Debt Levels Research Articles

Bankruptcy Prediction Model Development and its Implications on Financial Performance in Slovakia

Abstract Research purpose. Financial distress being a global phenomenon makes it impact firms in all sectors of the economy and predicting corporate bankruptcy has become a crucial issue in economics. At the beginning of the last century, the first studies aimed to predict corporate bankruptcy were published. In Slovakia, however, several prediction models were developed with a significant delay. The main aim of this paper is to develop a model for predicting bankruptcy based on the financial information of 3,783 Slovak enterprises operating in the manufacturing and construction sectors in 2020 and 2021. Design / Methodology / Approach. A prediction model that uses the appropriate financial indicators as predictors may be developed using multiple discriminant analysis. Multiple discriminant analysis is currently used in prediction model development. In this case, financial health is assessed using several variables that are weighted in order to maximise the difference between the average value calculated in the group of prosperous and non-prosperous firms. When developing a bankruptcy prediction model based on multiple discriminant analysis, it is crucial to determine the independent variables used as primary financial health predictors. Findings. Due to the discriminant analysis results, the corporate debt level of the monitored firms may be regarded as appropriate. Despite the fact that the model identified 215 firms in financial distress due to an insufficient debt level, 3,568 out of 3,783 Slovak enterprises operating in the manufacturing and construction sectors did not have any problems with financing their debts. The self-financing ratio was identified in the developed model as the variable with the highest accuracy. Based on the results, the developed model has an overall discriminant ability of 93% since bankruptcy prediction models require strong discriminating abilities to be used in practice. Originality / Value / Practical implications. The principal contribution of the paper is its application of the latest available data, which could help in more accurate financial stability predictions for firms during the current difficult period. Additionally, this is a ground-breaking research study in Slovakia that models the financial health of enterprises in the post-pandemic period.

Analisis Faktor-Faktor yang Mempengaruhi Utang Luar Negeri dan Pertumbuhan Ekonomi di Indonesia

This study aims to analyze the influence of the budget deficit, and inflation on Indonesia's foreign debt and analyze the influence of inflation, foreign direct investment and foreign debt on economic growth in Indonesia.This research is classified into descriptive and inductive research. Using annual time series data from 1986-2020. The analytical model used in this study uses a multiple linear equation analysis model using the Ordinary Least Square (OLS) method and simultaneous equation analysis using the Indirect Least Square (ILS) method.The results show that there is a positive and significant effect of the budget deficit variable and there is a negative and significant influence of the inflation variable on Indonesia's foreign debt for the period 1986-2020, and there is a negative and significant influence of the inflation and foreign debt variable on economic growth in Indonesia, while the variable Foreign direct investment has a positive and insignificant effect on economic growth in Indonesia for the period 1986-2020.Based on the results of this study, it is recommended that the government make policies that can reduce the level of foreign debt and the government must carry out new strategies to increase economic growth.

The Relationship between Capital Structure and Firm Performance: The Moderating Role of Agency Cost

Since it first appeared, agency theory has argued that debt can decrease agency issues between agent and principal and enhance the value of firms. This paper explores the moderating effect of agency cost on the association between capital structure and firm performance. A panel econometric method, namely a fixed-effect regression model, was used to evaluate the above description. This investigation uses secondary data collected from published annual reports of manufacturing firms listed on Tehran Stock Exchange (TSE) during 2011–2019. Empirical results show that capital structure is negatively related to firm performance. Agency cost also has a negative impact on corporate performance; however, in the case of ROA and EPS, the relationship is positive. Interestingly, the findings illustrate that increasing the level of debt can reduce agency costs and enhance firm performance. Moreover, robust correlations are revealing that agency cost significantly affects the relationship between capital structure and corporate performance. These findings provide proof to support the assumptions of agency theory, which explains the association between capital structure and performance of firms. This study provides new perspectives on the relationship between capital structure and firm performance by using data from listed manufacturing firms in Iran; hence, these new insights from a developing market improve the understanding of capital structure in Asian and Middle Eastern markets.

Kamu ve İç Borçların Ekonomik Büyüme Üzerindeki Eşik Etkisi: Kenya Örneği

This paper investigates the presence of the threshold effect of public debt and internal debt on economic growth in Kenya for the period 1970-2018. The Smooth Transition Regression model of analysis is used to analyze the effect of public and internal debt on growth. The findings of the study indicate that the threshold level of internal debt in Kenya is 17.3115% implying that domestic debt positively impacts economic growth when this threshold level is exceeded. The public debt threshold estimate is 33.29% and growth is positively affected when public debt exceeds this level. The results of this study imply that public and internal debt have a U-shaped relationship with the economic growth rate in Kenya and that the rate of economic growth is dependent on the amount of debt owed by the country. These results imply that there is a need for appropriate policy actions on more productive use of debt to ensure economic growth.

AWARENESS OF CREDIT MANAGEMENT AMONG PUBLIC SERVANTS IN MALAYSIA THROUGH COUNSELING AND CREDIT MANAGEMENT AGENCY (AKPK)

Credit Credit management is a crucial aspect in ensuring financial sustainability within society, particularly among civil servants. Therefore, it is paramount that the general public in Malaysia have a comprehensive understanding and awareness of the Credit Management program through the Credit Counselling and Management Agency (AKPK) to prevent the community from being burdened with high levels of debt, which could potentially lead to bankruptcy. As such, this article aims to analyze the behavior of public servants in the state of Kedah, involving a total of 150 individuals, in order to identify their level of awareness of the credit management program under the AKPK.This study employs quantitative methods to examine demographic factors, as well as the relationship between consumer understanding, awareness, and perception of credit management programs through the Credit Counselling and Management Agency (AKPK) among public servants in Malaysia. The results of this study can be useful in improving the quality of the Credit Management program under AKPK and raising awareness among civil servants towards credit management in Malaysia.

English

The main objective of this paper is to examine the key determinants of public debt in the Gambia. To achieve this objective, the Autoregressive Distributed Lag (ARD) method was employed to examine the impact of short-run and long-run selected macroeconomic variables as well as a government effectiveness variable in determining the public debt level of The Gambia during the period 2000 to 2019. The results reveal that trade openness and gross fixed capital formation have an increasing impact on the Gambia’s public debt in the long-run. On the other hand, GDP growth, official exchange rate, and the government effectiveness variables have been found to have decreasing effects on public debt levels in the long-run. However, none of the variables show a significant relationship with public debt of levels of The Gambia in the short-run. Given these findings, it is recommended for the Government of the Gambia to improve the country’s governance effectiveness, in particular, as weak government institutions was found to be one of the main drivers of the country’s public debt in the long-run.   Key words: Public debt, debt sustainability, Auto Regressive Distributive Lag (ARDL), GDP growth.

A Look at Individuals’ Financial Resilience in Albania Before COVID-19

In this article we explore financial resilience of individuals in Albania based on novel data from financial literacy survey of Bank of Albania. Also we analyze the impact that financial literacy has on individual financial resilience. Financial resilience is defined as the ability of individual to cope with an unexpected expenditure shock, liquidity constraint and higher indebtedness. In general the data display a low level of financial resilience of Albanians, where 64 % of individuals declare that they cannot come up with an unexpected expenditure shock and 69 % of individuals have financial cushion less than 3 months and only 15 % of individuals are concerned about their level of debt. The data show high level of heterogeneity of financial resilience based on socio-demographic characteristics of individuals. Empirical results based on binary regressions show that financial literacy increase the prevalence of financial resilience of individual in Albania. Thus promoting financial literacy would be a key elements policies for increasing financial resilience of individuals in short and long- term but also their financial well-being.

Firms’ financing dynamics around lumpy capacity adjustments

We study how firms adjust their financial positions around the times when they undertake lumpy adjustments in capital or employment. Using U.S. firm level data, we document systematic patterns of cash and debt financing around lumpy adjustment, remarkably similar across capital and employment. Firm-specific fundamentals reflected in Tobin’s Q, profitability and productivity are leading indicators of lumpy adjustment. Cash and debt capacity are actively manipulated, and contribute significantly quantitatively, to increase financial resources in anticipation of the expansion of firm capacity. Lumpy contractions in productive capacity follow years where firms reduce cash balances and hold above average levels of debt. During and after contractions, firms rebuild cash and reduce debt growth significantly in a concerted effort to restore financial resources by adjusting their productive operations.

Financial Leverage, Firm Size, Company Age, and Earning Persistence: Evidence From Indonesia

Everlasting earnings are needed for the firms to continue their business, and it becomes an expectation for the stakeholders, such as creditors, shareholders, and managers. Therefore, this study intends to prove the determinants of these earnings persistence. At least three factors are available based on the literature review: financial leverage, firm size, and company age. To make the study focus, it treats financial leverage as the primary variable, and the others become the control. By utilizing the quantitative design based on statistical testing, this study attempts to answer this issue. This study uses the firms in the infrastructure, utilities, and telecommunication sectors in the Indonesian capital market as the population and samples, the probability of t-statistic in the regression model to examine the prearranged hypotheses to achieve this destiny. Once analyzing the data from 2016 to 2019 of 25 companies taken by the simple random sampling technique, this research demonstrates that financial leverage and company age negatively influence this persistence; however, company size exhibits a positive impact. Based on the primary relationship evidence, this study suggests that firms reduce debt levels to avoid future failure, technical insolvency, and bankruptcy. Therefore, they can create earnings persistence from their managed business.

Financial Health of Private Equity-Backed Groups: Perspectives From Eye Care.

In private equity (PE) buyouts of medical practices, it is common for the PE firm to raise significant levels of debt in order to finance the purchase. This debt is subsequently shouldered by the acquired practice(s). There remains a scarcity of literature quantifying the effect of PE acquisition on the subsequent financial performance of eye care practices. We aim to identify and characterize debt valuations of ophthalmology and optometry private equity-backed group (OPEG) practices, which serve as an indicator of practice financial performance. A cross-sectional study from March 2017 to March 2022 was conducted using business development company (BDC) quarterly/annual filings to the Securities and Exchange Commission (SEC). The 2021 BDC Report was used to identify all BDCs actively filing annual reports (Form 10-Ks) and quarterly reports (Form 10-Qs) in the United States in 2021. The public filings of BDCs lending to OPEGs were searched from the inception of the OPEG's debt instrument in a BDC's portfolio and the amortized cost and fair value of each debt instrument were tabulated. A panel linear regression was used to evaluate temporal changes in OPEG valuations. A total of 2,997 practice locations affiliated with 14 unique OPEGs and 17 BDCs were identified over the study period. Debt valuations of OPEGs decreased by 0.46% per quarter over the study period (95% CI: -0.88 to -0.03, P = 0.036). In the COVID-19 pre-vaccine period (March 2020 to December 2020), there was an excess (additional) 4.93% decrease in debt valuations (95% CI: -8.63 to -1.24, P = 0.010) when compared to pre-pandemic debt valuations (March 2017 to December 2019). Effects of COVID-19 on valuations stabilized during the pandemic post-vaccine period (February 2021 to March 2022), with no change in excess debt valuation compared to pre-pandemic baseline (0.60, 95% CI: -4.59 to 5.78, P = 0.822). There was an increase in practices that reported average discounted debt valuations from 20 practices (1.6%) associated with one OPEG to 1,213 practices (40.5%) associated with nine OPEGs (including 100% of newly acquired practices), despite the stabilization of COVID-19-related excess (additional) debt. Debt valuations of eye care practices have declined significantly post-PE investment from March 2017 to March 2022, suggesting that the financial health of these groups is volatile and vulnerable to economic contractions such as the COVID-19 pandemic. Eye care practice owners must consider long-term financial risks and impacts of subsequent patient care when selling their practice to a private equity group. Future research should assess the impact of secondary transactions of OPEGs on the financial health of practices, practitioner lifestyle, and patient outcomes.

The relationship between sleep and salivary and serum inflammatory biomarkers in adolescents.

Poor sleep behavior can trigger an inflammatory response and contribute to the development of inflammatory diseases. Cytokines can act as indicators of inflammation and may precede the onset of inflammatory diseases. This study aimed to determine the association between sleep timing parameters (bedtime, sleep duration, sleep debt, and social jetlag) and the levels of nine serum and salivary inflammatory and metabolic biomarkers. Data were collected from 352 adolescents aged 16-19 years enrolled in Kuwait's public high schools. The levels of C-reactive protein (CRP), interleukin-6 (IL-6), interleukin-8 (IL-8), interleukin-10 (IL-10), vascular endothelial growth factor (VEGF), monocyte chemoattractant protein-1 (MCP-1), adiponectin, leptin, and insulin were measured from saliva and serum samples. We conducted mixed-effect multiple linear regression modeling to account for the school variable as a random effect to assess the relationship between the sleep variables and salivary and serum biomarkers. Mediation analysis was conducted to check if BMI was a mediator between bedtime and the biomarkers. There was a statistically significant elevation in serum IL-6 level associated with later bedtime (0.05 pg./mL, p = 0.01). Adolescents with severe sleep debt of ≥2 h had an increase in salivary IL-6 biomarker levels (0.38 pg./mL, p = 0.01) compared to those who had sleep debt of <1 h. Adolescents with sleep debt of ≥2 h had significantly higher levels of serum CRP (0.61 μg/mL, p = 0.02) than those without sleep debt. Additionally, we found that the inflammatory biomarkers (CRP, IL-6, IL-8, IL-10, VEGF, and MCP-1) and metabolic biomarkers (adiponectin, leptin, and insulin) had more statistically significant associations with the bedtime variables than with sleep duration variables. CRP, IL-6, and IL-8 were associated with sleep debt, and IL-6, VEGF, adiponectin, and leptin levels were associated with social jetlag. BMIz was a full mediator in the relationship between late bedtime and increased serum levels of CRP, IL-6, and insulin. Adolescents who go to bed at or later than midnight had dysregulated levels of salivary and serum inflammatory biomarkers, suggesting that disrupted circadian rhythm can trigger higher levels of systemic inflammation and potentially exacerbate chronic inflammation and the risk of metabolic diseases.

Public debt and r-g risks in advanced economies: Eurozone versus stand-alone

Differentials between interest rates on government bonds (r) and economic growth rates (g) are a key determinant of public debt dynamics. What are the predictors of r-g, and what risks do policy-makers face? Applying regression methods to data on 22 OECD countries over 1970–2018 shows that higher public debt levels are not predictive of more unfavourable r-g in both Eurozone and stand-alone countries, where the latter issue debt in their own currency. The Euro Crisis – a period characterised by doubts over whether the ECB would backstop government bond markets – is linked with more unfavourable r-g, but only in Euro periphery countries. Our results suggest that the Eurozone’s institutional architecture affects r-g risks. While we find that predicted probabilities of future r – g < 0 are typically significantly higher than 50 % across OECD economies under conditions similar to the pre-Covid-19 years, r-g risks are most significant in the Euro periphery.

Motivating factors and barriers to help-seeking for casino gamblers: results from a survey in Swiss casinos.

Gambling can have serious consequences for many aspects of a person's life. Yet relatively few people with gambling problems seek help. This study examines the extent to which exclusion from casino venues among other factors may act as a motivator for further help-seeking among casino gamblers (both landbased and remote) with at-risk or disordered gambling behavior. In addition, the barriers that prevent gamblers from accepting help are examined. Gamblers from Swiss casinos completed a written questionnaire twice, at 6-month intervals. The questions included whether they had sought help in the past 6 months. For those with a SOGS-R rating of 1 or over (n = 173) at the second survey point, a difference in help-seeking was found between the excluded and non-excluded gamblers (p < .001), suggesting that exclusion may be a motivator for help-seeking. Reported differences in levels of debt (p = .006), recognition of gambling problems (p = .010) and severity of gambling-related problems (p = .004) can be taken to suggest that other motivating factors may also influence help-seeking behavior. With regard to the support sought, the most frequently used forms of support were specialized addiction counseling centers (39.5%), followed by self-help groups (21.1%) and remote counseling centers (10.5%). In terms of barriers, reasons relating to attitude, such as denial, appear to pose greater barriers than treatment-related concerns. From a public health perspective, an overarching strategy is required to increase the share of help-seekers among casino gamblers through targeted measures.

Fiscal Compliance and Fiscal Response to the COVID-19 Crisis in Visegrad and Baltic States

The coronavirus crisis, which began in 2020, had a major impact on the fiscal policies of the EU member states. Governments increased their spending to support economies affected by quarantine measures. Expenditure increase and revenue reduction made EU countries non-compliant with the requirements set by the Stability and Growth Pact, adopted to balance fiscal policies. However, countries were affected differently and used different fiscal measures. The paper discusses differences in fiscal response to the COVID-19 crisis among Baltic and Visegrad countries. The paper aims to analyse how the fiscal response in 2020 correlates with their fiscal indicator's compliance in the pre-crisis period (2004-2019). The results suggest that the states could be divided into two subgroups according to their fiscal stance before 2020 and their reactions to the shock. The first group, consisting of Hungary, Poland, and Slovakia, represent states with a higher level of public debt, lower compliance with the debt and deficit rules, and higher expenditures. Hungary stands out among the states, while Estonia and the Czech Republic have the best compliance scores.

Asymmetric Impacts of Public Debt on Economic Growth: Empirical Evidence From Vietnam

Purpose: The objective studies the influence of government debt on the expansion of the Vietnamese economy was the subject of the research presented in this article. Theoretical framework: Most governments in developing nations have budget deficits due to excessive spending and inadequate revenue. When the government chooses to pay the budget deficit through borrowing, it incurs a liability known as public debt and public debt on economic growth. Design/methodology/approach: In regression analysis involving time series data, if the regression model contains the variables' present values and the lagged values (past values), this model is known as the lagged distribution model. If the model's explanatory variables include one or more lagged values of the dependent variable, the model is called the autoregressive model. Nonlinear Auto Regressive Distributed Lag regression was applied. Findings: The findings reveal that government debt has a considerable and disproportionate effect on sustained economic growth in the short and long run using a Nonlinear Autoregressive Distributed Lag (NARDL) model with quarterly data over twenty years beginning in 2000. Research, Practical &amp; Social implications: The results indicate a disproportional association between public sector debt levels and short- and long-term economic growth. The results are consistent with recent empirical studies showing a nonlinear relationship between some nations' public debt and economic development. Originality/value: Government debt should support short- and long-term economic growth through funding production. Consequently, government debt should not burden the economy when the high amount of debt exceeds the capacity to repay.

The role of COVID‐19 in worsening the debt sustainability in developing economies – The case of Ghana and Kenya

AbstractThe SARS‐CoV‐2 coronavirus pandemic has raised public debt sustainability issues, especially for Heavily Indebted Poor Countries (HIPC). Developing countries with limited fiscal space have had to take on significant external debts to help deal with the negative effects of the pandemic. This has led to further increases in the debt levels of these countries, with the potential to trigger a debt default. Addressing these issues, this study uses a framework for fiscal policy and public debt sustainability analysis. The results confirm the impact of the SARS‐CoV‐2 coronavirus pandemic on the debt levels of Ghana and Kenya. This study recommends the creation of domestic fiscal buffers and fiscal space toward the attainment of long‐term debt sustainability, contrary to the popular view of offering debt relief to these countries.

A VAR model for Fiscal Multipliers and the Future of Fiscal Policy in European Monetary Union

Abstract Fiscal multipliers have been a core issue for the effectiveness of fiscal policy. During the financial economic crisis of 2007–8 there has been a revival of interest in re-estimating the size of the multipliers. Empirical literature showed that fiscal multipliers are dependent either on structural characteristics of the economy (exchange rate regime, openness, etc.), or on business cycles or on fiscal characteristics (level of debt, the choice between expenditures and taxes, etc.) of the economies. The aim of this paper is to contribute to this discussion by developing a VAR model to compute the effects of fiscal policy to output for the 19 member states of EMU for the period 2002-2019. Controlling for size of the countries, level of Debt to GDP ratio and openness. Based on these findings we will discuss the difficulties of fiscal consolidation in EMU economies. We argue that EMU is facing a deadlock, the necessity of fiscal consolidation on the one hand and the unavoidable risk of uneven results of fiscal contraction in the member states due to different size of multipliers on the other hand. The only alternative for EMU is to take a step forward towards a fiscal union. In this case fiscal policy should be balance different political priorities and preferences and at the same time be timely and effective. JEL classification numbers: F35, O53. Keywords: Fiscal policy, European Monetary Union, debt, Fiscal cooperation, Fiscal multipliers.

A VAR model for Fiscal Multipliers and the Future of Fiscal Policy in European Monetary Union

Abstract Fiscal multipliers have been a core issue for the effectiveness of fiscal policy. During the financial economic crisis of 2007–8 there has been a revival of interest in re-estimating the size of the multipliers. Empirical literature showed that fiscal multipliers are dependent either on structural characteristics of the economy (exchange rate regime, openness, etc.), or on business cycles or on fiscal characteristics (level of debt, the choice between expenditures and taxes, etc.) of the economies. The aim of this paper is to contribute to this discussion by developing a VAR model to compute the effects of fiscal policy to output for the 19 member states of EMU for the period 2002-2019. Controlling for size of the countries, level of Debt to GDP ratio and openness. Based on these findings we will discuss the difficulties of fiscal consolidation in EMU economies. We argue that EMU is facing a deadlock, the necessity of fiscal consolidation on the one hand and the unavoidable risk of uneven results of fiscal contraction in the member states due to different size of multipliers on the other hand. The only alternative for EMU is to take a step forward towards a fiscal union. In this case fiscal policy should be balance different political priorities and preferences and at the same time be timely and effective. JEL classification numbers: F35, O53. Keywords: Fiscal policy, European Monetary Union, debt, Fiscal cooperation, Fiscal multipliers.

When does public debt hurt inequality in Africa?

PurposeThe question of what level of public debt can increase inequality has become crucial in Africa. In this study, the authors examine the effect of public debt on inequality in Africa and estimate the debt-inequality threshold. The authors then examine the moderating role of tax burdens and corruption in the relationship between public debt and inequality.Design/methodology/approachUsing data from the period 2005 to 2019 in 38 African countries, the generalized method of moment and the dynamic panel threshold regression techniques were employed to achieve the purpose of the study.FindingsThe results reveal that a 1% increase in public debt leads to a rise in inequality by about 0.17%. However, the effects doubles when the public debt ratio hits 57.47%. Tax burden worses the effect of public debt by about 2.9 percentage points, while control of corruption reduces debt effect on inequality by 61 percentage points.Research limitations/implicationsOwing to data availability, the study period was restricted to 2005 to 2019. Moreover, the study could not consider the disagreggation of inequality into different income groups due to pausty of data. While this could narrow the scope of the study, the results provide an important insight for policy makers.Originality/valueThis contributes to the scant literature on the effect of public debt on income inequality in African countries. This study is a novelty because its provides the level of public debt which worsens inequality in Africa, as well as the moderating effects of tax burden and corruption control.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-08-2022-0581

Coping with COVID‐19 shocks in rural Nepal

AbstractWe examine shocks experienced by rural Nepali households during the COVID‐19 pandemic. Households primarily experienced income and price shocks during a government‐imposed lockdown. During this time, households managed to effectively protect consumption, and mostly relied on credit (26%), asset sales (10%) and savings (8%). Debt levels nearly doubled, with limited changes to savings. We then leverage a long‐term randomized control trial (RCT) to assess whether beneficiaries of a livestock livelihood program are more resilient. Program beneficiaries are 6 percentage points less likely to take out new loans.