Debt Levels Research Articles

Three Industry Characteristics Affecting Capital Structure: Review of Literature

This paper summarizes the literature that studies the impact of industry characteristics on capital structure, and focuses on three factors, namely, growth opportunities, tangibility and firm size. We find that most literature supports the following conclusions: growth opportunities are negatively correlated with leverage, tangible assets are positively correlated with leverage, and enterprise size is positively correlated with debt level. At the same time, we find some limitations in previous studies. For example, scholars generally use linear regression as research method, and focus more on developed countries rather than on developing countries. According to these current situations, we give several suggestions for future research directions.

A method of water resources accounting based on deep clustering and attention mechanism under the background of integration of public health data and environmental economy.

Water resource accounting constitutes a fundamental approach for implementing sophisticated management of basin water resources. The quality of water plays a pivotal role in determining the liabilities associated with these resources. Evaluating the quality of water facilitates the computation of water resource liabilities during the accounting process. Traditional accounting methods rely on manual sorting and data analysis, which necessitate significant human effort. In order to address this issue, we leverage the remarkable feature extraction capabilities of convolutional operations to construct neural networks. Moreover, we introduce the self-attention mechanism module to propose an unsupervised deep clustering method. This method offers assistance in accounting tasks by automatically classifying the debt levels of water resources in distinct regions, thereby facilitating comprehensive water resource accounting. The methodology presented in this article underwent verification using three datasets: the United States Postal Service (USPS), Heterogeneity Human Activity Recognition (HHAR), and Association for Computing Machinery (ACM). The evaluation of Accuracy rate (ACC), Normalized Mutual Information (NMI), and Adjusted Rand Index (ARI) metrics yielded favorable results, surpassing those of K-means clustering, hierarchical clustering, and Density-based constraint extension (DCE). Specifically, the mean values of the evaluation metrics across the three datasets were 0.8474, 0.7582, and 0.7295, respectively.

The ‘Second U-Turn’: Domestic Politics and Foreign Economic Policy Choice in Ghana

Abstract After months of grandstanding amidst an economic crisis that has seen prices of basic goods skyrocketed, growing unsustainable public debt levels and the value of the local currency plummeting, the Government of Ghana made a U-turn on its earlier decision of not seeking an IMF bailout and announced on 1st July 2022, the intention to seek an IMF bailout. This paper tries to understand the initial government resistance to an IMF bailout. Using the qualitative research approach and analyzing speeches of political actors, the study makes the case that domestic politics was the main reason for the governments initial resistance to engaging the IMF. An IMF programme would be politically self-defeating for the government and provide a political tool for the opposition in the 2024 election since a similar deal in 2015 was portrayed as evidence of government failure. On the evidence of the current IMF bailout decision, the paper concludes that governments have political interest in making foreign economic policy choices in Ghana. Choices that may not enhance electoral chances are likely to be avoided in favour of those that enhance it. To derive the best outcome from foreign economic policy choices requires building national consensus, which would help to avoid adverse outcomes that may be occasioned by policy choices that enhance a political actor’s electoral chances at the expense of the long-term interest of the state.

Dynamiek van naoorlogse private schuldgroei in Nederland

The level of private debt in the Netherlands is exceptional in both historical and comparative terms. High debt ratios inhibit economic growth, induce financial fragility and lead to deeper and more tenacious recessions. Facilitated by fiat money creation, private debt in the modern economy mainly consists of bank credit. Internationally shared causes of the rise in bank money are the decline in cash payments, tax deductions and a narrowed focus in monetary policy. In the Dutch case, liberalized mortgages, the side effects of the funded pension system and the strong concentration of the banking system add to these. It is the confluence of these factors that has made Dutch debt growth since the 1970s exceptional. Some of these, notably the deduction of interest on mortgages and financial deregulation, have dominated the debate on this subject and hence are part of public perception. However, this does not apply to other mechanisms mentioned, such as the role of bank money and that of bank concentration. As a result, policy analysis of the debt problem thus far has been selective. The lessons of Dutch financial development are of importance to the realization of the European banking union and to monetary policy and taxation in the euro area. Our analysis demonstrates the usefulness of applied history.

Zero leverage and dividend policy

This study investigates zero leverage firms and their choice to pay dividends among New Zealand (NZ) listed firms for the period 2007 – 2021. Overall our findings indicate that after allowing for financial constraints limiting firm debt capacity and firm preference for financial flexibility, firm priority to pay dividends affects firm debt levels. Additional analysis shows that dividend paying firms with growth opportunities will increase short-term debt to maintain dividend payments.

Alleviating Medical Debt in the United States.

Alleviating Medical Debt in the United States.

Debt financing of SMEs: The certification role of R&D Subsidies

This study investigates the (unintended) effects of public subsidies for research and development (R&D) on the debt financing of small and medium-sized enterprises (SMEs) by examining a public program implemented in the Marche region of Italy during the 2005–2012 period. The study combines matching methods with a difference-in-differences estimator to examine whether receiving public subsidies affects total indebtedness and the structure and cost of debt of awarded firms. The results indicate that R&D subsidies are associated with a modification of firm debt structure (especially for young, high-tech, and risky firms) in favor of long-term maturities and help firms limit the average cost of debt. Subsidies also foster the use of bank financing and reduce trade debt, but they do not affect the overall level of debt. Taken together, these findings suggest that the public funding of SME innovation projects plays a certification role in the access to external financial resources for firms receiving subsidies.

Global Transmission of Fed Hikes: The Role of Policy Credibility and Balance Sheets

ABSTRACT: Contrary to historical episodes, the 2022–2023 tightening of US monetary policy has not yet triggered financial crisis in emerging markets. Why is this time different? To answer this question, we analyze the current situation through the lens of historical evidence. In emerging markets, the financial channel–based transmission of US policy historically led to more adverse outcomes compared to advanced economies, where the trade channel fails to smooth out these negative effects. When the Federal Reserve increases interest rates, global investors tend to shed risky assets in response to the tightening global financial conditions, affecting emerging markets more severely due to their lower credit ratings and higher risk profiles. This time around, the escape from emerging market assets and the increase in risk spreads have been limited. We document that the historical experience of higher risk spreads and capital outflows can be largely explained by the lack of credible monetary policies and dollar-denominated debt. The improvement in monetary policy frameworks combined with reduced levels of dollar-denominated debt have helped emerging markets weather the recent Federal Reserve hikes.

Positive money: progressive solution or Trojan Horse?

Abstract Andrew Jackson and Ben Dyson made in 2012 a proposal for banking sector reform, which aimed at eliminating the ability of commercial banks to create money. They claim that their proposal would return the monopoly of money creation to the state, would reduce the debt level in society, and in turn would end the need for expensive bail-outs of too-big-to-fail banks by taxpayers. This paper will discuss the theory-external post-Keynesian criticism of the reform proposal as well as a theory-internal criticism, which focusses on the impact of this proposal for the banks’ customers, the commercial banks and the taxpayers. The analysis will show that Jackson and Dyson’s proposal is not a progressive solution but a Trojan Horse.

Impact of economic policy uncertainty on financial flexibility before and during the COVID-19 pandemic

PurposeThis study examines the influence of economic policy uncertainty on financial flexibility before and during the coronavirus disease 2019 (COVID-19) pandemic. Few prior studies have examined this association specifically for debt and cash flexibility.Design/methodology/approachUsing quarterly data from 2016 to 2022, 1014 observations were collected from the S&P Capital IQ database for listed tourism companies in India. The pre-pandemic period is defined as 2016 Q1 to 2020 Q1, whereas the pandemic period is from 2020 Q2 to 2022 Q3. The data are analysed using ordinary least squares, probit, logit and difference-in-difference (DID) estimation.FindingsThe evidence of this study suggests a negative association of economic policy uncertainty with debt flexibility during the COVID-19 pandemic. The findings also suggest that COVID-19 induced economic policy uncertainty results in high cash flexibility. This meets the expectations for the crisis period, as firms are likely to hold more cash and less debt capacity to manage their operations. The results are robust for various estimation techniques.Research limitations/implicationsThis study is limited to one emerging country and is specific to one non-financial sector. Future research could extend to more emerging countries and include other non-financial sector companies.Practical implicationsThe findings of this research are useful for tourism sector managers as they can effectively manage their cash and debt flexibility during crisis periods. They will need to prioritise cash flexibility over debt flexibility to manage operations effectively. Policymakers need to provide clear and stable economic policies to help firms manage their debt levels during a crisis.Originality/valueTo the best of the author's knowledge, no existing studies have investigated the influence of economic policy uncertainty on the financial flexibility of tourism companies before and during the COVID-19 pandemic. Furthermore, this study establishes a novel set of critical determinants, such as economic policy uncertainty.

THE EFFECT OF DEBT LEVELS, CASH FLOW VOLATILITY, AND AMOUNT OF ACCRUALS ON PROFIT PERSISTENCE IN COMPANIES MANUFACTURING SUB-SECTORS OF VARIOUS INDUSTRIES LISTED ON INDONESIA STOCK EXCHANGE YEAR 2017-2021

This research was conducted to see how much influence the Level of Debt, Cash Flow Volatility, and Amount of Accruals have on Profit Persistence in Manufacturing Companies in the Various Industries Sub Sector in 2017-2021. The population in this study is the 2017-2021 Financial Statements for 9 Manufacturing Companies in Various Industrial Sub-Sectors, so the total sample is 45. This type of research uses a descriptive quantitative method with secondary data so that it can describe each variable in this study. The data will be processed using Statistical Product and Service Solution (SPSS) Version 25. The data analysis technique in this study uses descriptive analysis test, classic assumption test, coefficient of determination test, multiple linear regression analysis test, and uses a partial hypothesis test (t test ) and simultaneous test (F test) with a significance level of 0.05 . Based on the results of data analysis tests that have partially Debt Level has a negative and significant effect on Profit Persistence and Cash Flow Volatility has a negative but not significant effect, while the Accrual Amount has a positive and significant effect on Earnings Persistence., and the results of the study simultaneously stated that all independent variables significant effect on Profit Persistence simultaneously with the test results of the coefficient of determination showing an effect of 33.5%.

Resilience to extreme weather events and local financial structure of prefecture-level cities in China

We study the local economic impacts of extreme weather events and the role of local finance in economic resilience. We use data on the physical intensities of extreme wind and precipitation events for 284 prefecture-level cities in China between 2004 and 2013. We estimate impulse response functions using a bias-corrected method of moments estimator to capture the dynamic responses of affected cities up to 5 years after such events. We find that extreme precipitation events depress the growth of local GDP per capita for multiple years, while the negative effects of storms vanish after the first year. We then use this model to measure the economic resilience of cities to extreme weather events. Regressions of economic resilience on indicators of the local financial structure suggest that cities with higher levels of debt are less resilient. Moreover, the presence of state-owned commercial banks appears to be instrumental to regional economic resilience. As extreme weather events are expected to become more frequent and severe due to climate change, our results inform the emerging debate about regional economic resilience to weather-related shocks.

Achieving debt reduction through fiscal and macroeconomic stability in Zambia

Research problem: Zambia has in the past experienced debt crises and in most cases used fiscal adjustments and monetary tightening as efforts towards redeeming the economy. However, it has been noted that the country fails to come out of the crisis without external support mostly from the IMF and World Bank. This research looks at how Zambia can use fiscal and Macroeconomic variables (fiscal, interest rates, growth rates and inflation rates) to sustain public debt. Zambia has a record of unsustainable debt due to inactive use of these variables. There is always a tendency to emphasize them during a crisis and this comes too late to remedy the extent of the damage. Contribution of study: Various studies have been carried out on Zambia’s debt management but there seems to be no serious emphasis on the efficient use of these variables as guides to debt reduction. This study emphasizes the active and continuous use of these variables as they form the basis of economic stability which is a foundation for ensuring liquidity in the economy and thus capacity to sustain public debt. Aim and objectives: to establish how fiscal and Macroeconomic variables can be used to sustain public debt. This study identifies the use of fiscal and macroeconomic variables (growth, interest rates and inflation) as essential in ensuring reducing the debt level to acceptable levels. It also recognizes the availability of other debt reduction strategies but emphasizes the use of fiscal and macroeconomic variables as they are always at the government’s disposal and their continuous application can prevent debt problems from getting out of control. Literature Review: Literature Review contains evolution of the debt crisis with particular attention to the 20th century from the post-World War I preceded by the great depression the World War Two (WWII) to the current post-COVID-19 crisis. A sensitivity analysis was used via results of the multiple Linear regression coefficients to identify highly sensitive variables to debt dynamics. Methods: The paper used a combination of quantitative and qualitative data analysis through the mixed-method research. Findings: It was found that interest rates and fiscal balance were very sensitive to debt but the earlier had a positive while the latter had a negative effect on debt. Conclusions and Recommendations: The study concluded that fiscal balance needed to grow by 4.5 of GDP in order to make debt barely sustainable. This result guides Zambia to direct more effort towards raising the fiscal balance.

Evaluating fiscal policy reforms using the fiscal frontier

We develop a Fiscal Frontier which traces out the maximum government debt level that can be sustained at a given welfare cost. Through duality, the intertemporal policy mix underpinning the Frontier mirrors standard Ramsey policy and defines an upper limit on the welfare gains that can be achieved by any fiscal reform. The Frontier is then used to evaluate a variety of fiscal reforms: (1) one-off changes in tax instruments considered in Laffer curve calculations, (2) a gradual reduction in capital taxation proposed by Lucas (1990), and (3) fiscal consolidation strategies akin to those considered by the Congressional Budget Office. Conventional Laffer curve calculations significantly under-estimate the sustainable debt of the US. The desirable pace of capital tax abolition has slowed since the 1970s, but the reform remains close to the Frontier. Achieving debt reduction targets considered by the Congressional Budget Office is typically very costly, especially when the fiscal consolidation is large and must be achieved quickly, but a simultaneous capital tax reform can more than offset those costs in all cases we consider.

ALIRAN KAS, TINGKAT HUTANG, PERBEDAAN ANTARA AKUNTANSI DAN LABA FISKAL PADA PERSISTENSI LABA : BUKTI DARI PERUSAHAAN OTOMOTIF

This study aims to analyze the effect of cash flow, debt levels, book tax differences on profit persistence. The measurement of profit persistence focuses on the regression coefficient of present profit against previous earnings. This research uses data from companies listed on the Indonesia Stock Exchange (IDX) in 2017-2021. The number of research samples was 7 companies obtained by purposive sampling method. The source of research data is secondary data. The analysis technique used in this study is multiple linear regression analysis. The results of the analysis show that cash flow (X1) has no effect on profit persistence, debt level (X2) has no effect on book tax differences (X3) has no effect on profit persistence.

Can at-the-Market Offerings Affect REIT Debt Maturity Choice?

This study examines the differences in debt maturity choice between Real Estate Investment Trusts (REITs) with At-the-Market (ATM) offerings and those without, as well as the subsequent changes in REIT debt maturity following the adoption of ATM programs. We find that ATM REITs consistently maintain higher levels of long-term debt than non-ATM REITs, even after implementing ATM offerings. It suggests that the capital raised through ATM offerings is not primarily utilized to reduce long-term debt. Additionally, the study highlights that small REITs experience a significant increase in short-term debt when actively employing ATM offerings. This outcome indicates that ATM programs offer smaller REITs the necessary financial flexibility to raise funds and address short-term debt obligations.

Leverage target and R&D spending

AbstractIn this paper, I examine how capital structure (relative to target) affects the financing of R&D spending. Studies on capital structure have shown that firms adjust their debt levels toward target debt levels. I show that firms with below‐target debt are more likely to issue debt to finance R&D spending compared to firms that have above‐target debt. The results are stronger for firms that are smaller in size and firms that do not pay dividends. I also show that firms with below‐target debt are more likely to use a greater fraction of proceeds from net debt issuance to finance R&D spending (either directly or indirectly).

The Effect of Sales Growth and Leverage on Tax Avoindance with Institutional Ownership as a Moderating Variable in Pharmaceutical Sub-Sector Companies on the Indonesia Stock Exchange

This study aims to determine the effect of sales growth and leverage on tax avoidance with institutional ownership as a moderating variable in pharmaceutical sub-sector..companies.. listed..on..the..Indonesian..stock..exchange. ..This..study uses statistical analysis methods that are used to explain the descriptive data of the overall variables. The number of samples analyzed was 50 samples of pharmaceutical sub-sector companies listed on the Indonesia Stock Exchange (IDX) in 2017-2021. sample using purposive sampling technique. Analysis of research data using multiple linear regression test and Moderated Regression Analysis (MRA). The results of this study indicate that sales growth has an effect on tax avoidance, meaning that if sales growth the level will also increase. Leverage affects tax avoidance, which means that if the level of debt is high, the level of tax avoidance will also increase. Institutional ownership is able to weaken sales growth towards tax avoidance, the higher the level of institutional ownership in the company will increase supervision of the company. And institutional ownership is able to weaken leverage against tax avoidance, with high institutional ownership, institutions are very concerned about the level of debt used by the company to meet the company's operational activities.

Does China's green power trading policy play a role? - Evidence from renewable energy generation enterprises

Green power trading is an institutional innovation proposed by China to promote green and sustainable development. This policy aims to relieve the serious debt pressure of renewable energy generation enterprises, thus laying the foundation for achieving carbon reduction targets. This paper empirically examines the role of green power trading by constructing the difference-in-differences (DID) model. Our findings indicate that green power trading significantly reduces the debt levels of policy-covered generation enterprises. This effect is more pronounced for state-owned enterprises, companies with better ESG performance, companies in regions with higher degree of marketization and companies specializing in renewable energy power generation. Further research discusses the impact mechanism of green power trading in terms of external and internal environmental channels. We find that a strong green development atmosphere, especially the external atmosphere, will significantly reinforce the weakening effect of green power trading on corporate debt. Our research provides empirical evidence for the success of green power trading policy in its pilot phase.

THE EFFECTIVENESS OF DEBT RULE ON FISCAL SUSTAINABILITY: DO MACROECONOMIC DATA MATTER?

The effectiveness of the debt rule to achieve a certain level of public debt and debt sustainability targets is one of the fiscal sustainability discussed in the literature. The current study attempts to estimate the impact of the debt rule on fiscal sustainability indicators for 77 countries during 1985 - 2018. There are two existing indicators are widely utilized cover primary gap and recursive algorithm. To deal with the potential of a random walk of the variables, the two-step system generalized method of moment (GMM) estimator is employed. Specifically, the current study constructs a new fiscal sustainability indicator by incorporating financial technology (FinTech) using principal component analysis (PCA) for 67 countries in 2014 and 2017. The new indicator is the main contribution on the existing literature of fiscal sustainability. The findings reveal that the debt rule has a positive and significant impact on the primary gap, either in the short- or medium-term, implying that the debt rule is effective in encouraging fiscal sustainability. Conversely, it has a negative and significant impact on the recursive algorithm. Similarly, this rule significantly contributes on the new indicator by incorporating FinTech. Therefore, policymakers are challenged to conduct this rule as a key fiscal rule in fiscal sustainability policy. The policymakers should also take more attention to increase the level of FinTech to guarantee fiscally sustainable level.