Leverage Position Research Articles

An Empirical Study of Relationship between Working Capital Management and Leverage in Selected Petroleum Companies in India

The main purpose of this article is to find out the relationship between working capital management and leverage of selected petroleum companies in India. The management of working capital and leverage in the business organization has been considered as very crucial part in financial management. Working capital considered as surplus of current assets over current liabilities and leverage considered as firm’s ability of employing long term fund having a fixed cost for the purpose of increasing the return of the real owner of the organization. The evaluation of relationship between the two variables and it is identified with the help of parametric test like correlation analysis and one-way ANOVA. The major findings of the study indicated that there is mixed relationship between working capital and leverage position because with the help of correlation analysis Reliance Petroleum, ONGC (Oil and Nature Gas Corporation Limited), IOCL (Indian Oil Corporation Limited), BPCL (Bharat Petroleum Corporation Limited) indicated positive relationship between two variables. GAIL (Gas Authority of India Limited) indicated negative relationship between working capital and leverage during the study period.

Banks' leverage in foreign exchange derivatives in times of crisis: A tale of two countries

Before the outbreak of the Global Financial Crisis, on May 6, 2007, the Colombian central bank imposed a cap on the Gross Leverage Position in Foreign Exchange Derivatives of financial intermediaries. It was the only country in the world that implemented this prudential policy. Using synthetic control methods, we construct counterfactual scenarios and show that this policy intervention, while costly in financial stability terms in the pre-GFC period, was effective in reducing Colombia's financial stability risks during the crisis. A trade-off between “calm” and “turbulent” periods emerges from our results, which should be considered when deciding on the right policy tools to use before a crisis break-out.

Impact of COVID-19 on Financial Performance and Profitability of Banking Sector in Special Reference to Private Commercial Banks: Empirical Evidence from Bangladesh

The current crisis caused by the COVID-19 pandemic has hit the global economy hard, causing significant damage to every aspect of the global banking system, and Bangladesh is no exception. For that reason, its performance and profitability have been affected. In this study, we investigate the impact of COVID-19 on the financial performance and profitability of the listed private commercial banks in Bangladesh. We initially compute each bank’s financial performance index (FPI) to determine the position according to their financial performance individually before and the current period of COVID-19 by the standardized CAMELS rating system. After assessing the position, the fixed-effect regression model is used to explore the impact of the bank’s specific variables and macroeconomic variables along with the banks’ variables on the banks’ profitability. The banks that performed better during the pre-pandemic period of COVID-19 also performed better during the pandemic period of COVID-19. The performance of AIBL, EBL, and BBL was almost autonomously higher during both periods. In the case of bank profitability, our paper discovered that during the pandemic period of COVID-19, high non-performing loan rates, holding more liquid assets, a high amount of hedging capital, and inappropriate bank size lessened the banks’ profitability. In contrast, a low leverage position and inflation rate enhanced the bank’s profitability during this period. The outcome of this study will help bank authorities detect the loopholes and take preventive measures that can improve their profitability during a crisis period like COVID-19. The investors and depositors who invest money in banks can precisely decide their portfolios.

The Concept and Implementation of Contract for Difference in Derivatives Market

Contract for Difference (CFD) is a leverage product that offers exposure to the market by only placing a small margin (deposit) of the total value of the transaction. CFDs provide traders with an advantage when the price of an underlying asset goes up (by taking a long position) or when it goes down (by taking a short position). When a CFD contract is closed, traders will receive or pay a certain amount of value that arises due to the difference between the purchase price and the selling price of an underlying asset. This shows that CFDs are almost similar to a futures contract in terms of their value derived from various underlying assets and both provide an advantage by providing leverage benefits. Hence, this study aims to examine the concept and course of CFD transactions implemented in Malaysia. This qualitative study applied the content analysis method. Findings show that most traders use CFDs to achieve leverage positions offered by brokers as well as to make short sales and as a hedging tool (hedging mechanism).

The demands of displacement, the micro-aggressions of multiculturalism: performing an idea of “Indianness” in Singapore

ABSTRACT This paper explores the ways in which state-defined discourses of multiculturalism can unintentionally create a framework through which micro-aggressions are enacted against those interpreted as “other”. These definitions cascade down from the state to majority and then minority ethno-national groups, who leverage positions of relative dominance to establish the terms of acceptance and integration into society. By negotiating these terms, ethnicity becomes a performative construct through which difference is asserted and reified. We illustrate these ideas through an empirical analysis of Singapore’s minority Indian community, and how Singaporean Indians perform an idea of “Indianness” in response to their Singaporean Chinese fellow citizens on the one hand, and their migrant Indian counterparts on the other. This positioning causes Singaporean Indians to be subject to micro-aggressions vis-à-vis the Chinese majority, and to perpetrate micro-aggressions against Indian non-national minorities. In turn, this causes Singaporean Indianness to be underperformed throughout daily life.

Drivers of Sustainability Accounting and Reporting in Emerging Economies: Evidence from Nigeria

Stakeholders’ demand for companies to provide social, economic and environmental reports is increasingly becoming a fundamental requirement for companies. This paper investigates the factors that drive the choice of sustainability reporting in an emerging market economy context, with reference to Nigeria. Using data sourced from 3 different reports (annual accounts, sustainability reports and websites) of the top 50 large companies listed in the Nigeria Stock Exchange for the period 2015–2020 and a fixed effect panel regression model, our study makes three important findings. First, the study provides evidence that sustainability reporting is mostly influenced by the following company internal factors: size, profitability, ownership structure, listing age, leverage and auditor type. Second, the findings indicate that that size of firms, profitability and companies audited by Big-4 audit firms has a significant positive relationship with sustainability reporting in Nigeria. In contrast, ownership structure and the leverage position of firms affect sustainability reporting negatively. Finally, our study shows that the banking and oil and gas sectors take sustainability reporting more seriously than any other sectors in Nigeria. Contextualizing the findings within accountability and transparency, we provide evidence on the drivers and the relationship between the various drivers and sustainability reporting in Nigeria. This has implications for policymakers, future researchers and contributes to the literature of sustainability reporting in Nigeria. Even though this study used Nigerian data, it will increase pressure on firms in other developing countries to assess the context-specific determinants of sustainability reporting.

The demise of the US investment banking from a Minskian perspective

This research analyses the causes behind the de-facto demise of the US firms dedicating their activity exclusively to securities business, in the wake of the financial crisis of 2008, focusing on the firms´ risk mismanagement and bad lending practices, that increased fragility and risk exposures in the US securities sector. These practices emerged when leading firms became gradually convinced of the goodness of financial instruments of their own design, as they engaged in proprietary trading activities and trading of financial products with residual liquidity, increasingly shifting their use from hedge to speculative purposes. In this way, leading financial operators able to take unrestricted risk and highly leveraged positions in unregulated markets are the cause behind volatility in asset prices, and they are ultimately responsible of the cyclical boom and bust dynamics of the market-based economy

Business shocks and corporate leverage

We examine whether and to what extent business shocks explain the puzzling instabilities of corporate leverage. We find that business shocks explain a large portion of the unexplained leverage deviation, cross-sectional leverage position migration, and evaporating leverage similarities in the cross-section of firms. The cross-sectional distribution of corporate leverage is relatively persistent when there are fewer and smaller business shocks but becomes unstable for firms with larger business shocks. Our findings suggest that business shocks lead to discontinuities in the corporate value creation process and investment, thereby affecting corporate financing decisions. Put simply, the lumpiness of investment creates a “lumpy need for external financing. Our analysis implies that the empirical modeling of capital structure adjustment and, indeed, the modeling of other corporate policies, should be conditioned on business shocks.

Do leveraged warrants prompt individuals to speculate on stock price reversals?

Using proprietary data on bank-issued knock-out warrants written on a stock index, we find that individual investors’ aggregate warrant portfolio speculates against the short-term trend of the index. We argue that contrarian trading is driven by the interaction of product design and investors’ preference for large leveraged positions. Investors tend to open larger positions whenever warrants offer higher leverage. As a result, investors open an aggregate long position when calls offer higher leverage than puts. Since knock-out leverages move systematically with the underlying, aggregate warrant positions become contrarian even if investors do not intend to speculate on reversals.

Leverage, Corporate Governance and Real Earnings Managem ent: Evidence from Korean Market

Purpose: This study examines how corporate governance (CG) and leverage simultaneously influence real earnings management (REM). Methodology: We employed CG score (CGS), total, short-term, and long-term debt ratios as independent variables, and REM metrics as dependent variables. We include ordinary least-squares (OLS) panel data regressions, residual test, and interaction analysis in our study. Findings: While a significant positive relationship existed between leverage and REM, CG had a negative effect on real manipulations. Our results from the interaction analysis and residual test show that CG is a key player in explaining the relationship between leverage and REM. We also find that firms with a low-level of CG were more likely to conduct REM activities than those with a high-level CG. Research limitations/implications: These results imply that the reduction in opportunistic behavior of managers in the presence of strong CG could decrease the leverage of firms and REM activities and improve the quality of their earnings. Moreover, shareholder rights and audit organizations were the prominent CG characteristics influencing REM activities, as they enforce additional monitoring of financial reporting quality and increase audit standards. CG strategies mitigate the corporate corruption scandals through the adoption of high-quality accounting and financial norms in reporting and management. Thus, executives decrease their incentives to conduct REM activities and leverage cannot be used freely as a mechanism to manipulate earnings, given firms’ leverage position is audited and reviewed by the financial committee in firms with strong CG. For future research, the authors suggest including the degree of leverage as a disaggregation sample and adding the degree of cost stickiness. Originality/value: Several s tudies have investigated e ither the relationship between ( 1) REM and leverage, or ( 2) REM and CG, including leverage as a control variable. Our study, extends this bilateral relationship to simultaneous relationship between leverage, CG, and REM. Moreover, we investigate the predominant CG characteristics that influence the association among leverage and REM. We conduct interaction analysis and residual effect to investigate if CG should be considered as a determinant variable in the recurrence of REM activities of managers. We include firms with high- and low- levels of CG to show which firms are leveraged.

Investor Leverage and Intraday Lead-Lag Relations in Stock Markets

Using a sample of Chinese stocks, we demonstrate that liquidity and price movements in stocks with investor leverage can spill out to other stocks within a day causing the intraday lead-lag relations in stock markets. In addition, we provide evidence suggesting that leverage positions in leveraged stocks contribute to the degree of their leading effects. In particular, margin interest is positively associated with the leading effects in both return and liquidity and short interest is positively associated with the leading effect in return. Finally, we employ the mediation models to gauge the mechanisms through which the lead-lag relation may appear. We find that both the deleverage process of the leveraged traders and the cross-asset learning behavior of the investors are important driving forces for the leading effect of the leveraged stocks. Evidence in this paper helps us to understand how and why liquidity and return commonality across stocks are formed.

Analisis Kesehatan Keuangan BUMN Untuk Melihat Keberlanjutan Perusahaan Di Masa Datang Pada PT. Garuda Indonesia (Persero) Tbk.

The research objective is to analyze the financial performance of PT. Garuda Indonesia (Persero) Tbk is based on financial statements for the period 2014-2018. Using a quantitative method approach by calculating the ratio in the company. The results of the current ratio research decreased in 2017 and 2018, the Solvency Ratio reached the position of extreme leverage in 2018, the activity ratio analysis showed that the financial position of PT Garuda Indonesia (Persero) Tbk in 2014-2015 the average age of its receivables increased, the analysis of profitability ratios and the value of profit margins counted very small because the expenditure is quite large and results in a healthy condition, the average analysis of the Z score from 2014 - 2018 is 1.6, the figure can be categorized in areas prone to bankrupt or gray areas. It is expected that PT. Garuda Indonesia (Persero) Tbk can pay attention and analyze financial ratios that are generated based on periodic financial statements, so that PT. Garuda Indonesia can increase finance significantly

Leverage analysis

Many systemic design processes include the development and analysis of systems models that represent the issue(s) at hand. In causal loop diagram models, phenomena are graphed as nodes, with connections between them indicating a control relationship. Such models provide mechanisms for stakeholder collaboration, problem finding and generative insight and are powerful . These functions are valued in design thinking, but the potential of these models may yet be unfulfilled. We introduce the notion of “leverage measures” to systemic design, adapting techniques from social network analysis and systems dynamics to uncover key structures, relationships and latent leverage positions of modelled phenomena. We demonstrate their utility in a pilot study. By rethinking the logics of leverage, we make better arguments for change and find the place from which to move the world.

R&D tax incentive scheme and in-house R&D expenditure: evidences from Indian firms

PurposeThe purpose of this paper is to examine the impact of research and development (R&D) tax credit scheme on participating firm’s R&D expenditure in Indian manufacturing firms.Design/methodology/approachTobit model is used to estimate the impact of R&D tax credit scheme on R&D expenditure.FindingsThe results suggest that there is a positive and significant effect of R&D tax incentive scheme on R&D. The introduction of the R&D tax credit scheme and the policy amendment are positively influencing R&D investment of the participating firms. However, industry-specific results suggest that these positive results are mainly driven by electronic and pharmaceutical industries. The study reveals that import of technology, import of raw materials, competition, profitability, age and leverage position of the firm also positively influence the R&D intensity of the firm.Research limitations/implicationsThe study is limited to the listed manufacturing firms in India.Practical implicationsThe study evaluates the innovation policy to help the policymakers in designing an effective policy.Originality/valueThe paper provides evidence on the impact of R&D tax incentive scheme on firm innovation to explain the factors that contribute to the R&D expenditure of the participating firms. It also summarises the effectiveness of tax incentive scheme on different industry groups and firm size.

Chimpanzees' understanding of social leverage.

Social primates can influence others through the control of resources. For instance, dominant male chimpanzees might allow subordinates access to mate with females in exchange for social support. However, little is known about how chimpanzees strategically use a position of leverage to maximize their own benefits. We address this question by presenting dyads of captive chimpanzee (N = 6) with a task resulting in an unequal reward distribution. To gain the higher reward each individual should wait for their partner to act. In addition, one participant had leverage: access to an alternative secure reward. By varying the presence and value of the leverage we tested whether individuals used it strategically (e.g. by waiting longer for partners to act when they had leverage in the form of alternatives). Additionally, non-social controls served to show if chimpanzees understood the social dilemma. We measured the likelihood to choose the leverage and their latencies to act. The final decision made by the chimpanzees did not differ as a function of condition (test versus non-social control) or the value of the leverage, but they did wait longer to act when the leverage was smaller—particularly in test (versus non-social control) trials suggesting that they understood the conflict of interest involved. The chimpanzees thus recognized the existence of social leverage, but did not use it strategically to maximize their rewards.

Capital Structure Management of Joint Venture Banks of Nepal

<p>This study entitled,” Capital Structure Management of Joint Venture Banks of Nepal” has been conducted to examine whether the determinants of capital structure affect the leverage position of joint venture banks. Three joint venture banks have been selected for the study based on their similarities in assets size and age. The study intends to test the relationship between capital structure and profitability and evaluate the optimality of the capital structure of the banks. The main purpose of this study is to analyze and compare the capital structure management practices of three leading joint venture banks taken into consideration.</p><p>This study has been conducted with the secondary data obtained from the quarterly financial statements, annual publications of NRB and even from the official website of Nepal Stock Exchange. A linear regression model has been applied for analyzing the data. Six independent variables have been identified based on the standard determinants of capital structure. The variables include size, profitability, assets tangibility, liquidity, risk and growth. To determine the variables, previous studies particularly of Sailaja and Madhavi (2015), Singh and Tandon (2012) and Basnet (2015) have been consulted. Statistical and financial tools such as ratio analysis, correlation and regression analysis as well as inferential analysis have been used to analyze the quantitative data.</p><p>The researcher has been able to draw the conclusion that the regulatory requirements also affect the leverage position. In addition to these, factors that are significant to the capital structure of the three sample banks are size of the bank, profitability, liquidity and growth. The study has thus helped to find out strengths & weaknesses of the joint venture banks. With these findings, the study might be helpful to drive the banks into the progressive track. Understanding these factors and their crucial relationships with leverage will help to maximize the value of the bank and minimize the overall cost of capital.</p><p>The study concludes that amongst the three joint venture banks taken into consideration, Everest Bank Limited is the better in terms of profitability, Himalayan Bank Limited is better in terms of stability and Nepal SBI Bank is more risk prone but has sufficient liquidity. Hence, the study shows that the standard determinants of capital structure are actually able to explain the variation in leverage of banks.</p><p>Journal of Business and Social Sciences Research, Vol. 1, Issue 1, pp. 58-79</p>

Graphing Capital Structure Analysis of IT Sector With Special Reference to HCL

This study employs two different analytical tools namely, financial ratios and statistical tools. To calculate the growth of the select IT Industry, the compound annual growth rate and trend analysis were used. To find out the capital structure position debt-equity and leverage of select IT Industry and Information Technology industries were analyzed. The Summary statistical co-efficient of variation, correlation, multiple regression analysis and structural equation model were also used appropriately to compare the profitability and the leverage position of the select IT Industry. There were evidences from foreign studies to support Capital Structure theories which have studied various determinants of Capital structure with IT Industries. The Industries range from small scale to very large scale company. The researcher had made an attempt to study the structure of capital in IT Industry in India. The researcher was motivated to carry out a study on these IT industries. By using various capital related terms such as long -term debt, short-term debt, operating cost, operating profit, expenses, dividend payout, net profit to net worth, total debt, capital intensity, firm’s asset structure, age of the firm, size of the firm, growth of the firm and firm’s risk the current research has been designed. The required financial data have been collected from the time boundary of 2006 – 2007 to 2016 – 2017. The present research work is a rewarding exercise to the scholar and the researcher will be delighted if the suggestions are incorporated to earn good return on equity. The restructuring of capital, where the companies are suffering with sickness will enhance a good and viable financial performance. For academics, trainers and consultants, the present research will help them to look into it with a new insight and analyze the same with various dimensions in IT Industry. The findings of the study certainly provide a framework for understanding the capital structure and financing of Small and medium enterprises, and have significant theoretical and practical implications. Based on the findings suggestions were given to improve the efficiency of determinants of capital structure and its operations by proper mobilization of funds thus highlighting the prominent role of the finance manager. This study aims at finding out the trend and pattern of financing by the Indian IT Industries.

Vulnerability of the Largest Normalized Residual Statistical Test to Leverage Points

The largest normalized residual statistical test (LNRT) is claimed to have the ability to detect noncritical single or multiple interacting but nonconforming bad data. However, we show in this letter that this claim does not always hold true for bad leverage points. Specifically, we prove that while a single noncritical and nonleverage measurement that is corrupted by a sufficiently large gross error is likely to be detected, the same measurement in a position of leverage and corrupted by the same gross error is unlikely to be detected. Furthermore, we show that multiple noncritical bad leverage points that are topologically adjacent to each other naturally form one or several groups of interacting bad data, which may cause the LNRT to fail. Since leverage points are common in actual power systems, the LNRT is doomed to frequently fail to detect bad data. Simulation results carried out on IEEE 30-bus system validate our theoretical results.

Unpacking policy formulation and industry influence: the case of the draft control of marketing of alcoholic beverages bill in South Africa.

Alcohol is a major contributor to the Non-Communicable Disease burden in South Africa. In 2000, 7.1% of all deaths and 7% of total disability-adjusted life years were ascribed to alcohol-related harm in the country. Regulations proposed to restrict alcohol advertising in South Africa present an evidence-based upstream intervention. Research on policy formulation in low- and middle-income countries is limited. This study aims to describe and explore the policy formulation process of the 2013 draft Control of Marketing of Alcoholic Beverages Bill in South Africa between March 2011 and May 2017. Recognising the centrality of affected actors in policy-making processes, the study focused on the alcohol industry as a central actor affected by the policy, to understand how they-together with other actors-may influence the policy formulation process. A qualitative case study approach was used, involving a stakeholder mapping, 10 in-depth interviews, and review of approximately 240 documents. A policy formulation conceptual framework was successfully applied as a lens to describe a complex policy formulation process. Key factors shaping policy formulation included: (1) competing and shared values-different stakeholders promote conflicting ideals for policymaking; (2) inter-department jostling-different government departments seek to protect their own functions, hindering policy development; (3) stakeholder consultation in democratic policymaking-policy formulation requires consultations even with those opposed to regulation and (4) battle for evidence-evidence is used strategically by all parties to shape perceptions and leverage positions. This research (1) contributes to building an integrated body of knowledge on policy formulation in low- and middle-income countries; (2) shows that achieving policy coherence across government departments poses a major challenge to achieving effective health policy formulation and (3) shows that networks of actors with commercial and financial interests use diverse strategies to influence policy formulation processes to avoid regulation.

Analisis Faktor yang mempengaruhi Kebijakan Dividen pada Perusahaan Manufaktur yang Terdaftar di Bursa Efek Indonesia

This study aims to determine the effect of liquidity position, leverage, profitability, and firm size against dividend policy. Dependent variable in this research is dividend policy measured by dividend payout ratio. Independent variables used are the position of liquidity, leverage, profitability, and company size. This research is an associative research with a causal approach. The population of this research is a manufacturing company listed in Indonesia Stock Exchange (BEI) in 2012 until 2014. Samples determined by purposive sampling method, with the number of samples of 28 manufacturing companies so that the total observation in this study as much as 84 observations. The data used in this research is secondary data. Data collection techniques using documentation method through IDX official website: www.idx.co.id.Metode data analysis used is multiple linear regression analysis with the help of software SPSS for Windows 22.Result research proves that the liquidity position does not affect the dividend policy on the company manufacturing listed on the Indonesia Stock Exchange (BEI) for the period 2012-2014. Profitability and firm size have a positive effect on dividend policy on manufacturing companies listed in Indonesia Stock Exchange (IDX) period 2012-2014, and leverage negatively affect dividend policy on manufacturing companies listed in Indonesia Stock Exchange (IDX) period 2012-2014.