, which has become increasingly popular recently. The study uses the method developed by Agrawal and Nagarajan (1990) [13] to select unlevered and levered companies for comparison to identify the causes of low leverage. The results of empirical analysis indicate that first, companies with low debt levels are relatively profitable, have high internal reserves, and possess future growth opportunities. Second, unlevered companies exhibit higher economic value compared to levered companies. Debt does not improve company value through low cost of capital or higher cash flow via tax shield. Third, family ownership tends to prefer low debt levels. Finally, unlevered companies have higher cash holding compared to levered companies, and this trend is maintained over long period of time. The preference for higher cash among unlevered companies has a historical basis. The companies are maintaining low debt levels for future growth opportunities and their management preference for high level of cash has remained consistent over time.

Mitigating Underinvestment through Accounting Conservatism: A Comparative Study of Family and Non-Family Firms in Taiwan

This study examines the role of accounting conservatism in mitigating underinvestment due to internal cash flow volatility in Taiwan-listed and OTC companies from 2013 to 2022, comparing family and non-family firms. Utilizing regression analysis, we assess how accounting conservatism influences investment decisions under varying conditions of cash flow stability. Our findings reveal that accounting conservatism significantly alleviates underinvestment across all sampled firms, particularly in family firms where its impact becomes pronounced under high cash flow volatility conditions. In contrast, conservatism does not significantly affect investment decisions in stable cash flow scenarios. Additionally, the study finds that accounting conservatism can reduce capital costs under high cash flow volatility, thereby promoting investment. These insights provide a new understanding of the function of accounting conservatism across different firm types and offer practical guidance for financial decision-making.

The market value of cash holdings from related‐party sales: The role of source of cash flows

AbstractThis paper finds that investors evaluate cash holdings differently based on the source of cash flows. Using cash flows from related‐party sales as a proxy for diverse sources, we find that shareholders discount the value of cash holdings for firms with higher cash flows from related‐party sales. We find that firms use related‐party sales cash flows differently; cash flows from related‐party sales are more likely to be retained as internal cash reserves or distributed as dividends, rather than utilised for necessary investments. We further document a negative valuation of investments for firms with more related‐party sales.

Cash Flow Sensitivity Analysis of Energy Companies

If financial markets are efficient, companies can easily access finance. However, due to market frictions in financial markets, it is often not easy to find suitable financing sources for investments. As a result of the market frictions, the growth of national economies slows down. In this study, this problem will be addressed for energy companies. In other words, we examine whether energy companies are faced with financial constraints using the data of energy companies in 13 selected countries between the years 2010-2021. The results show that cash flows created by energy companies in 7 countries are effective in financing their investments. High cash flows and increased investments resulting from fluctuations in energy prices may also indicate that companies exhibit excessive investment behavior due to agency problems. On the other hand, all stakeholders need to make timely investments in the energy sector compared to other industries to support energy policies and increase social welfare.

Effect of Working Capital, Debt Maturity, Sales, and Tangibility on Investment Efficiency

The research objective is to analyze variables such as working capital, debt maturity, sales and tangibility that affect investment efficiency. Investment is the activity of placing funds in one or more types of assets for a certain period to earn income. Factors that reflect company performance are the financial statements presented in the annual report. Underinvestment occurs when an investment company requires the use of large amounts of debt. Companies with overinvestment are companies that are in the mature stage with slow growth rates, and high cash flow. In this study the approach used is using quantitative methods. Then analyzed partial and multiple regression. The data used is secondary data. The independent variables used are working capital, debt maturity, sales, and tangibility. The dependent variable used is investment efficiency. The targeted output is to analyze whether the variables of working capital, debt maturity, sales and tangibility affect investment efficiency, so that with this research it is hoped that investment can be efficient.

The The Role of Growth in Moderating the Relationship of Intellectual Capital to Firm Values

This study examines the moderating effect of growth on the relationship between intellectual capital and firm value. The population in this study is made up of manufacturing companies in the consumer goods sector that are listed on the Indonesia Stock Exchange in the 2017–2020 period. The determination of the sample using the purposive sampling method yielded a sample of 37 companies. The analytical method used is moderated regression analysis (MRA). The study results reveal that intellectual capital has a significant positive effect on firm value. Furthermore, growth strengthens the effect of positive intellectual capital on firm value. With growth, it can indicate the company's progress through an increase in assets, one of which is intellectual capital that has the potential to generate high cash flows in the future, thereby increasing the value of the company.

Did COVID-19 pandemic affect firms’ operating cycle?

ABSTRACT This paper investigates the impact of COVID-19-related disruptions on firms’ operating cycles. Demand shocks and supply chain disruptions can have unexpected outcomes on operating cycles, especially on receivables and inventories. We find that the COVID-19 pandemic caused a significant increase in firms’ operating cycle lengths. Further, we separate the operating cycle into its components and find that firms experienced an increase in both receivables and inventories; this implies longer times to collect receivables and slower-moving inventories. Furthermore, we find that firms with more resources – larger firms and higher cash flows – experienced smaller increases in operating cycles. Moreover, while firms experienced a sharp drop in profitability after COVID-19, an increase in operating cycle exacerbated the drop in profitability even more. We contribute to the literature by showing how the aftermath of COVID-19 impacted firms’ operating cycles.

The influence of cash flow volatility on firm use of debt of different maturities or zero-debt: International evidence

The empirical international literature on the relationship between firm cash flow volatility and debt maturity and zero-debt policy provides contradictory evidence. Using a large international sample, we find that cash flow volatility is positively associated with our measure of debt maturity at less than the 1% level of significance. Relative to unconditional means of debt maturity, a one standard deviation increase in cash flow volatility implies a 2.57% decrease in the probability of firms using long-term debt, a 5.83% increase in the probability of firms using only short-term debt and an 11.8% increase in the probability of firms using zero-debt. Overall, our results support the screening and the trade-off theories that firms with high cash flow volatility are screened out of the long-term debt market.

Stay ahead: CEO education and entry timing within industry merger waves

PurposeThis study aims to explore the effect of chief executive officer education on firms’ action timing and acquisition performance in industry merger waves. In addition, this study investigated the moderating influence of CEO duality and firm cash flow on the relationship between education and entry timing.Design/methodology/approachFollowing the methodology for determining merger waves in previous studies, the authors identified 16 industry merger waves of Chinese listed firms from 2008 to 2019. Multiple linear regression was employed to examine the hypotheses.FindingsThe results showed that higher CEO education was associated with early participation in merger waves. CEO duality negatively moderated the education-entry timing relation. The effect of CEO education on entry timing was more pronounced when firms had higher cash flow. Moreover, more educated CEOs materially enhanced acquisition performance in merger waves.Originality/valueEntry timing in industry merger waves has important implications, as early movers establish competitive advantages and achieve higher acquisition performance. However, the managerial characteristics determining entry timing have not received adequate attention. Meanwhile, studies examining the effect of CEO education on acquisitions are limited. This study explored the effect of CEO education on firms’ entry timing and acquisition performance in merger waves, thereby contributing to the literature on merger waves and managerial characteristics. This study’s findings regarding the moderators of the education-entry timing relation enrich the literature on corporate governance and agency theory.

Precautionary versus Signalling Motive of Share Repurchases: Evidence from Policy Uncertainty and the COVID‐19 Crisis

AbstractUsing policy‐related uncertainty as a shock to firms’ internal and external financing frictions, we find significantly lower repurchase likelihoods, short‐term market reactions, and post‐announcement completion rates of open market share repurchases during periods of high policy uncertainty. Firms are more likely to switch from a high‐ to a low‐commitment repurchase technique when policy uncertainty is high. In contrast, for firms that are significantly undervalued ex ante, higher policy uncertainty leads to more repurchase activities. In addition, we show that the COVID‐19 crisis is associated with a lower repurchase likelihood for financially constrained firms or those with high cash flow volatility, while undervalued firms repurchased more shares during the pandemic period. Our results are robust after controlling for potential sources of endogeneity and conducting a battery of robustness tests. Collectively, our evidence suggests that the relationship between uncertainty and share repurchases is conditional on institutional contexts. Firms’ level of financial flexibility, their demand for signalling, and the credibility and magnitude of repurchase signals all significantly affect their precautionary and signalling motives.

How client criminalisation under end-demand sex work laws shapes the occupational health and safety of sex workers in Metro Vancouver, Canada: a qualitative study

ObjectivesIn 2014, Canada implemented end-demand sex work legislation that criminalises clients and third parties (eg, managers, security personnel, etc) involved in sex work. The focus of this analysis is to...

Determinants of becoming an M&A acquirer or target: evidence from the US insurance industry

PurposeThis paper explores which fundamental aspects of US insurance firms are significant factors in determining whether a firm will be a target or acquirer firm.Design/methodology/approachBy focusing on 251 mergers and acquisitions (M&A) deals (119 target firms and 132 acquirer firms) over the period between 1990 and 2019, multinomial logistic regression results identify the determinants associated with becoming targets or acquirers.FindingsUS insurance firms are more likely to become targets if they are smaller, have lower cash holdings, are non-life, and do not have environmental, social and governance (ESG) scores. Insurance firms are more likely to be acquirers if they have higher profitability, higher cash flow and higher intangibles, and if they are non-life and do not have ESG scores. Moreover, the likelihood of becoming an acquirer decreases in times of global financial crises (GFCs) as compared to non-GFC times.Originality/valueThis paper is the first to utilize multi-period multinomial logistic regression analysis to investigate the determinants of selection decisions of M&A targets and acquirers in the US insurance industry.

Tunneling through trademarks

This study documents how trademarks can be used to benefit controlling families at the expense of outside minority shareholders. Using a sample of Korean business group firms from 2017 to 2020, we find evidence to support this. First, firms are more likely to be licensor firms if the family holds higher cash flow rights. Second, we find that the association between a firm's sales and the likelihood of it being a licensee firm (or the amount of trademark royalty payments) gets stronger when the family's cash flow rights in the firm fall further below those in the licensor firm (i.e., higher cash flow rights differentials). Third, we find that the negative association between a firm's trademark royalty payments and shareholder distribution (i.e., dividend payouts and stock repurchases) gets stronger when family's cash flow rights differentials widen. Fourth, we find that the share prices of licensee firms react negatively on the day when the full disclosure of trademark royalty payments became mandatory, and that this tendency is stronger in firms with higher trademark royalty payments and higher cash flow rights differentials. Finally, these results manifest more significantly in pure holding company groups, where alternative tunneling channels are limited.

Operating room relay strategy for turnover time improvement: a quality improvement project

IntroductionOperating room (OR) management plays a pivotal role in the healthcare system due to the high cash flow it yields. Enhancing communication in the OR, which is the common root...

The Effect of Cash Turnover and Customer Growth on Profitability at PT Bank BRI Branch Unit Sawang Lhokseumawe

This study aims to determine the extent of the influence of cash turnover and growth in the number of customers on profitability at PT. Bank BRI (Persero) Lhokseumawe branch, Sawang Cash Office, North Aceh. Based on the results of the study illustrates that the increase in cash turnover and the number of customers contributed to increasing the profitability of PT. Bank BRI (Persero) Lhokseumawe branch office, Sawang unit, North Aceh Regency. With high cash flow turnover, banks can channel the proceeds from revolving funds to other productive sectors quickly and accurately, of course with a fluctuating profit level. Thus PT. Bank BRI (Persero) Lhokseumawe branch office, Sawang cash office have contributed to increased economic growth in Aceh in general, North Aceh, in this case Sawang District, North Aceh Regency in particular. This can be seen from the growth of various products and community businesses as well as the use of natural resources as superior products from Sawang District, North Aceh Regency.

CEO power and the likelihood of paying dividends: Effect of profitability and cash flow volatility

This study empirically investigates the relation between CEO power and the likelihood of dividend payouts. It argues that powerful CEOs pay dividends to establish reputation in capital markets to raise external financing at favorable terms. The net expected value of such reputation, however, depends on the likelihood of external financing, which is positively related to low profitability and high cash flow volatility. Empirical results show that powerful CEOs are more likely to pay and increase dividends when their firms face low profitability and high cash flow volatility.

Brand equity and corporate debt structure

AbstractWe use the firm's stock of trademarks and their ages to compute proxies for brand equity. We find that firms with more brand equity have lower equity and asset volatility and higher cash flows. Although suggestive of greater debt capacity, we find that firms with high brand equity use less debt. Further, brand equity has no influence on debt maturity. We provide evidence that the relation between brand equity and leverage is causal, using the enactment of the Federal Trademark Dilution Act in 1996, which exogenously increased the value of famous brands and significantly decreased the leverage ratio of firms with famous brands. This negative effect on leverage is weaker for firms with high business risk and low information asymmetry, and stronger for firms with collateralized trademarks. We argue that the negative effect of brand equity on leverage is more consistent with a pecking order mechanism than with a limited contractability mechanism.