Long-term Debt Financing Research Articles

How Does China’s Carbon Emissions Trading Policy Affect the Financing of High-Carbon Enterprises?

Evaluating the impact of carbon emissions trading (CET) policy on the operations and development of high-carbon enterprises is of great practical importance in a context where policy-makers aim to balance steady growth and reduce carbon emissions. Based on the panel data of A-share listed enterprises, this paper comprehensively employs the difference-in-differences (DID) and the difference-in-differences based propensity score matching (PSM-DID) methods to investigate the impact of China’s CET policy on the financing constraints and financing ability of high-carbon enterprises. The results indicate that: first, the level of financing constraints of high-carbon enterprises in China has significantly increased with the implementation of the CET policy from 2012 to 2019. Second, the impact shows significant heterogeneity in various industries, carbon markets, and the characteristics of enterprises. Third, the CET policy reduces the long-term debt financing ability of high-carbon enterprises by 22.26 percent during the sample period, but it has no significant impact on short-term debt financing ability. JEL Classification: C33, D92, G32, Q43, Q58

Green finance and the mitigation of corporate debt financing in China: evidence and implications for sustainable finance

To address the pressing challenges posed by environmental issues, numerous countries have been actively exploring green finance practices. Using a sample of listed companies in China from 2008 to 2020, this study aims to enrich the understanding of the economic consequences of green finance. Specifically, it is the first to investigate the causal relationship between green finance and corporate debt financing levels. Our findings reveal that green finance effectively mitigates corporate debt financing levels, and this conclusion remains robust after undergoing a series of rigorous tests. Further analysis reveals that green finance achieves this by alleviating financing constraints and enhancing executive compensation. Heterogeneity analysis demonstrates that the impact of green finance is particularly pronounced in state-owned enterprises, regions with lower marketization levels, superior industrial structures, and lower carbon emissions. Additionally, our research shows that with the strengthening of external environmental regulations, green finance significantly promotes the reduction of long-term debt financing levels but has no significant impact on short-term debt financing levels. The conclusions of this study provide valuable insights for policymakers and enterprises seeking to reduce corporate debt financing levels. Moreover, it offers a new perspective on the economic consequences of green finance, particularly in the context of debt financing.

Digital government and corporate leverage: Evidence from China

Corporate leverage is an indicator of economic health, and this topic has attracted a great deal of attention since the international financial crisis of 2008. This paper constructs a model of enterprise decision-making under a digital government and theoretically analyzes how the government digital reform impacts corporate leverage and the mechanism of this impact. Theoretical analysis has previously shown that digital reforms by governments help to ease the information asymmetry between banks and enterprises, which in turn affects the actual economic activities of enterprises. Based on these findings, the “one-stop government service” natural experiment used in this paper and the empirical analysis using a multiphase difference-in-differences (DID) method show that digital government can inhibit the short-term debt financing of enterprises while improving their long-term debt financing. This study further finds that the digital government can improve the level of long-term debt for long-term use, thereby reducing corporate leverage. By enriching the theoretical and empirical research on government digital reform, this paper contributes significant theoretical and practical insights to the literature on corporate leverage in the context of government factors.

How ESG performance affects maturity mismatches between investment and financing: Evidence from Chinese A-share listed companies

This study investigates the relationship between environment, society, and governance (ESG) performance and maturity mismatches between investment and financing based on unbalanced panel data from Chinese listed companies. The results suggest that ESG performance significantly reduces the potential for maturity mismatch between corporate investment and financing and that the ESG activities of Chinese enterprises are consistent with the principles of responsible investment. Specifically, society and governance performance significantly reduces maturity mismatch, while environmental performance exerts an insignificant effect. Enterprises with high ESG performance prefer long-term debt financing structures, and they also have increased trade credit and endogenous financing. In addition, investment efficiency and innovative investment are beneficial for ESG performance to promote the long-term transformation of debt maturity structures. Finally, ESG performance is more effective in reducing maturity mismatch caused by environmental policy and COVID-19.

Female CEOs and SME’s financing decision: evidence from firm-level data

PurposeThis study investigates the relationship between female CEOs and SMEs’ financing decisions. The study also examined the moderating role of ownership structure (female, foreign, and state ownership) in female CEO-SMEs’ financing decisions.Design/methodology/approachThe study has applied Generalized Least Square (GLS) and Binomial Logistic Regression. The study has used firm-level data from 2,700 Small and Medium Enterprises (SMEs) in the Chinese economy.FindingsThe results suggest that female CEOs use debt financing. However, the financing decision of female CEOs varies if we account for female ownership, foreign ownership, state ownership, firm association with big firms, and the industry in which the firm operates. This study also provides robust evidence that female CEOs utilize debt financing under certain conditions and that female CEOs prefer long-term debt financing to short-term debt financing when considering debt maturity choices.Originality/valueRecent studies report a negative relationship between female CEOs and financing decisions based on the rationale that females are risk-averse and choose less risky financing compared to their male counterparts. This study posits new evidence that female CEO financing decisions are not always risk averse if we consider female ownership, foreign ownership, state ownership, firm association with big firms, and the industry in which the firm operates. Thus, we contribute to the corporate governance literature, and this study implies a corporate financing policy.

Do Intra-industry Peer Effects Influence the Debt Financing Policy of Companies Listed in Thailand?

Rational imitation of financial policies, namely peer effects, was documented to prevail among firms within an industry in both developed and top emerging economies. Lacking evidence from medium-sized emerging Asian countries, this study examined intra-industry peer effects, i.e., imitation, on debt financing at Thai listed companies. The sample consisting of the firms listed on the Stock Exchange of Thailand (SET) during the years 2001–2018 was incorporated to discover those effects. Numerous databases associated with the SET (e.g., SETSMART) and the firms’ websites were used to collect financial numbers. With 6,058 firm-year observations, unbalanced panel data was then analyzed by using the random-effects and fixed-effects ordinary least squares models as well as the two-stage least squares regression. The main findings show that a focal firm imitates the long-term debt financing of its industry peers. Using the instrument approach to address endogeneity, the key results are confirmed. Peers’ equity shock as the instrumental variable decreases their financing with debt, subsequently lowering debt levels at a focal firm. This mimicking was operated through peer action, not peer character, i.e., performance. In additional tests, severe market competition was found to strengthen the uniformity of decision-making on debt finance among industry peers. Meanwhile, the high cost of information embedded in innovation-driven businesses has not been found to both promote and reduce peer effects on debt finance. Including the extra control variables at firm-specific levels, the key results remain robust. This study highlights a vein of social learning theory and competition-based theory in discussing herding behaviors toward all member firms in a certain industry. The conclusions enrich the literature on peer effects on debt finance policy.

Does Capital Structure Affect Profitability of Listed Ghanaian Firms?

ABSTRACT: Capital structure is one of the crucial decisions managers must make that can affect a firm's short-term and long-term value maximization prospects. Though extant studies have shown capital structure significantly affects profits, researchers have struggled to find an optimal mix of capital structure ideal for value maximization due to the influence of macro and micro factors. There is therefore the need for this to be properly studied contextually. Building on the Pecking Order Theory, this study examines the capital structure effects on profitability from a short-term, long-term, and total debt financing perspective on listed Ghanaian firms between 2003 and 2013. An unbalanced panel data of 23 listed manufacturing and service firms that are listed on the Ghanaian Stock Exchange are subjected to robust maximum likelihood heteroskedastic linear estimation models. Three main regressions that are run explain the short-term debt, long-term debt and total debt effect on firm profitability. The results show that short-term debt exhibits a positive effect on return on equity (ROE), whilst the relationship reverses for long-term debt, indicating that short-term financing was beneficial to firms rather than long-term financing. Also, total debt exhibited a negative and non-significant effect on return on equity. The author also found that firm liquidity exhibited a more pronounced positive effect on profitability for firms with short-term debt than long-term debt. Financial risk negatively affected the returns of only firms with short-term debt. Market share had a pronounced positive effect on ROE across firms whilst firm age exhibited a less pronounced positive effect on firm profits. Firm size and growth had increasing profit effects but was not significant in the dataset. Financial risk also negatively affected profits, but this was only significant in firms with short-term debt structures. This study finds that managers need to adopt more short-term debt financing rather than long-term financing as the former leads to more profits. There is a need for policymakers to develop long-term debt financing structures to compete in the Ghanaian debt market. It is also recommended that managers exercise due care when supplementing equity capital with debt.

The nexus between financing pattern, firm-specific factors, and financial performance: Panel evidence of listed SMEs in India

The study analysed the impact of financing patterns (FPs) on the financial performance of 226 listed small and medium enterprises (SMEs). Firm size, age, liquidity, sales growth (SG), and asset tangibility (AT) are treated as firm-specific control variables. The result indicates that total debt financing (TDF), short-term financing, and trade credit financing have a significant relationship with Return on Asset (ROA), whereas long-term debt financing (LTDF) does not. Further, Return on Equity (ROE) is used to confirm the robustness of the result and demonstrate the same direction of the relationship with financing. Thus, the study provides an illustrative description of relationships and helps in developing an understanding of accessing the future financial needs of SMEs.

ОБЛИГАЦИИ КАК ИНСТРУМЕНТ ПРИВЛЕЧЕНИЯ ФИНАНСИРОВАНИЯ ДЛЯ СУБЪЕКТОВ МСП

This article deals with the issue of attracting long-term debt financing by small and medium- sized businesses through the placement of bond loans. To date, there are conditions that make bond financing more profitable compared to bank lending. In many ways, the driving force of this market is private investors. This market segment is attractive to them due to increased interest rates. Thus, the allocation of citizens’ funds into business development tools is created, which contributes to the development of the national economy.

THE IMPACTS OF CORPORATE GOVERNANCE MECHANISMS AND OWNERSHIP STRUCTURE ON CAPITAL STRUCTURE OF CHINESE DUAL-LISTED COMPANIES

This research aims to assess how the mechanisms of corporate governance and ownership structure affect the capital structures of Chinese dual-listed companies that list their shares in the China A-share market and the Hong Kong market simultaneously from 2003 to 2019. A binary variable of state control firm attribute is introduced to proxy the political connection to the Chinese government. Both the independent director ratio and CEO duality are negatively and significantly associated with the long-term debt ratio. The board size negatively and significantly relates to the short-term debt ratio. Evidence of board members’ avoidance of investors’ pressure to use more debt and escape from debt lenders’ monitoring is observed in this research. Both foreign ownership and state ownership are significantly and negatively associate with the short-term debt ratio, but significantly and positively associate with the long-term debt ratio. Thus, both foreign investors and the Chinese government prefer the companies to achieve rapid growth through the use of more long-term debts. The binary variable of state control firm attribute has a significant positive association with the short-term debt ratio alone. However, evidence of declining use of long-term debt financing due to political connections, such as the issuance of equity, is not observed.

Analyzing the Debts Effects on Netflixs Liquidity and Costs

Netflix has issued substantial sums of debt in 2018 and 2019 in order to expand its content library and deal with the intense rivalry that exists in the streaming media sector. The objective of this paper was to investigate the ways in which Netflix's liquidity and costs of financing are impacted by the use of long-term debt financing. The annual reports that Netflix produced from 2017 through 2022 were scrutinized in great detail. According to the findings of this research, Netflix did not experience any liquidity issues in 2018 and 2019 as a result of its long-term debt financing. Therefore, organizations that provide streaming media may utilize long-term debt financing in order to make short-term investments if they managed the due dates of their loan in an appropriate manner. Meanwhile, based on the findings of this study, Netflix was able to reduce the costs associated with debt by issuing debt mostly in euros and using fixed interest rates. When interest rates are forecasted to rise, it may be beneficial for businesses to cut their debt costs by taking on debt denominated primarily in euros and offering fixed interest rates.

Effects of monetary policy uncertainty on debt financing: Evidence from Korean heterogeneous firms

This study investigates the combined effects of monetary policy uncertainty (MPU) and firm characteristics on Korean heterogeneous firms' capital structures in the short- and long-terms. The results reveal that while both MPU and firm characteristics play a key role in short-term debt financing, they appear to be less significant in long-term debt financing. Such asymmetric responses are mainly attributed to different business strategies and debt maturities. Firms make decisions on long-term debt financing based on their internal plans rather than interest rates or MPU. In contrast, firms can choose the appropriate timing to refinance or issue debts at a more favorable interest rate when financing through short-term debts. We find that the marginal effects of firm characteristics on short-term debt ratios vary with the level of MPU. Furthermore, the marginal effects of MPU differ across heterogeneous firms because of distinct firm characteristics. However, an increase in MPU leads to a decline in short-term debt ratios over the sample period. Our results provide some insights into the design of monetary policies to manage highly leveraged firms especially with short-term debts.

Debt Financing and Financial Performance of Manufacturing Firms in Kenya. African Journal of Commercial Studies

This study examines the conditions associated with long-term debt financing, including the obligation to repay borrowed funds on predetermined dates, the interest rate, loan duration, leverage level, and interest coverage ratio. Debt financing, being a crucial element in the growth and sustainability of businesses, has the potential to influence the outcome of financial performance in a variety of ways. The research commences by carefully analyzing the circumstances that are typically linked with long-term debt financing, which emphasizes the duty to repay any borrowed funds on predetermined future dates. Additionally, the study highlights the influential factors that may come into play, including but not limited to the interest rate charged on loans, loan duration, leverage level, and interest coverage ratio. A comprehensive review of the empirical literature provides valuable insights into the relationship between debt financing and financial performance. While some studies seem to suggest positive outcomes, such as increased profitability, others bring to the forefront the potential negative consequences that may arise, such as agency problems, information asymmetry, and financial distress costs. This study acknowledges the research gaps that exist within the current literature and emphasizes the importance of delving deeper into the specific impact that debentures, trade credit, and loans may have on the financial performance of manufacturing firms in Kenya.

THE EFFECT OF LONG-TERM DEBT FINANCING ON PROFITABILITY OF COMMERCIAL AIRLINES IN KENYA

<p>The objective of this study was to assess the effect of long-term debt financing on the profitability of commercial airlines in Kenya. Pecking order theory directed the study. A cross-sectional research design was adopted in the study. The census sampling technique was. Secondary data was collected from audited financial statements. Panel data was analyzed using descriptive and inferential statistics. Descriptive statistics consisted of minimum values, maximum values, mean and standard deviation and inferential statistics consisted of correlational analysis, Hausman test for fixed and random effects and random effects models. Hausman test indicated that the random effect model was appropriate for the study. The study results showed that long-term debt financing has a negative and statistically significant effect on the profitability of commercial airlines in Kenya. This is supported by a regression coefficient of –0.2318 and a p-value of 0.038. The study recommends that executives of commercial airlines should aim to have a long-term debt that is manageable by the company and ensure that the long-term debt load is compatible with a favorable long-term debt ratio for the company to function without worrying about defaulting on loans.</p><p> </p><p><strong>JEL:</strong> R40; L20; G20</p><p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/soc/0045/a.php" alt="Hit counter" /></p>

Effective risk management in the shadow of COVID-19 pandemic: The evidence of Indonesian listed corporations

The study uses COVID-19 to identify the treatment group as the difference in change of non-financial corporations (NFCs) risk management ratios over time to investigate the causal effect of the NFCs' effective risk management (ERM) practices on operational efficiency (OE). ERM was measured by solvency and liquidity ratios, while the risk management theory was developed to refine the scope of the study. The data were collected from the central bank of Indonesia to map the empirical analysis, and the difference in difference (DID) technique was used to illustrate how NFCs react to mitigate the negative impact of COVID-19 and generate OE. Specifically, a quasi-natural experiment was used to size the effect of ERM practices on corporate OE during the COVID-19 pandemic. The descriptive analysis revealed that the COVID-19 pandemic effect has been unequal across different industrial sectors. Moreover, the empirical findings showed that corporate risk management during COVID-19 is the source of structural change, which affects its existence and operational efficiency. While debt amount and age may affect corporate credit score, ERM practices led the indebted corporation to the flexibility of debt refinancing or/and restructuring, which offers them the ability to prevent bankruptcy and adapt to the changes while operating efficiently. The finding revealed evidence of the important role of long-term debt in offering protection to NFCs during the credit supply shock brought in by the COVID-19 pandemic. Furthermore, the findings show that long-term debt is negatively associated with corporate OE. This was expected given that corporations use long-term debt financing for long-term investment, while short-term debt funds the working capital. Thus, to assess the effect of debts on corporate OE, managers should consider their maturity structure, among other factors.

THEORETICAL AND PRACTICAL ASPECTS OF MANAGEMENT OF THE FINANCIAL STABILITY OF THE ENTERPRISE

The article considers the basic scientific approaches to the economic contents of the notions of financial stability, mechanism of enterprise management. Offered interpretations of the concept of the mechanism of financial stability enterprise management and main stages of the process of its formation. The activity of the Ukrainian enterprise "Stalkonstruktsia" LLC is characterized. It was determined that during 2019-2021, the company's balance sheet is completely liquid, which indicates a sufficient amount of funds to repay current liabilities. The indicators of the business activity of "Stalkonstruktsia" LLC in 2019-2021 positively characterize the company's activity, namely, the company uses its own capital effectively, we observe an increase in the turnover rate of stocks, finished products, accounts payable and an increase in the efficiency of their use, which is positively reflected in the business activity of the company. It was concluded that the enterprise needs to use more long-term debt financing in its economic activities, which will increase the return on equity.

Effect of Financing Decisions on Financial Performance of Small and Medium Enterprises in Nairobi City County, Kenya

Small and medium enterprises play a role in contributing to the development of the economy through job creation, poverty eradication, wealth creation as well as the creation of new businesses. However, SMEs have significantly high incidences of illiquidity and lack of credit access. Over the last two decades, alternative sources of SME financing have emerged and include equity, short-term debt, long-term debt, and internal financing. Nonetheless, despite the availability of these sources of financing, SMEs in Kenya are still experiencing poor financial performance. This study, therefore, sought to investigate the influence of financing decisions on the financial performance of SMEs in Nairobi City County, Kenya. The study sought to determine the influence of equity financing, short-term debt, long-term debt, and internal financing on the financial performance of small and medium enterprises in Nairobi City County. The study sought to determine the moderating effect of firm characteristics on the relationship between financing decisions and the financial performance of small and medium enterprises in Nairobi City County. An explanatory research design was used in this study. The unit of analysis was the top 100 small and medium enterprises in Nairobi City County. Stratified random sampling was used in the selection of 80 SMEs from the target population. This study used secondary panel data, which was collected by the use of a data extraction tool. Analysis of quantitative data was done by the use of inferential and descriptive statistics with the help of statistical software known as Stata version 14. This was followed by inferential statistics which included multivariate regression analysis. The results were presented in figures (bar charts and pie charts) and tables. The study found that equity financing has a positive and significant influence on the financial performance of SMEs in Nairobi City County. The study also established that short-term debt has a positive and significant influence on the financial performance of SMEs in Nairobi City County. In addition, the study established that long-term debt has a positive and significant effect on the financial performance of SMEs in Nairobi City County. Also, the study revealed that internal financing has a positive and significant effect on the financial performance of SMEs in Nairobi City County. The study recommends that the management of small and medium enterprises should make use of equity financing whenever they want to explain their businesses and when they are financing different projects including product development and internal business process improvement. Also, the management of small and medium enterprises should obtain loans from banks, Sacco’s, and microfinance institutions to finance their operations. Moreover, the study recommends that the SMEs in Nairobi City County should avoid obtaining short term loan since these loans have high interest which requires to be paid for a brief period of time and hence may negatively affect the financial performance of the SMES. The study recommends that the management of small and medium enterprises should seek to increase the total assets of their organization so as to enable them to obtain loans from financial institutions to grow their business and improve financial performance.

CEO personality traits and debt contracting: Evidence from pilot CEOs

Using pilot certificates as a proxy for the personality trait of sensation seeking, which captures the desire for varied, novel, and complex personal sensations and experiences, we find that firms with pilot CEOs use longer-maturity debt financing even when it is more costly than shorter-term debt. Our findings are robust to controlling for potential endogenous matching between firms and CEOs. Our evidence indicates that CEOs with sensation-seeking personality traits prefer long-term debt financing to avoid the liquidity risk associated with short-term debt financing that may hamper other corporate activities motivated by their sensation seeking.

CSR disclosure and debt financing in India: does CEO tenure matter?

PurposeThe study aims to examine whether corporate social responsibility (CSR) disclosure does improve debt financing of listed firms with sustainable development agendas coupled with high chief executive officer (CEO) tenure in India.Design/methodology/approachEmploying panel regression based on fixed effect and instrumental variable regression with fixed effect assumptions, the study examined data from the Bombay stock exchange from the period 2010 to 2019.FindingsThe study demonstrates that the disclosure of current exchange capital and moral capital cannot cause a firm to access short-term and long-term debt financing. However, lag investment in moral capital causes a positive effect on short-term debt financing. The second findings show that CEO tenure has a positive and statistically significant association with short-term debt financing and an insignificant association with long-term debt financing. The third findings show that the interaction of current CSR disclosure (moral and exchange capital) and CEO tenure is insignificant in affecting short-term and long-term debt finance. However, the interaction of lag CSR disclosure (moral and exchange capital) and CEO tenure positively affect short-term debt financing. The study addresses any endogeneity concerns arising from the CSR disclosure-debt financing association.Research limitations/implicationsThis study uses a single country to examine the inter-relationship between CEO tenure and debt financing and CSR measured by moral capital and exchange capital, thereby limiting the study's results for generalisation.Practical implicationsThe observation is that moral capital investment and disclosure do not guarantee new entrants the chance to access debt financing, but subsequent and lag CSR disclosure ensures access.Originality/valueNo studies examine morality from CSR disclosure on debt financing. This study shows that decoupling CSR into exchange capital and moral capital in accessing debt financing presents new inputs for scholarly debate on CSR.

The Impact of the Green Credit Policy on the Short-Term and Long-Term Debt Financing of Heavily Polluting Enterprises: Based on PSM-DID Method.

“Green economy and sustainable development” has become the focus of contemporary world economic development. As an important part of green financial instruments, green credit has become a hot topic. This paper investigates whether the Green Credit Policy has had any impact. Does it have a binding effect on the debt financing of heavily polluting enterprises? Using the Green Credit Guidelines as the starting point for the implementation of the Green Credit Policy, this paper takes Chinese A-share listed enterprises from 2004 to 2020 as the research sample, and applies the propensity score matching combined with difference-in-difference (PSM-DID) method to analyze the impact of green credit policies on the long- and short-term financing scale of heavily polluting enterprises. The study found that the implementation of the Green Credit Policy significantly suppressed the long-term financing of heavily polluting enterprises, but allowed for the expansion of short-term financing for heavily polluting enterprises. Compared with the state-owned enterprises, the Green Credit Policy has a more significant impact on non-state-owned enterprises in terms of suppressing long-term financing and increasing short-term financing, suggesting that the Green Credit Policy is affected by the “credit discrimination” of non-state-owned enterprises. Therefore, the Green Credit Policy still needs to be improved. This study provides empirical evidence of the effectiveness of green credit policies in China, and offers suggestions for further green credit policies in the future.