Internal Funds Research Articles

The role of earnings quality in the impact of earnings management and leverage on firm value

Purpose: This study examines the impact of earnings management and leverage on firm value with earnings quality as an intervening variable. Research methodology Quantitative methods were used in this study, which employed path analysis to examine the relationships between variables. Samples were taken from state-owned enterprises in Indonesia, with a particular focus on those listed on the 2017-2021 BUMN 20 Index of the Indonesia Stock Exchange. Results: The results show that earnings quality mediates the relationship between leverage and firm value. Specifically, leveraging through earnings quality was found to maximize firm value, as profitable businesses prioritized internal financing because of their high rate of return. Limitations: This study was limited to the IDX BUMN 20 index between 2017 and 2021. Contribution: The findings suggest that management should consider leveraging to optimize firm value. In addition, it provides valuable insights into firm value, particularly for firms that rely heavily on internal financing. Novelty: This research is the first study to specifically focus on the IDX BUMN 20 index, covering both the periods before and during the Covid-19 pandemic.

THE EFFECT OF PROFITABILITY, ASSET GROWTH AND OPERATING LEVERAGE ON CAPITAL STRUCTURE WITH COMPANY SIZE AS A MODERATING VARIABLE

Capital structure plays an important role in maintaining the survival of the Company. The better the capital structure owned by the Company, the better the Company will be in financing the Company's operations, even more able to survive in the event of an economic shock. The purpose of this research is to obtain empirical evidence of the effect of Profitability, Asset Growth, and Operating Leverage on Capital Structure with Company Size as a moderating variable. This study uses purposive sampling as its sampling technique and uses primary consumer sector companies as research samples. The data used in this study comes from the Financial Statements of companies listed on the Indonesia Stock Exchange. Data processing in this study used the Smart PLS program. The results showed that the independent variables of Profitability, Asset Growth, Operating Leverage had no significant positive effect on the Company's Capital Structure. But when the profitability variable is moderated by company size, it produces a significant influence on the capital structure, while for the Asset Growth variable moderated by company size, although it has increased, it still does not significantly affect the Company's Capital Structure. From the result above, it can be concluded that the use of profitability is the key of all independent variables in influencing the capital structure. Companies that use internal funds will be better at financing the Company's operations, increasing assets, assessing the size of the company, namely utilizing the Company's retained earnings to increase the growth and survival of the Company.

The impact of borrowing concentration on innovation: When is one not just enough?

Using a survey dataset of small and medium-sized enterprises (SMEs) in Tanzania and Kenya, we find that nearly half of these SMEs concentrate their borrowings exclusively with a single bank. These SMEs rely heavily on internal financing, have limited access to external finance, and are less likely to introduce new or improved products, processes, or services in both local and international markets. Our findings provide valuable insights into the financing decisions of SMEs in developing markets and their impact on critical outcomes such as innovation. They also highlight the need for policy interventions to improve access to finance and diversify financing options to promote sustainable and inclusive economic growth.

Effect of Firm Size and Profitability on Long Term Debt of Firms Listed at the Nairobi Securities Exchange, Kenya

Organization expenses result from a company’s utilization of long-term debt in its capital structure. One can also characterize a firm’s size by looking at its assets. In order for a company to draw in investors, its worth increases with its size. The profitability of a business may be enhanced by including long-term obligations in its structure of capital since the interest paid on such debts is deduction for taxes. Therefore, this study aimed at examining the effect of firm size and profitability on long term debt of listed firms at the Nairobi Securities Exchange. The study was based on trade off theory and pecking order theory. Secondary data was obtained from the firms from 2007-2011. Panel data was used to analyze data observations. The result indicates that firm size had insignificant effect on long term debt of firms. Profitability had significant effect long term debt. The study recommends that larger firms should leverage their greater access to capital markets to secure long term debts financing at favorable terms, balancing the benefits of debt against potential risks. Firms also with high profitability should encourage internal financing sources to reduce reliance on external debt and minimize financial cost.

Unintended consequences of tax incentives on firms' human capital composition: Evidence from China

This paper investigates the unintended effects of tax incentives on firms' human capital composition. By exploring data on A-share listed firms from 2015 to 2020 and utilizing a quasi-experimental design, we examine the impact of the 2018 value-added tax (VAT) credit refund policy on the human capital composition of firms' workforce. We find that treated firms increased the ratio of R&D employees by 0.61% relative to control firms. The incentive effect is more pronounced for firms in modern service sectors, mature firms, non-state-owned firms, and firms located in eastern regions. The mechanism reveals that the VAT policy, by refunding tax credits to pilot firms, alleviated internal financing constraints and prompted firms to increase investments in fixed assets and R&D expenditures. This enhanced the firms' human capital structure. Our study provides a novel perspective on how tax incentives unintentionally affect firms' human capital composition while also providing insights into further refining China's VAT credit-refund system in the post-COVID era.

Funding Learning Health System Research: Challenges and Strategies.

A growing number of health systems are establishing learning health system (LHS) programs, where research focuses on rapidly improving the health system's internal operations and performance. The authors examine funding challenges facing such initiatives and identify strategies for managing tensions between reliance on external research funding and directly contributing to improvement and learning within the researchers' own system. Qualitative case studies of LHS research programs in 5 health systems were performed via 38 semistructured interviews (October 2019-April 2021) with 35 diverse respondents. Inductive and deductive rapid qualitative analysis supported interview, system-level, and cross-system summaries and analysis. External funding awards to LHS researchers facilitated some internal improvement and learning, scientific advancements, and the reputation of researchers and their systems, but reliance on external funding also challenged researchers' responsiveness to concerns of system leaders, managers, practitioners, and system needs. Gaps between external funding requirements and internally focused projects arose in objectives, practical applicability, audiences, timetables, routines, skill sets, and researchers' careers. To contribute more directly to system improvement, LHS researchers needed to collaborate with clinicians and other nonresearchers and pivot between long research studies and shorter, dynamic improvement, evaluation, and data analysis projects. With support from system executives, LHS program leaders employed several strategies to enhance researchers' internal contributions. They aligned funded-research topics with long-term system needs, obtained internal funding for implementing and sustaining practice change, and diversified funding sources. To foster LHS research contributions to internal system learning and improvement, LHS program leaders need to manage tensions between concentrating on externally funded research and fulfilling their mission of providing research-based services to their own system. Health system executives can support LHS programs by setting clear goals for them; appropriately staffing, budgeting, and incentivizing LHS researchers; and developing supportive, system-wide teamwork, skill development programs, and data infrastructures.

Financing sources, green investment, and environmental performance: Cross-country evidence

This article investigates the influence of financing sources and financial constraints on green investment, based on a study conducted with a sample of Eastern European SMEs from 2018 to 2020. We constructed a green investment proxy using principal component analysis, revealing two principal pillars: pure green investment and mixed green investment. Employing two-stage least squares regression analysis (2SLS) and instrumental probit (IV Probit), our results demonstrate that internal finance positively impacts green investment. Conversely, we find that leverage and financial constraints negatively correlate with green investment and environmental performance. The findings of this study provide compelling evidence that SMEs operating in the Eastern European region face significant financial constraints, impeding their ability to adopt responsible investments aimed at reducing their considerable environmental footprints. These results hold valuable implications for both managers and policymakers, emphasizing the importance of facilitating increased access to debt and devising green financial incentives to promote environmentally responsible investments among Eastern European SMEs, particularly during periods of conflicts.

Pengaruh Profitabilitas, Likuiditas, Struktur Aset, dan Pertumbuhan Penjualan Terhadap Struktur Modal pada Perusahaan Sektor Consumer Goods Industry yang Terdaftar di Bursa Efek Indonesia Tahun 2019-2022

This research aims to test and analyze the influence of profitability, liquidity, asset structure, and sales growth on capital structure in companies in the consumer goods industry sector. This type of research is quantitative research with a sample of companies in the consumer goods industry sector. The independent variables used in this research are profitability, liquidity, asset structure, and sales growth, while the dependent variable in this research is capital structure. The sample in this study was 32 companies using the purposive sampling technique. The data analysis method used is multiple regression analysis. Based on the results of research conducted with a sample of 32 companies, it can be concluded as follows: (1) The profitability variable has a significant positive influence on capital structure because the company is carrying out expansion which requires a lot of funds to encourage increased profits in the future. (2) The liquidity variable has a significant negative influence on capital structure because sector companies that have high liquidity means they can pay short-term debt, so they tend to reduce total debt, which ultimately will make the capital structure smaller. (3) The asset structure variable does not have an influence on the capital structure because most of the company's fixed assets are financed with the company's internal funds. An increase in fixed assets is not always followed by an increase in long-term debt. (4) The sales growth variable does not influence the capital structure because sales tend not to be supported by an efficient increase in the company's capital, resulting in operational costs that are too high

Does internal cash flow-external financing sensitivity react to economic policy uncertainty and geopolitical risk? Evidence from Saudi Arabia

PurposeThis study aims to investigate the influence of economic policy uncertainty (EPU) and geopolitical risk (GPR) on the relationship between internal cash flow and external financing in an emerging market, Saudi Arabia. It also examines the role of asset tangibility and financial crisis in establishing this relationship.Design/methodology/approachThe sample was taken from non-financial sector companies listed on the Saudi Stock Exchange between 2002 and 2019. The data were analyzed using panel data regression analysis, including ordinary least squares and fixed effects model. The author addresses potential endogeneity through the generalized method of moments.FindingsThis study found that both EPU and GPR reduce the sensitivity of external financing to internal cash flow. This implies that firms depend more on internally generated funds during periods of increased EPU and GPR. Besides, this study found that the influence of EPU and GPR on the sensitivity of external financing to internal cash flow is more (less) negative for more tangible firms (during the financial crisis period). This result implies that Saudi firms boasting a higher level of tangibility are more flexible when it comes to seeking external financing. However, the presence of uncertainty during the crisis period makes the external financing costly, and therefore, firms will be less likely to raise funds from external sources.Practical implicationsThis study has important implications for managers, policymakers and regulators. First, the paper findings provide insights for corporate decision-makers in helping them to focus on internal funds to finance their investment during uncertain times. Second, the findings help managers to understand the role of asset tangibility in raising external funding when firms face financial constraints due to uncertainty. Third, this study also helps corporates to focus on internal funds to finance their investment during the crisis period because EPU and GPR increase the cost of external finance. Finally, the results provide guidelines for policymakers and regulators to make appropriate policy measures to increase the easy availability of external finance during periods of increased EPU and GPR.Originality/valueThis paper is the first to shed light on the impact of internal funds on external financing while paying close attention to the role of EPU and GPR.

PHILIPPINES: DIASPORA AND HOMELAND CONFLICT. LOCATING THE MORO DIASPORA IN THE MINDANAO INSURGENCY

An ever-expanding body of literature suggests the possible link between diasporas and the exacerbation of civil wars in their home countries. One of the most notable findings on the link between diaspora and armed conflict is derived from a set of arguments known as the Greed and Grievances Thesis. According to the said framework, a higher diasporic support to a homeland conflict is positively correlated with a higher incidence of civil war intractability. Applying this framework to the data on external support to the Moro Islamic Liberation Front (MILF) insurgency from 1990–2008, the study notes that there is a lack of support from the Moro diaspora which forced the MILF to secure peace with the Philippine government. On the contrary, the increase in conflict activities during the insurgency can be qualitatively attributed to the economic and political support from hostile states and international terrorist networks that support the Moro insurgents against the Philippine government. The study concludes that there is an absence of substantial evidence on the role of the Moro diaspora in funding the insurgents due to other factors such as internal financing for the rebellion and the role of international actors in prolonging the Moro conflict. Keywords: Moro Muslims, diaspora, civil war, homeland conflict, the Philippines.

Sources of financing: Which ones are more effective in innovation–growth linkage?

The study assesses the impact of eight sources of financing (internal funds, bank loans, credit lines, trade credit, equity, grants, leasing and factoring) on innovation and firm growth. It provides evidence that not all external financing sources have the same impact on innovation and growth. Output additionality on turnover growth seems higher for equity financing. In contrast, employment growth appears to be more associated with financing sources linked to increased fixed assets or the solving of liquidity problems. The number of financing instruments used together also seems to matter, revealing the existence of complementarities.

Chief executive officer duality and the relationship between firm performance and dividend payouts

Using a panel of data on manufacturing firms listed on the Chinese stock exchange over the period 2017 to 2022, this research paper empirically investigates the relationship between firm performance and dividend payouts. Unique features of Chinese financial markets allow us to contribute to the literature on how corporate governance, in particular concentrated managerial power and state ownership, affects agency costs and therefore the relationship between firm performance and dividend payouts (Burdeos, 2021; Debnath et al., 2022; Vicente, 2020). The main findings of this study are as follows. Firms follow the pecking order theory when funding their capital needs: firms wait for dividends, preferring to take advantage of profitable investment opportunities when firm performance is good. This negative relationship between firm performance and dividend payout is even stronger at firms with highly concentrated managerial power as indicated by chief executive officer (CEO) duality. However, state-owned enterprises, which face a double principal–agent problem that cannot be fully addressed by CEO duality, demonstrate a weaker negative relationship between firm performance and dividend payouts. We find evidence that the negative relationship between firm performance and dividend payouts strengthened during the COVID-19 pandemic: firms were even more likely during to prefer internal financing during the pandemic years.

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

Government Health Expenditure and Policy for Public Health Outcomes: A Systematic Literature Review

INTRODUCTION: The level of good governance, the efficiency of the healthcare system, and socioeconomic vulnerabilities all affect public health outcomes. Despite potential gains in terms of health outcomes, public healthcare investment has been extremely low in low-income countries. By improving the consolidation of healthcare system performance, this study helps the government and policymakers improve the quality of life in developing countries. MATERIALS AND METHODS: This study aims to assess the government health expenditure and policy for public health outcomes. The research is based on a review of empirical studies and reports. The PubMed search engine was used to locate research publications on government health expenditure and policy for public health outcomes. The PubMed Open Database was applied to find the publications using the keywords “health expenditure” and “health policy”. All papers that were published from January 1, 2013, to January 31, 2024, were checked for the study. 121 research papers were discovered during the initial inquiry; five duplicate articles were eliminated, and 84 were irrelevant to the study. Finally, 25 research papers and reports were selected for evaluation with the study titled “ Government Health Expenditure and Policy for Public Health Outcomes: A Systematic Literature Review”. RESULTS: Raising the nation’s social health insurance (SHI) coverage does not guarantee universal health care (UHC) or improved financial security. Extremely few people in poverty have health insurance and attempts to give them coverage through exemptions and waivers have not had the intended effect. To prevent families from being ruined due to family health problems, an innovative insurance plan needs to be created. Supply-side strategies, or health infrastructure, are needed to expand access to high-quality medical treatment. CONCLUSIONS: The quality of life in developing nations is directly improved by the consolidation of healthcare system performance, suggesting that policymakers should step in and offer financial and political help through a variety of policy options. Curative and preventive care are provided by health systems, which can greatly enhance people’s health. Developing a robust health finance system has been a primary objective for numerous countries worldwide, as increased public spending on healthcare leads to better health outcomes and more effective healthcare services. Financial limitations are one of the largest barriers to obtaining high-quality healthcare. A national health insurance program increased public financing for healthcare, and the construction of community-based clinics in rural areas could all contribute to the nation’s transition to universal health care. Policymakers ought to pay greater attention to the quality of care since it significantly affects the amount of money that patients must pay out-of-pocket. Governments must develop new internal financing sources and devise strategies to refocus on health promotion and prevention.

Determinants of internal financing: small and medium enterprises in Pakistan

Purpose- Internal financing is an indicator of self-reliance, growth, and survival of a firm without help from external sources. It assesses the growth and survival of a firm without raising capital in equity or debt markets. This study identifies the determinants of internal financing. Methodology- The study is based on six years of data from 398 companies in Pakistan, while panel least square (PLS) techniques have been applied to estimate the parameters. The conclusions have been derived through 12 mathematical equations Findings- This study provides a device to assess the appropriate level of internal equities. From an investment policy point of view, lower return on investment discourages investment in small and medium enterprises. Conclusion- The lower return on investment discourages investors from investing in small and medium enterprises. To compensate this effect, the study suggests the intervention by monetary and fiscal policy for the survival of small and medium enterprises (SMEs). Keywords: Dividend, intangible assets, leverage financing, Pakistan, SMEs. JEL Codes: G32, G35, M41

The Impact of Stock Market Listing on the Financial Performance of Companies within the Rwanda Stock Exchange (RSE)

The study, titled Stock Market Listing and Company Performance in Rwanda aimed to explore the connection between a company's stock market listing and its performance. Examined within were firms listed in the Rwanda Stock Exchange, specifically Bralirwa, KCB, and BK. Utilizing a quantitative research design, the study relied solely on secondary data, primarily the financial statements of the three companies that operated in Rwanda between 2008 and 2015. The scope included BK, Bralirwa, and KCB. Data gathered from 2010 to 2012 was structured in tables, with financial ratios computed and subsequent analysis conducted using SPSS to ascertain the relationship between stock listing and financial performance. The results demonstrated a positive yet statistically insignificant relationship between stock listing and the financial performance of the listed firms. Notably, the correlation between financial leverage and financial performance lacked statistical significance (R = 0.303, P > 0.01) and showed a negative correlation with market ratio (0.582, P > 0.01). Recommendations included a call for improved liquidity management, especially in working capital for firms like BK, to address the impact on liquidity levels while maintaining financial stability. Stakeholders were encouraged to recognize the linkage between stock listing and financial performance and adopt suitable measures to assess and analyze the financial status of companies. Moreover, the study revealed that companies in Rwanda tend to rely more on short-term debt than long-term debt, potentially due to the underdeveloped bonds market in the country. Liquidity ratios exhibited a negative relationship with financial leverage, indicating that highly profitable and well-performing companies in Rwanda tend to have less debt and rely more on internal financing sources, aligning with the pecking order theory. Furthermore, the study emphasized considering the market value of capital structure in evaluating stock listing, given its stronger connection to financial performance compared to the book value. Keywords: Stock Market, Listing, Performance of Companies, Rwanda Stock Exchange, Liquidity.

The Relationship Of Capital Structure To Profitability: Eviden Of Power Companies In G-20 Countries


 
 
 Net Zero Emissions (NZE) have become a major concern for many countries because of their impact on global business and corporate capital structures, especially in the electricity sector. The purpose of this study was to examine the effect of capital structure on profitability. The object of this study is companies in the electricity sector in G-20 countries for 5 (five) years from 2018-2022. The method used in this study was linear regression panel data with observation companies as many as 267 observation data totaling 1,335. The results of this study show that DAR has a negative and significant influence on ROA and ROE in electricity sector companies (electric utilities) in G-20 countries. The findings of this study indicate that companies are better off relying on internal funding first and if the company needs additional funds, it can use the option of issuing new shares.
 
 

DETERMINAN STRUKTUR MODAL: ANALISIS SEBELUM DAN PADA MASA COVID-19

Companies must be able to combine their capital structure through internal and external funding to maximize company value while minimizing costs. This research examines the factors of ownership structure, asset structure, and liquidity on capital structure and differences in influence before and during the Covid-19 pandemic. This research uses a quantitative design with multiple linear regression analysis. Testing was carried out on manufacturing companies listed on the Indonesia Stock Exchange for the 2018-2021 period with a sample of 447 data with a distribution of 228 data for 2018-2019 and 219 data for 2020-2021. The study's results proved that institutional ownership and managerial ownership did not affect capital structure, capital structure was negatively affected by asset structure, and liquidity was negatively affected. No differences in ownership, asset structure, or liquidity were found before and during the Covid-19 pandemic. The results of this research provide relevant theoretical contributions to agency theory, pecking order theory, and relevant trade-off theory.

Manufacturer’s Green Financing and CER Decisions under the Carbon Tax Policy and Capital Constraints

This study constructs a two-echelon low-carbon supply chain consisting of a single manufacturer and a retailer. The manufacturer’s initial capital is zero. The study analyzes three financing modes of the manufacturer by using the Stackelberg game model: external financing (the EF mode), internal financing (the IF mode), and trade credit financing (the TC mode). We found that the IF mode is superior to the EF mode while inferior to the TC mode regarding carbon emission reduction (CER), market demand, and the manufacturer’s profit. Additionally, the IF mode is superior to the EF mode regarding the retailer and supply chain’s profits and special to the TC mode only when the loan and deposit interest rate meet the specific conditions. The best financing mode for the manufacturer is the TC mode, but he needs to give some compensation to the retailer in order to make the retailer cooperate with him. The impact of carbon tax rate changes on the equilibrium solutions in the three financing modes is not only related to the change range of the carbon tax rate itself but also closely related to the initial carbon emissions. A high carbon tax rate can help stimulate the cleaner manufacturer to reduce carbon emissions, but a moderate carbon tax rate is more applicable to the polluting manufacturer. A numerical example is given to demonstrate some of the conclusions. Finally, the study provides managerial insights based on the analytical results.

Analisis Pengaruh Return On Equity Dan Net Profit Margin Terhadap Return Saham

The profitability ratio is used as a benchmark in determining stock returns, because the profitability ratio is a ratio that measures how efficiently a company uses its assets and manages its operations. The higher the profit generated, the higher the stock return that investors will get. Included in this ratio are ROE (Return on Equity) and NPM (Net Profit Margin). The design of this research is a Literature Review or literature review. ROE is often referred to as profitability of own capital. This amount is obtained by dividing net profit after tax by total capital. A high ROE number shows the industry's ability to generate profits for shareholders. On the other hand, a high level of profitability will cause less external funds to be used. Companies with high profitability will have large internal funds. An increase in ROE increases the company's sales value, which has an impact on share prices. These two factors have a positive influence on stock returns, which means companies with high ROE and net profit margin tend to have higher stock returns. Therefore, investors can consider ROE and net profit margin as indicators of company performance that can influence stock returns when choosing investments.