Level Of Long-term Debt Research Articles

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.

Фактори впливу на структуру капіталу нефінансових корпорацій України

The purpose of this study is to determine the factors that explain the capital structure of Ukrainian non-financial corporations. The study was carried out on a sample of 8525 Ukrainian large and medium-sized enterprises on the time horizon of 2014-2019, covering one economic cycle. Banks and non-bank financial institutions are excluded from the sample of enterprises, since the structure of their assets differs from that of commercial companies. To determine the impact of fundamental factors, the capital structure of companies is represented separately by three indicators: i) the level of current debt, ii) the level of long-term debt, and iii) the level of debt in general in the structure of liabilities of enterprises. The list of indicators that explain the capital structure of Ukrainian companies includes fundamental indicators – profitability, company size, asset structure, current liquidity, growth; and macroeconomic variables: GDP growth and consumer price index. The results of the study confirm that the conception of sequential actions best explains the principle by which Ukrainian companies form the structure of liabilities. According to the results of the modeling, the company’s factors demonstrate statistical significance, but do not explain the variation in the level of debt in terms of types of economic activity. Only the factors of profitability, asset structure and type of economic activity are statistically significant for all types of models. The sign of the influence of factors that determine the capital structure of Ukrainian companies corresponds to the results of studies of both developed countries and transition economies. Also, the impact of factors on the level of indebtedness of enterprises differs significantly depending on the maturity of obligations. This study can be further developed by updating the calculations and data that include the period of recent crises. This will allow us to check whether companies have changed their approaches to choosing a capital structure during the wartime.

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.

What Drives Negative Investment-Cash Flow Sensitivities? Revenue Effect Versus Corporate Life-Cycle Dynamics

In order to identify the economic driver of negative investment-cash flow sensitivities (ICFS), we derive testable predictions from extending a theoretical investment model with endogenous financing costs (“revenue effect”) and contrast them with the corporate life-cycle hypothesis. We find that firms with (i) lower levels of long-term debt display stronger negative ICFS, and (ii) firms with more risky revenues invest more, which contradicts the predictions of the revenue effect. At the same time firms with strongly negative ICFS are (iii) smaller, (iv) younger and (v) have higher growth opportunities, which is consistent with the life-cycle hypothesis.

The Economic Situation of Polish Cities in Post-Mining Regions. Long-Term Analysis on the Example of the Upper Silesian Coal Basin

The purpose of this article is to identify the long-term economic consequences of mine decommissioning for five selected cities located in Poland in the Upper Silesian Coal Basin. It is carried out over a period of 18 years and covers the period 2003–2020. The economic effects of decommissioning are examined in the context of the budgets of cities where mining plants were closed. In the course of the analyses, the authors of the article attempt to answer the following research questions: (1) has the decommissioning of the mines influenced the current and strategic situation of the examined cities in terms of their budgets? (2) Have the examined cities felt the economic effects of mine decommissioning in a similar way? The assessment of the economic effects of mine decommissioning was carried out from the following two perspectives: (1) operational, relating to the balance of local budgets, and (2) strategic, taking into account the level of long-term liabilities of the examined cities. As part of the research methodology, budget analysis, descriptive statistics, dynamics and trends analysis, correlation and comparative analysis were used. The research carried out in the article shows that the decommissioning of hard coal mines in the examined cities of the Upper Silesian Coal Basin had a negative impact on the balance of local budgets and the level of long-term debt. This was especially true in the cities where all the mines had been decommissioned and which had no way of replacing the mining industry with other economic alternatives. The cities with more diversified economic activity and sources of income were in a better economic condition.

The review of the financial strategies of Polish wood-industry companies listed on the Warsaw Stock Exchange

The review of the financial strategies of Polish wood-industry companies listed on the Warsaw Stock Exchange. The paper focuses on the analysis of the financing strategies of wood industry enterprises listed on Warsaw Stock Exchange in 2018 - 2020. This paper examines three main values characterising company's financing strategy: equity capital share in total capital, equity capital share in fixed assets and long-term debt share in total debt. The data for calculations was taken from publicly available quarterly financial statements of analysed entities from 1st quarter of 2018 to 3rd quarter of 2020. The analysis showed that moderate financing strategy was used by Biofactory and KLON companies and an aggressive strategy was used by Standrew. KPPD financing strategy was not possible to clearly define due to the high volatility of values of examined ratios and depend on the considered period. The highest variability in the structure of foreign capital was observed in KLON - in this company the highest level of long-term debt was observed (above 70% of total debt).

Capital Structure and Firm Financial Performance: Moderating Effect of Board Financial Literacy in Nigerian Listed Non-Financial Companies

Objective – The study examined the moderating effect of board financial literacy on the relationship between capital structure and firm financial performance of listed non-financial companies in Nigeria. Design/methodology – Capital structure was measured by long term debts to total assets, short term debts to total assets equity to total debt ratio and board financial literacy was measured by ratio of board members that have professional and academic qualification in accounting, finance and economics. Meanwhile financial performance was measured by return on assets. Secondary data was extracted from the sampled firms annual report and accounts and analyzed using Panel Least Square. Results – The study revealed a positive and significant relationship between long term debt and ROA. It also shows that board financial literacy moderate capital structure significantly and increase firm performance. The study recommended that the management of Nigerian listed non-financial firms should optimize the capital structure in order to increase the financial performance. They can do that through ensuring that their capital structure is optimal by using more of current debts and non-current debt than equity. The Board of Directors of Nigerian listed company should be concerned about the level of long term debt, short term debt and include members that are financially literate who will contribute in financing decision of firm in order make optimal capital structure for better financial performance. This is because the findings of this study revealed a positive significant moderating relationship between long term debt, short term debt and financial performance.

Financial Sustainability and Earnings Management in the Spanish Sports Federations: A Multi-Theoretical Approach

The objective of this study is to analyze, from a multi-theoretical framework, whether the managers of the Spanish National Sports Federations (NSFs) apply earnings management using accounting accruals as a measure of managerial discretion; secondly, whether these practices are associated with both the level of dependence on external resources, and the economic and financial control mechanisms exercised by the Superior Sports Council (Consejo Superior de Deportes, CSD) for the granting of public subsidies. The study provides evidence that long-term debt levels and the size of sports federations are determinants of earnings management, with a more accentuated relationship in the case of Olympic and Paralympic sports federations.

The impact of revenue diversification on municipal debts: comparing short-term and long-term debt levels

ABSTRACTThe extant literature has offered two competitive implications of revenue diversification: revenue stabilisation and fiscal illusion. Stabilisation helps governments have less revenue volatility, while fiscal illusion expands tax burdens through the increase in expenditure. The competitive views on revenue diversification leave a niche to explore the association between revenue diversification and debt levels in local governments. We estimate the static and dynamic effects of revenue diversification on both short-term and long-term debt levels in 150 fiscally standardised cities. Our findings show that local governments with greater revenue diversification are more likely to reduce short-term debts while expanding long-term debts. The findings imply that a stabilised revenue structure helps local governments better manage operational budgets but also invest in capital projects with greater debt capacity.

Modified audit opinions and debt contracting: evidence from China

ABSTRACTWe examine whether the type of audit opinion a company receives is associated with the debt characteristics of Chinese companies. Our analyses indicate that companies receiving modified audit opinions pay higher interest rates and have more short-term debt. When the auditor mentions going concern in the audit opinion, companies pay higher interest rates and have a lower percentage of long-term debt, but this result is weaker for state-owned enterprises. We also find that companies receiving qualified or adverse opinion pay higher interest rates and have a lower level of long-term debt as a percentage of total debt.

Family firm identity and capital structure decisions

PurposeThe purpose of this paper is to grasp the effect of familiness on capital structure decisions in family firms, as family firm identity may be an important source of competitive advantage due to its potential to moderate relationships with stakeholders such as banks.Design/methodology/approachThe paper uses panel data from 2010 to 2014, which combine financial and structural data on 691 large private German companies. The econometric approach is a random-effect and tobit panel regression using different dependent variables relating to debt.FindingsThe study reveals that family firms have significantly higher overall and long-term debt levels compared to their non-family counterparts. Contrary to the extant literature, tangibility is not significantly related to debt in the context of family firms and the hypothesized higher usage of trade credits by family-owned businesses could not be supported.Research limitations/implicationsFuture research can improve the measurement of familiness by changing from a dichotomous to a continuous variable, acknowledging that family businesses are not homogenous. This would also enable a different econometric approach.Practical implicationsA practical implication for family firms is to actively capitalize on their identity and thus, improving the way they present themselves towards different groups of stakeholders to mitigate information asymmetries and enhance trust.Originality/valueThe paper investigates large private family-owned businesses, applies multiple dependent variables, and uses a family firm specific theoretical framework, namely familiness, to explain the family’s influence on the business.

Capital Structure Determinants Based Upon Total Debt, Short- and Long-Term Debt, Industry and Time

We investigate important debt level determinants and whether or not these determinants are affected by industry and time. Continuing from our previous paper, we include short- and long-term debt levels and test whether or not there are differences of key debt level determinants between long- and short-term debt levels. We find that unlike Western firms, short-term debt level takes a bigger portion of total debt level than long-term debt level in Korean firms. Although this is an unusual phenomenon reflecting financial theory, this is the way Korean firms manage their debts. This proves that Korean firms rely more upon short-term debt. We find that not only total debt level, but also short- and long-term debt levels also have target debt levels; and this fact implies that adjusting debt level is firms’ top priority as previous debt levels are related to firm‘s bankruptcy probability and efficient debt management policy. This of course supports the trade-off theory. We also find that previous debt levels, total assets and firms’ earnings are the most important capital structure determinants for firms; and these factors are followed by new investment, dividend and tangible assets. Their associations with DLs (total debt levels, and short- and long-term debt levels) are generally consistent. Namely, DLs are decided by the similar key factors. In addition, cash level change, interest rate and time variables show different directions with DLs between short- and long-term debt levels. They also show different associations with DLs in line with industries and time. Namely, some variables play different roles for firms’ short-term and long-term debt level decision in accordance with industries and time. This paper also suggests that annual stock price growth and R&D expenses have less influence on DLs. We find some evidence that industry and time factors influence debt level shifts, but we admit that we do not have crystal clear structural evidence to prove these influences. Finally, this paper mainly supports the trade-off theory. However, as given evidence of the negative relationship between DLs and earnings, we could also partially support the pecking order theory. However, we do not find evidence that support the market timing theory.

LIQUIDITY RISK VS. UNDERINVESTMENT PROBLEM : AN EMPIRICAL STUDY OF THE TEXTILE SECTOR OF PAKISTAN

This research study tests the underinvestment hypothesis and the liquidity risk hypothesis in the textile sector of Pakistan. A panel data set of 105 textile companies has been employed over eight years extending from 2004-2011. Using 2-Stage Least Square Estimation procedure (2SLS) and the Generalized Method of Moments (GMM), the empirical findings reveal that textile firms in Pakistan use high level of long term debt to shrink the liquidity risk which allows the firms to use more debt. Moreover growing firms use less leverage than the non growing firms when exposed to high growth opportunities. The growth opportunities exhibited a negative relationship with debt maturity but no significant economic relationship with leverage. In the textile sector of Pakistan leverage and short term debt maturity structure tends to complement each other to hedge the firms against the liquidity risk.

Debt Structure When Bankruptcy Law Offers Incentives to Restructure

We augment the LLSV creditor rights index with a new “restructuring index” that measures the incentives provided to creditors to grant concessions outside formal bankruptcy. We study the joint impact of the two indexes on a firm’s leverage policy. We show that the two indexes have at most a statistically weak effect on the level of long-term debt. Instead, the two indexes affect the distribution of long-term debt into bank debt, public debt and private placements. Bank debt increases when the values of both indexes are high. Public debt increases when the creditor rights index is high, but the restructuring index is low, and private placements increase when the restructuring index is high, but the creditor rights index is low. Smaller firms with fewer tangible assets borrow more from banks when both the creditor rights and restructuring indexes are high. When aggregated at the country level, these firm-level results suggest that bankruptcy law can influence the relative importance of credit and equity markets as sources of financing GDP growth.

Debt Structure When Bankruptcy Law Offers Incentives to Restructure

We augment the LLSV creditor rights index with a new “restructuring index” that measures the incentives provided to creditors to grant concessions outside formal bankruptcy. We study the joint impact of the two indexes on a firm’s leverage policy. We show that the two indexes have at most a statistically weak effect on the level of long-term debt. Instead, the two indexes affect the distribution of long-term debt into bank debt, public debt and private placements. Bank debt increases when the values of both indexes are high. Public debt increases when the creditor rights index is high, but the restructuring index is low, and private placements increase when the restructuring index is high, but the creditor rights index is low. Smaller firms with fewer tangible assets borrow more from banks when both the creditor rights and restructuring indexes are high. When aggregated at the country level, these firm-level results suggest that bankruptcy law can influence the relative importance of credit and equity markets as sources of financing GDP growth.

Debt Maturity, Underinvestment Problem and Corporate Value

This study examine show Malaysian public listed firms with low and high corporate value use debt maturity as a tool to mitigate under investment problem.This study employs panel data methodology instead of the commonly used pooling regression. Results show that firms with low Tobin’s Q ratio, a proxy for corporate value, maintain lower level of long-term debt to mitigate agency costs of debt caused by under investment problem, whereas firms with high Tobin’s Q ratio are indifferent with the debt maturity decision.This study extends the literature on the determinants of debt maturity structure by highlighting the importance of recognizing the firms by the corporate value in relation to the under investment problem. The findings also provide additional justification to the literature in explaining the negative relationship between agency costs of debt and debt maturity structure using a sample of firms from a developing market.

Business Cycle and Long-Term Debt: Effects on Hotel Operating Lease

Over the last 25 years, many hotel operators have chosen to lease their property instead of owning as a financing strategy. This paper examines the combined and separate contributions of business cycles and a firm's level of long-term debt on hotel owner/operator use of operating leases. The results indicate that operating leases were used more often during contracting business cycles and less often during cycles of expansion. According to the results, operating leases and long-term debt are not complementary, although they are increasingly treated as complements when the economy suffers a downturn.

Market Imperfections and Optimal Capital Structure: Evidence from Indian Panel Data

This article is an attempt to answer the question: whether corporate firms in India have a tendency to adjust their financial structure to a targeted level? For this, we have focused on the partial adjustment process of long-term debt and equity. The results show evidence in favour of adjustment process towards optimal level of long-term debt and equity, but it is very slow in both the cases, especially in case of equity. Adjustment speed for long-term debt in India is similar to the speed of adjustment of developed countries, the United States (US) and the United Kingdom (UK). This finding does not support the view that economies characterized by private lending adjust faster than market-dominated economies as transaction cost of private lending is less in comparison to public lending. This study contributes to the existing literature by considering capital market regulation as one of the determinants of capital structure. It has been observed that stringency of capital market regulation exerts a negative impact on equity and debt. As the stringency of capital market regulation increases, it reduces the problem of ‘asset substitution’, and at the same time, raises the transaction cost of fund raising from the public domain. Moreover, the interaction between real and financial decisions has also been observed as the labour demand and leverage is inversely related. The impact of labour demand on leverage is transitory in nature.

The impact Debt Structure on Firm Invstments: Emprical Evidience from Turkey

The purpose of this study is to examine the impact of corporate debt structure on firm investments in Turkey. The regression and correlation analysis reveal a significant positive effect between corporate debt structure and firm investments. This effect is relatively strong for companies with high growth opportunities compare to companies with low growth opportunities. Consistent with the existent literature these findings provide support that a higher level of long-term debt in total debt structure reduces investments for firms with high growth opportunities. These effects need, therefore, to be incorporated in debt structure for Turkish firms to support their assets with proper financing sources.

Determinants of corporate debt maturity in South America: Do institutional quality and financial development matter?

We test whether a country's level of financial development or institutional quality (or both) has a first‐order effect on corporate debt maturity decisions on a sample of 359 non-financial firms from five South American countries over a 12‐year period. We find that there is a substantial dynamic component in the determination of a firm's debt maturity, and firms face moderate adjustment frictions toward their optimal maturities. More importantly, the level of financial development does not influence debt maturity, whereas the institutional quality of a country has a significant positive effect on the level of long-term debt in a firm's financial structure. Our results support the hypothesis that the quality of national institutions is an important determinant of corporate financing in general and of debt maturity in particular.