Make Financing Decisions Research Articles

Analysis of Financing Channels of Real Estate Companies in China

With the continuous development of China's economy, the real estate industry plays an important role in it, which witnesses booming growth. However, with its rapid development, it has also brought great problems and challenges, such as blocked funding sources and high financing costs. Therefore, this article will study the financing channels of several listed real estate companies, China Fortune Land Development CO, Poly Development Co., Ltd. since 2014 to 2018, comparing and analyzing the financing channels of private and state-owned enterprises. By extracting information about funding costs and risks from financial and public debt information, the differences in WACC values, cash flow status, and debt structures under different companies' financing plans will be compared. Accordingly, this study investigated possible reasons of choices made by these two enterprises. Enterprise decision-makers still need to make sufficient understanding and weigh the pros and cons before making financing decisions and should not finance blindly. These results of this article have reference significance for the financing of future real estate companies.

Different approaches to regulate digital health applications in seven European countries

Abstract Background Demographic ageing, shortages in health workforce and increased use of digital tools in daily life kindle decision makers’ interest to utilize digital health applications (DHA). While there are several reviews that provide an overview across remuneration frameworks, no synthesis between additional regulatory aspects and frequency of remuneration approval has been conducted. Methods European countries with either strong status in digital health in general or regulation for health apps in particular were chosen for analysis (BE, DK, DE, EE, EN, FR, NL). Country specific information was collected from scientific and grey literature, legal and stakeholder webpages. Semi-structured interviews were conducted with country experts via video call or e-mail and analyzed using Mayring’s structured, qualitative content analysis. Preliminary results We find three approaches concerning DHT-definitions: For BE, DE, FR, specific regulations define national remuneration requirements. EN and NL define only minimum requirements while decentralized payors make financing decisions. DK and EE fit DHTs into existing financing schemes. Among countries with a national financing framework, DE achieved the largest number of approvals, followed by FR, while BE has not yet issued a (lasting) financing approval. Evaluation requirements focus on clinical and economic outcomes, largely ignoring non-clinical improvements for patients. Conclusions The German regulation stands out with a peculiar definition that might help clarify evaluation criteria, increase the number of financing approvals but also empower patients while reducing the role of health workforce in their application. BE and NL regulations necessitate involvement of health workers, thus addressing structurally different applications. Key messages • Drawing lessons for DHT regulations across countries needs to address differences in national definitions and evaluation criteria. • A standardization system for DHT may help to speed utilization of effective tools and clarify evaluation requirements.

Are “too big to fail” banks just different in size? – A study on systemic risk and stand-alone risk

This study shows that investment decisions drive tail risks (i.e., systemic risk and stand-alone tail risk) of TBTF (Too-Big-to-Fail) banks, while financing decisions determine tail risks of non-TBTF banks. After the Dodd-Frank Act, undercapitalized non-TBTF banks continue to gamble for resurrection, and their stand-alone tail risk become more sensitive to funding availability and net-stable-funding-ratio than TBTF banks. We show that implementing a slimmed-down version of TBTF regulations on non-TBTF banks cannot efficiently contain the stand-alone risk of non-TBTF banks and cannot eliminate TBTF privilege. Moreover, non-TBTF banks together generate larger pressure of contagion on the real economy, and they herd more when making financing decisions after the Act. Our findings highlight the need for enhanced regulations on the liability-side of non-TBTF banks.

Board Composition and Cash Hoarding: Evidence from Jordanian Small- and Medium-Sized Enterprises

This study examines the influence of board composition on cash hoarding in Jordan. Based on a sample of 24 small and medium-sized enterprises (SMEs) between 2010 and 2020, the results show that board size has a positive impact on cash hoarding, whereas board independence has a significant negative influence on cash hoarding. Importantly, we note that cash hoarding is not affected by either chief executive officer (CEO) duality or female directors, contradicting the idea that women are risk-averse when making financing decisions. Regarding the other explanatory variables, the results reveal that firm size and operational risk have a significant and negative effect on cash hoarding, whereas growth opportunities have a positive and significant impact on cash hoarding. Finally, cash hoarding is not affected by cash flows. The results remain robust after addressing the endogeneity problem, and they enrich the literature with new evidence of the influence of female directors on cash hoarding in Jordan, where female board representation is low. Furthermore, the results provide evidence of the role of CEO duality on boards of directors, an issue that regulatory bodies in Jordan should consider when planning future governance reforms. Subjects: Quantitative finance, corporate finance, business, management, and accounting.
 
 Received: 9 July 2023 / Accepted: 18 November 2023 / Published: 5 January 2024

Financing Decisions and Financial Stability: Moderating Effect of Firm Size of Listed Industrial Goods Firms in Nigeria

The ability to make savvy financing decisions is now a key differentiator for corporate firms seeking to outpace competition and achieve sustainable growth. In view of this, this study examined the moderating effect of firm size on the nexus between financing decisions and financial stability of listed industrial goods firms in Nigeria. The study employed Altman’s Z-score in evaluating the financial stability of listed industrial goods firms in Nigeria and a combination of debt-equity ratio, interest coverage ratio, and total debt ratio as key predictors. Altman’s Z-score assisted in gauging firms’ financial stability over the research period. Additionally, the natural logarithm of total assets was integrated into the analysis to further refine the predictive model and to achieve the study objectives. The study adopted an ex-post facto research design and utilized a panel data of one hundred and fifty (150) pooled observations gathered across a sample of ten (10) listed industrial goods firms in Nigeria over a period of fifteen (15) years (2009-2023). The study employed descriptive statistics tools, Pearson correlation analysis and Fixed effects regression technique via Eviews 10.0 statistical package in analyzing the data. The study findings revealed that with the moderating effect of firm size, debt equity ratio has an insignificant negative relationship {(Coeff. = -0.000247 (0.6571)} with financial stability of listed industrial goods firms in Nigeria while interest coverage ratio has a significant positive relationship {Coeff. = 2.322405 (0.0173)} with financial stability of listed industrial goods firms in Nigeria. It also revealed that total-debt ratio has an insignificant negative relationship {Coeff. = -0.002365 (0.4236)} with financial stability of listed industrial goods firms in Nigeria. It was thus concluded that firm size has a significant moderating effect on the relationship between financing decisions and financial stability of listed industrial goods firms in Nigeria. The study recommended, amongst others, that firms should consider their size when making financing decisions and adjust their strategies accordingly for enhanced financial stability, growth prospects, and overall success.

Debt overhang and carbon emissions

PurposeThis study investigates the association between debt overhang and carbon emissions (both direct and indirect emissions) using a sample of US publicly listed firms.Design/methodology/approachThe study applies generalized least squares (GLS) regression analyses to a sample of 2,043 US firm-year observations over a period of 14 years from 2007 to 2020. The methods include contemporaneous effect, lagged effect, alternative measures of carbon emissions and debt overhang, intensive versus non-intensive analysis, channel analysis, firm fixed effects, change analysis, controlling for credit rating analysis, propensity score matching approach, instrumental variable analysis with industry and year fixed effect.FindingsThis study's findings reveal that the debt overhang problem increases carbon emissions. This finding holds when the authors use alternative measures of carbon emissions and debt overhang. The authors find that carbon abatement investment is a channel that is negatively impacted by debt overhang, which in turn increases carbon emissions. This study's results are robust for several endogeneity tests, including firm fixed effects, change analysis, propensity score matching approach and two-stage least squares (2SLS) instrumental variable analysis.Practical implicationsThe outcome of this research has policy implications for several stakeholders, including investors, firms, market participants and regulators. This study's findings offer insights for investors and firms, helping them allocate resources effectively and make financing decisions aimed at reducing carbon emissions. Regulators and policymakers can also use the findings to formulate policies that promote alternative sustainable finance practices.Originality/valueThe outcome of this research is likely to help firms develop their understanding of the debt overhang problem and undertake strategies that yield a significant amount of funding to invest in reducing carbon emissions.

Development banks and state-led investments: new research questions

ABSTRACT The aim of the article is to bring in the concept of governance and financial bureaucracies into the discussion on financing of innovation and development. The article refers to national development banks as the example of state-backed investors who make investment decisions in line with policy priorities (to prioritized sectors, technologies and development projects). While building on the examples of public development banks, the article seeks to conceptualize the governance of public strategic investments through the notion of a state-led ‘investment function’. In doing so, the article seeks complementarity of the concepts that derive from economics and innovation literature on one hand and public policy and governance literature on the other hand. This study suggests that the governance of state-led investments can be understood as a combination of financial policies, institutions and organizational routines that translate into capacities of respective public bureaucratic structures to make financing decisions.

Implications of financial leverage for bank profitability in Ghana

The complexity of the relationship between debt and equity financing models and their impacts on bank profitability in the Ghanaian banking sector cannot be overemphasized. This study examines the impacts of the two financing models on bank profitability. Emphasis is placed on the importance of credit risk, liquidity risk, and capital adequacy when making financing decisions. To measure bank profitability, the research employs two key metrics: Risk-adjusted return on assets (RAROA) and risk-adjusted return on equity (RAROE). These metrics indicate how well banks are performing financially. An inverse relationship between bank profitability (measured by RAROA) and credit risk was among the research findings. This implies that higher credit risk negatively affects profitability. There is a direct link between capital adequacy and RAROE, inferring that as banks increase their lending activities, they need to maintain adequate capital to safeguard their profitability. We recommend a balanced financing approach, which mitigates risks associated with excessive debt while still benefiting from the advantages of asset diversification and strategic growth.

Employing Strategic Planning in Making Financing Decisions: An Analytical Study on a Sample of Iraqi Commercial Banks

This study provides a comprehensive analysis of the impact of employing strategic planning on financial decision-making using both exploratory and descriptive methods. The results demonstrated a consensus among participants regarding the importance of strategic planning and financial decisions, enhancing the competitiveness of organizations. The study also emphasizes the importance of continuous research and precise analysis of financial challenges, predicting future market changes. The researcher strongly recommended making data-driven decisions, maximizing the benefits of data analysis and financial modeling techniques in informing strategic financial decisions.

Model Sistem Penunjang Keputusan Untuk Pengelolaan Pembiayaan Nasabah Di BPR Sehat Sejahtera Universitas Pamulang

Abstract
 
 One of the BPRs that is currently developing in South Tangerang is BPR Sehat Sejahtera. BPR Sehat Sejahtera is part of the Pamulang University Sasmita Group, whose function as a bank is to channel financing to community businesses so that they are able to support the country's economy. To distribute financing, BPR managers are expected to be able to conduct financing analysis to reduce the risk of financing failure. Until now, financing analysis carried out by BPRs tends to be manual and requires quite a long time to make financing decisions. One method that can be used to assist in financing analysis is the credit scoring model. To facilitate decision making, an SPK was formed with a credit scoring model to provide several choices regarding customer financing applications. The DSS development process follows the traditional software development stages, namely: (1) planning, (2) analysis, (3) design and (4) implementation. SPK is developed using a spreadsheet model with a dialog display that supports user needs. The credit scoring model developed uses several methods, namely discriminant analysis, multiple linear regression, logistic regression, and decision trees. Each method will produce a different credit scoring model to be included in the SPK model base. The SPK prototype developed resulted in several financing analyzes according to the credit scoring model used. The prediction accuracy shown by credit scoring models ranges from 70% -80%. This method is capable of producing a model that provides a fairly high predictive accuracy. Meanwhile, the decision tree method is still not optimal in producing a credit scoring model.
 
 Keywords: financing analysis, discriminant analysis, BPR, credit scoring, decision tree, multiple linear regression, logistic regression, decision support system (DSS)

Optimal Debt and Risk Balancing Behavior of Rural Households in China: Evidence from a Discrete Choice Experiment

ABSTRACT Using an in-the-field discrete choice experiment on 336 farmers from rural China, this study aims to determine whether farmers optimize debt according to the optimal capital structure models and assess whether there is evidence of risk balancing behavior among Chinese farmers when they make financing decisions under risk constraints. Results suggest that farmers will increase leverage with greater profits, reduced interest rates, reduced business risk, lower risk aversion, and increasing prudence; they will reduce credit demand with increased collateral requirements, shorter repayment terms, and reduced loan usage flexibility. We also found significant heterogeneity among farmers and substantial differences across areas.

Penerapan Manajemen Risiko Kredit Dan Likuiditas Dalam Memberikan Pinjaman Dan Pembiayaan Kepada Anggota (Studi Pada BMT Nashrul Umam Balen)

Based on the regulation of the Financial Services Authority (OJK) regarding the implementation of risk management in Islamic microfinance institutions, including the management of credit risk and liquidity risk. Credit risk (financing risk) is a risk that occurs due to the inability of the borrower and/or others to pay dependents to financial institutions. Whereas Liquidity risk is the risk that occurs as a result of NBFI liquidity management (Non-Bank Financial Services Institution) which failed. The purpose of this research is to know the application of risk management in providing financing to members. In this research, the author used a qualitative approach with a descriptive method and type of case study research on the object. With this methodology, the author describes the application of management credit and liquidity, methods of financing decisions, and integration of risk management in financing. The research results obtained are: (1) The application of risk management is to reduce financing so that NPL (Non-Performing Loan) financial institutions remain below standard; (2) In making financing decisions, the marketing department is required to: observe the main principle, namely 5C which relates to the overall state from prospective members, including character (character), capital (capital), capacity (ability), collateral (guarantee), and condition of the economy (state of the economy); (3) In the implementation of day-to-day operations of risk management integration credit and liquidity are indispensable in providing loans and financing to members. This is due to integration in implementation risk management for credit and liquidity risk can have implications for the liquidity position of BMT.

The Relationship Between Capital Sructure and Financial Performance of Firms in Ghana and Nigeria

This study aimed to investigate, using a sectorial analysis, the relationship between capital structure and financial performance and consider the effect of debt maturity on the relationship. the relationship between capital structure and financial performance, considering the debt maturity, using 425 cross-sectional firm-year samples from firms in Ghana and Nigeria from 2014 to 2019. The empirical findings suggested a significant negative relationship between capital structure and financial performance. Debt maturity did not affect the relationship between capital structure and financial performance. However, the Industry influences the direction of the relationship between capital structure and financial performance. Also, debt maturity influences the capital structure performance relationship in specific sectors but not the market. This paper extends on previous studies on the relationship between capital structure and financial performance by incorporating sectorial and debt maturity on firms in Ghana and Nigeria. The findings of this study will assist finance managers in maximizing performance by considering financially sensible heterogeneities such as the sector and the funding source when making financing decisions.

Capital structure and stock price of non-financial firms listed in Viet Nam

The aim of our paper is to consider the non-linear effect of the capital structure represented by debt ratio on stock prices of non-financial firms listed in Vietnam. The research sample in this paper is 458 firms, which was selected by the purposive sampling method. The research data has been extracted from audited financial statements of the firms at the end of every year over the period from 2015 to 2019 and processed correspondingly with stock price statistics from FiinPro Data. According to the panel data of our paper, we used Pooled Ordinary Least Squares (POLS), Fixed Effects Model (FEM) and Random Effects Model (REM), but we only selected FEM after using Redundant Fixed Effects test, Breusch-Pagan test and Hausman test. However, the Wald test’s result showed that the heteroscedasticity does exist in the model; therefore, we adjusted by using Generalized Least Squares (GLS) method. The final estimation results based on GLS show that capital structure has a positive effect on stock price within a limit of debt ratio and will have a negative effect when this limit has been exceeded. This implies that capital structure has an inverted-U-shaped effect on stock price, and we identify the debt ratio threshold of capital structure of 22.07%. The findings are expected to provide useful information for financial managers when making financing decisions with the expectation of maximizing shareholder value and also for investors when analyzing and investing in stocks. The limitations of this research are that the research sample does not include all non-financial firms listed in Vietnam and the research model has not considered the moderating or intervening relationship between factors; according to that, future studies may consider these.

Does Financing Decision-Making by Regional Government-Owned Syariah Banks Depend on Financial-Information Quality and Managers' Characteristic?

This study examines the impact of financial information quality on managers’ financing decision-making. It also investigates the role of managers’ characteristics – educational background, gender, and working period – on the relationship between the quality of financial statement information and financing decision-making. The samples were finance managers at Bank Aceh Syariah, a Syariah bank owned by the regional government in Aceh, consisting of 24 finance managers at the branch offices and 86 finance managers at sub-branches that spread throughout Aceh. The data was obtained by using a questionnaire distributed using google form. A multivariate analysis was used to test the hypothesis. The results showed that the quality of financial statement information has a positive effect on financing decisions. It becomes the basis for managers in making financing decisions in Islamic banks owned by local governments. Managers’ characteristics do not influence financing decisions and do not strengthen or weaken managers in making financing decisions based on financial statements. The result confirms hypothesis 1, however, it does not support any other hypotheses regarding finance managers’ characteristics. Therefore, it is suggested for future research to broaden and compare the characteristics of finance managers of national Islamic banks in Indonesia and Islamic banks from other countries to capture comprehensive results.

Factors Affecting the Financing of Small and Medium Sized Real Estate Enterprises

Under the role of private capital in financial services, can shadow banking play a positive role in the development of small and medium-sized real estate enterprises. Based on this thinking, this paper puts forward the role of shadow banking in the financing process of small and medium-sized real estate enterprises. Through the analysis and demonstration of AHP model, it quantifies the key factors of small and medium-sized real estate enterprises in the four financing schemes of trust, REITs, financing guarantee and private financial system, and extracts the key factors as the comparison items. The financing suggestions for small and medium-sized real estate enterprises mainly focus on making financing decisions according to the consistency of their own financing objectives and enterprise life cycle, and under the guidance of relevant policies and measures of the State Council and other countries, timely make financing plans based on the principle of low financing cost, so as to realize the sustainable development of small and medium-sized enterprises.

Director Networks and Cost of Equity Capital: Based on “Busy Director Hypothesis” Analysis

This paper uses the data of Shanghai and Shenzhen A-share-listed companies from 2008 to 2018 to construct the director networks as an indicator to explore the relationship between the company’s director networks and the cost of equity capital and the influence of nature of property rights and the ownership structure on the aforementioned relationship. The research results demonstrate that director networks cannot effectively reduce the cost of equity capital. This conclusion verifies the “busy director hypothesis.” With the increase in the director networks centrality, the increase in the cost of equity capital in non-state-owned listed companies is more significant compared with state-owned listed companies; equity concentration plays a significant negative regulatory role in the director networks centrality and affects the cost of equity capital. Compared with the networks centrality of independent director, the networks centrality of nonindependent director has a stronger negative effect on the cost of equity capital. This article broadens the perspective of corporate governance research and provides new ideas for listed companies to make financing decisions.

Do Internal Factors of MSMEs Matter in Islamic Bank Financing Decision?

The existence of an Islamic bank is expected to play a role in increasing and equalizing the economy, including in supporting the growth of MSMEs. Therefore, it is important to know the character of MSMEs in determining Islamic financing. This study aims to examine the effect of the MSME's firm age (calculated from firm incorporation), firm size (as measured by asset ownership) and the level of religiosity of MSME managers in Islamic banks' financing decisions. This study is quantitatif by nature, and the sample of this study comprised 147 MSMEs. Based on the regression analysis, the results found that the firm size is not proven to be influential. Meanwhile, the firm age had a negative effect and the level of religiosity had a significant positive effect on Islamic bank financing decisions. The results of this study contribute to enriching a clear understanding through empirical evidence about how internal factors of MSMEs can influence their behavior in making financing decisions from Islamic bank.

Family Ownership Structure, Independent Directors, and Independent Commissioners: Effects on Leverage

Research aims: The purpose of this research was to examine the direct relationship between family ownership structure and leverage as well as the indirect impact of independent commissioners and independent directors on the relationship between family ownership structure and leverage.Design/Methodology/Approach: This research applied a purposive sampling technique that resulted in 22 Indonesian manufacturing public firms operating from 2010 to 2018 as the research sample. The panel data were collected from Thomson Reuters, and family ownership data were manually collected from company annual reports. This research employed multiple regression analysis with four models.Research findings: The results indicated that family ownership structure was negatively significant to leverage. The independent director was not proven to strengthen the relationship between family ownership structure and leverage but rather was partially proven to do so yet the independent commissioner could not strengthen the relationship between family ownership structure and leverage.Theoretical contribution/ Originality: This research was contributed to develop the relationship between ownership structure in family companies by involving independent commissioners and independent directors.Practitioner/Policy implication: This research’s result can help companies make financing decisions and mitigate agency problems.Research limitation/Implication: The limitations of this research were the sample only focused on manufacturing public firms and Indonesia Stock Exchange has implemented regulations to eliminate the rule requiring each company to have an independent director, which became effective as of December 28, 2018.

The Pecking Order and Financing Decisions: Evidence From Changes to Financial-Reporting Regulation

We use the staggered introduction of a major financial-reporting regulation worldwide to study whether firms make financing decisions consistent with the pecking order theory. Exploiting cross-country and within country-year variation, we document that treated firms increase their issuance of external financing (and ultimately increase investment) after the new regime. Furthermore, firms make different leverage decisions (debt vs equity) around the new regulation depending on their ex-ante debt capacity, which allows them to adjust their capital structure. Our findings highlight the importance of the pecking order theory in explaining financing as well as investment policies.