Financing Mode Research Articles

Relationship Between Mode of Financing and Financial Performance of Deposit Taking Savings and Credit Cooperative Societies in the Lake Region Counties of Kenya

Mode of financing is an important factor for consideration when it comes to firm financial performance. Several studies show that highly leveraged organizations usually do well in terms of financial growth by increasing the value of a firm, contrary to the MM theorem that argues that capital structure is irrelevant factor to consider since it does not affect the value of an organization. This study focused on establishing the relationship between share capital, retained earnings, members’ deposits, debt financing and financial performance of SACCOs in the Lake Region Counties of Kenya. The study was prompted by the increase in the number of SACCOs in the Lake Region Counties facing financial difficulties resulting to low returns to investors and in some instances, SACCOs being de-registered by SASRA for not meeting the SASRA regulations, thus threatening the wellbeing of the lake region’s economy. The study adopted explanatory research design and the target population was all the 34-deposit taking SACCOs in the Lake Region Counties of Kenya. Secondary data was obtained from the annual reports and financial statements of the 34 DT-SACCOs were used for analysis. The annual reports and financial statements were sourced from the official website of SASRA and the respective official websites of the DT-SACCOs. The period of study was stretch from year 2015 to year 2019. The collected data was converted into panels and fed into STATA version 14 for analysis. The data was analyzed using descriptive statistics, correlation analysis and panel data regression analysis. The study revealed that share capital has an insignificant positive relationship with performance of SACCOs in the lake region while retained earnings has a significant effect on financial performance of SACCOs in the lake region. The study also showed that debt financing has a significant negative effect on financial performance of SACCOs in the lake region. The study recommends DT SACCO management to exploit internal source of financing such as retained earnings and share capital. It also recommends that DT SACCOs should avoid expensive debts but instead sought loans with favorable terms. Keywords : Mode of financing, financial performance, Deposit taking Savings and credit cooperative societies DOI: 10.7176/EJBM/13-23-04 Publication date: December 31 st 2021

Equity of health care financing in South Korea: 1990\u20132016

BackgroundThe National Health Insurance in Korea has been in operation for more than 30 years since having achieved universal health coverage in 1989 and has gone through several policy reforms. Despite its achievements, the Korean health insurance has some shortfalls, one of which concerns the fairness of paying for health care.MethodUsing the population representative Household Income and Expenditure Survey data in Korea, this study examined the yearly changes in the vertical equity of paying for health care between 1990 and 2016 by the source of financing using the Kakwani index, considering health insurance and other related policy reforms in Korea during this period.ResultsThe study results suggest that direct tax was the most progressive mode of health care financing in all years, whereas indirect tax was proportional. The out-of-pocket payments were weakly regressive in all years. The Kakwani index for health insurance contributions was regressive but now is proportional to the ability to pay, whereas the Kakwani index for private health insurance premiums turned from progressive to weakly regressive. The Kakwani index for overall health care financing showed a weak regressivity during the study period.DiscussionThe overall health care financing in Korea has transformed from a slight regressivity to proportional over time between 1990 and 2016. It is expected that these changes were closely related to the improved equity of health insurance contributions from 1998 to 2008, which was the result of a merger of the health insurance societies and an amendment in the health insurance contribution structure. These results suggest that standardizing insurance managing organizations and financing rules potentially has positive implications for the equity of healthcare financing in a country where the major method of health care financing is social health insurance.

An Algorithm for the Pricing and Timing of the Option to make a Two-Stage Investment with Credit Guarantees

We develop a jump-diffusion model for a guarantee-investment combination financing mode (G-I mode) that is recently popular in financial practice. We assume that a borrower has exclusively an option to invest in a project in two stages. The project’s cash flow follows a double exponential jump-diffusion process and it is increased by a growth factor once the second-stage investment is exercised. The first-stage investment cost is financed by a bank loan with the guarantee provided by an insurer, who promises to provide the second-stage investment cost as well as take the lender’s all default losses. In return for the guarantee and investment, the borrower pays a guarantee fee upon first investment and grants a fraction of equity upon second investment to the insurer. In sharp contrast to prior papers on guarantee, the guarantee costs are contracted prior to investment. We provide closed-form solutions and produce a numerical algorithm for the timing and pricing of the two investment options.

Optimal strategies for financing a three-level supply chain through blockchain platform finance

The application of blockchain technology solves the trust problem between core enterprises (CEs), small and medium-sized enterprises (SMEs), and commercial banks, facilitating CEs and commercial banks to provide guarantee for SMEs and finance them, respectively. This study considers a three-level supply chain composed of a manufacturer, a distributor, and a capital-constrained retailer, and explores the operational strategies of blockchain platform finance (BPF), a supply chain finance mode enabled by blockchain technology. First, optimal decision solutions are obtained through decision and parameter sensitivity analyses. Second, by comparing the BPF and SME independent finance (SIF) modes, we obtain the applicable BPF mode conditions; for instance, when the retailer’s initial capital is low and the production cost is high, BPF is the better option for the manufacturer, distributor, and retailer compared to SIF. Third, we find that risk sharing improves the financing efficiency of the BPF mode. This study provides a theoretical basis for decision makers to implement blockchain supply chain finance at three levels: joint financing and operation decision-making, financing mode selection, and financing efficiency improvement.

Analysis of sales and financing modes in a green platform supply chain with a capital-constrained manufacturer

PurposeThe purpose of this paper is to investigate the optimal operational strategies in a green platform supply chain and provide suggestions on the selection of sales and financing modes for the capital-constrained manufacturer.Design/methodology/approachThis study combines different sales channels with financing modes and investigates three sales-financing modes, i.e. traditional sales-prepayment financing (TSPF), traditional sales-bank financing (TSBF) and online sales e-retailer financing (OSEF). By establishing and comparing Stackelberg game models of these sales-financing modes from the perspectives of economy, environment and social welfare, the optimal strategies of emission reduction, financing, pricing and service improvement are obtained.FindingsThe results suggest that as the commission rate increases to a certain level, a threshold of the cost coefficient of emission reduction can be found such that the manufacturer should choose OSEF below this threshold and TSBF above this threshold. OSEF is Pareto optimal when this cost coefficient is low, and this mode can lead to the highest social welfare when the platform loan interest rate is relatively low. The Pareto areas in TSBF and OSEF enlarge as the default coefficient decreases.Practical implicationsThese results can provide operational insights on how to select sales channels and financing modes when manufacturer faces financial constraints in emission reduction.Originality/valueThis paper combines different sales and financing modes to study their comprehensive influence on the decision-makings of chain members and the resulting performance of economy, environment and social welfare.

Optimal financing strategies with 3PL customized service in a capital-constrained supply chain

• We adopted game theory and numerical analysis to analyze supply chain finance. • 3PL financing and bank financing modes are studied. 3PL firm undertakes customized service. • The optimal financing strategy depends on the ratio of revenue-sharing. • 3PL financing is the optimal strategy, achieving a win-win outcome. • When the retailer has extremely risk-averse attitude, bank financing might be the optimal financing strategy. Consumers are becoming more customized-conscious and customized service becomes particularly important. We suppose that 3PL firm and the newsvendor-like retailer are risk-neutral profit maximizers, and the retailer is capital-constrained, needing short-term financing. Considering customized service, we mainly discuss two financing sources: bank financing and 3PL financing, where the customized service level is determined by the retailer or 3PL firm. The results show that the optimal financing strategy depends on the ratio of revenue-sharing. When the ratio is within a certain range, 3PL financing is the optimal strategy, achieving a win–win outcome. This paper also discusses a case where the retailer has risk aversion behavior. We reach an interesting conclusion. When the retailer has extremely risk-averse attitude, bank financing might be the optimal financing strategy. When the retailer is relatively optimistic, 3PL financing is a wise choice. These conclusions give us some meaningful management inspirations in light of customized service.

Research on the Debt Default Risk of Guangyi Technology

In the process of production and operation, the funds held by enterprises often do not meet the needs of the expanding production scale, so enterprises usually obtain the required funds by borrowing. However, the financing mode of enterprises is not only limited to borrowing from banks or other financial institutions. With the rapid economic development and the continuous activity of the capital market, the bond market has gradually become an important channel for enterprise financing [1]. In order to improve the layout of the industrial chain, Guangyi Technology has carried out continuous mergers and acquisitions (M&A) since 2013. Due to its limited funds, Guangyi Technology acquired a large amount of funds required for M&A by means of equity pledge. However, the copyright cloud project invested in M&A in the early stage did not achieve the expected results, leading to a frequent breach of equity pledge, which evolved into debt defaults. Therefore, this article takes Guangyi Technology as the research subject and puts forward relevant avoidance suggestions through the evaluation of its debt default risk.

CROWDFUNDING AS A MODE OF ALTERNATIVE FINANCING: PERSPECTIVES OF DEVELOPMENT IN UZBEKISTAN

CROWDFUNDING AS A MODE OF ALTERNATIVE FINANCING: PERSPECTIVES OF DEVELOPMENT IN UZBEKISTAN Umidjon Yorqulov Assistant teacher, Tashkent State University of Economics, Uzbekistan, Tashkent   ABSTRACT Current work aims to invest

Principal approaches to the classification of science in national, international, and European law. Part II. Subject (industry) classification. Classification by other criteria

Part II of the article deals with the approaches of modern legal sustems to the subject-matter (disciplinary) classification of science, as well as with the additional classification criteria such as mode of financing of scientific research and its importance for State and society which are employed in several legal systems.Basing on practical examples, author demonstrates that, despite the equivalence of the main classification criteria, the modern law lack uniform approaches to subject-matter (disciplinary) classification of science. This state of play characterizes both inter-state context (different scientific disciplines in different legal systems) and intra-state context (different approaches in different legal sources of the same country).Author concludes in favour of consideration of a legal recognition as a specific category of scientific research those conducted by means of megascience-facilities. The above-mentioned category can be further divided into subcategories corresponding to various types of megascience-facilities such as light-sources and neutron sources.

Financing models for an online seller with performance risk in an E-commerce marketplace

Third-party sellers on e-commerce marketplaces (e.g., Amazon and Alibaba) have been primarily dependent on conventional financing modes such as bank credit financing (BCF) to meet their working capital requirements. Many of these platforms have recently started novel financing programs (platform credit financing, PCF) for the sellers under the umbrella of Supply Chain Finance. For example, Amazon provides unsecured loans to third-party sellers on its platform under the Amazon lending program. These loans are risky for the platform. If the seller is unable to fulfill customer’s orders because of some internal inefficiencies (performance risk), the platform loses the loan amount and incurs a goodwill cost among its customer base. In this paper, we develop a series of game-theoretic models to analyze and compare BCF and PCF for a cash-constrained third-party seller on an e-commerce marketplace. We derive optimal interest rates that the platform may charge the seller depending on its performance risk. We derive conditions under which either BCF or PCF could be more profitable for the seller. We introduce innovative contracts (Guaranteed Demand Increment Contract and Lending Rate Matching Contract initiated by the platform and Lumpsum Transfer Contract initiated by the seller) that incentivize the seller or platform to act in a mutually beneficial way. Our analysis shows that these contracts achieve win–win outcomes and increase the total supply chain profit.

Impact of COVID-19 on the Performance and Stability of Conventional and Islamic Banks in the GCC Region, Malaysia, and Pakistan

This study examines the impact of COVID-19 on the performance and stability of conventional and Islamic banks. The sample included all the 21 listed Islamic banks (IBs) and 44 listed conventional banks (CBs) from the GCC region, Malaysia, and Pakistan. Quarterly data of these banks covering the period January 2019 to June 2020 were obtained from their quarterly reports. Performance was measured by return on assets (ROA) and return on equity (ROE), while stability was measured by the Z-scores of these banks. Based on the previous literature, a better performance of IBs was expected because these banks are based on the participatory mode of financing instead of debt-based financing. However, the results of the current study showed a significant and negative impact of COVID-19 on the financial performance of both types of banks, suggesting that either type of banking was significantly affected during the pandemic. However, we did not find any significant evidence of the impact of COVID-19 on the stability of these banks.

Impact of COVID-19 on the Performance and Stability of Conventional and Islamic Banks in the GCC Region, Malaysia, and Pakistan

This study examines the impact of COVID-19 on the performance and stability of conventional and Islamic banks. The sample included all the 21 listed Islamic banks (IBs) and 44 listed conventional banks (CBs) from the GCC region, Malaysia, and Pakistan. Quarterly data of these banks covering the period January 2019 to June 2020 were obtained from their quarterly reports. Performance was measured by return on assets (ROA) and return on equity (ROE), while stability was measured by the Z-scores of these banks. Based on the previous literature, a better performance of IBs was expected because these banks are based on the participatory mode of financing instead of debt-based financing. However, the results of the current study showed a significant and negative impact of COVID-19 on the financial performance of both types of banks, suggesting that either type of banking was significantly affected during the pandemic. However, we did not find any significant evidence of the impact of COVID-19 on the stability of these banks.

Evolutionary multiplayer game analysis of accounts receivable financing based on supply chain financing

This paper introduces the core enterprise into the traditional accounts receivable financing model, which only includes the bank and the small and medium-sized enterprise (SME), and further analyses the strategic decisions of the bank, the SME, and the core enterprise by applying game theory. The stability of strategic decisions is also analysed. Finally, we prove the usability of the pledged financing mode of accounts receivable based on supply chain finance through simulation analysis and evolutionary game theory. Research results show that adding the core enterprise to the traditional accounts receivable financing model can reduce the bank’s loan risk to a certain extent, enhance the credibility of the accounts receivable, which will be beneficial to the realisation of accounts receivable financing. The successful operation of accounts receivable financing mode will help the three parties to achieve three-win results. In addition, the lending rate of the bank and the reputation loss suffered by the core enterprise due to default will affect the evolutionary equilibrium of the tripartite evolutionary game.

On the Comparison and Choice of Fund-Raising Methods of Enterprises

With the deepening of economic system reform, there are more and more financing methods for Chinese enterprises. But at present, the choice of financing mode of Chinese enterprises still relies on the indirect financing of banks with bank loan as the core to a large extent. The current indirect financing mode in China is actually the result of many factors such as the social and economic system environment, historical and cultural habits, economic development stage and economic development goal, economic growth mode and ownership structure. Because our country is still a big country that mainly relies on domestic savings to develop economy at the present stage, the recent transition mode of our country's enterprise financing can take the bank financing as the main financing mode, and at the same time moderately develop and improve the direct financing. On this basis, will gradually transition to a diversified financing model. In the market economy system, it is necessary to establish a variety of financing ways coexist financing system and financing structure, form an all-round, multi-level financing new system.

Mode selection and risk estimation of financing in new energy automobile enterprises

Financing is a necessary economic activity of the new energy automobile enterprises, and it has an important function to push the enterprise to expand reproduction and promote the development speed of the enterprise. At the same time, there are many kinds of financing modes, such as internal financing, external debt financing and equity financing. If the financing mode is matched with the enterprise status, the financing activity is easier to succeed and the risk is also smaller. Otherwise, improper financing mode will not only affect the profit of enterprises, but also affect the survival of enterprises. We suppose that, after financing, the business manager of the enterprise can make a choice to invest either hydrogen-fueled vehicle project or lithium-ion battery vehicle project, in this case, we made an equilibrium analysis on the choice of investing which one new energy vehicle project and corresponding financing mode, according to the incomplete information dynamic game model, it is concluded that the equilibrium point (perfect Bayesian equilibrium refinement) of financing is most likely to appear in the state of equity financing; when the rate of return on assets of investment projects is within a certain range, both the financing enterprise and the investor can obtain the bigger profit. In addition, the risk value of the project also is calculated by using VaR model.

A LITERATURE REVIEW ON ISLAMIC FINANCE MODES AS AN ALTERNATIVE APPROACH TO FINANCE THE BUSINESS MODEL OF A CIRCULAR ECONOMY

This study explores how Islamic Finance Modes can provide alternative sources of financing business models in a circular economy. A comparative analysis of the Islamic Finance Modes such as Musharakah, (Equity Sharing), (Mudarabah), (Silent partnership), Forward sale (Salam), Manufacturing Financing (Istisna), Leasing (Ijarah), Sukuk (Investment Certificate), Qard Hassan (Beneficence Loans), Wakalah, (Agency contract) Kafalah (Suretyship Contract), and Ju’ala (Service Agency) were undertaken in relation to its suitability as a source of financing businesses in a circular economy. This study relies heavily on secondary data through literature reviews and research works of authors and researchers on Islamic Finance and Circular Economy. The study concludes that Ijarah, Sukuk, Qard Hassan, Istisna, Musharakah, Mudarabah, Wakalah, Kafalah, and Ju’ala financing modes are essential for providing alternative solutions to financing challenges confronting business models such as balance sheet extension, working capital, and increased credit risk in a circular economy. This paper recommends that Islamic Banks should review and redesign their products and services in order to cater for financing businesses in a circular economy and also support them by providing professional services in analyzing the creditworthiness of companies and viability of projects.

Financing and carbon emission reduction strategies of capital-constrained manufacturers in E-commerce supply chains

In this paper, a manufacturer is considered who is regulated by the cap-and-trade scheme and sells products on an e-business (EB) platform. When this manufacturer is capital-constrained, funds can be accessed via EB platform financing mode, supplier credit financing mode, and mixed financing mode, where the manufacturer accesses funds from both the supplier and the EB platform. Considering the exogenous retail price, this paper develops optimizing models under all three financing modes to investigate the manufacturer's emission reduction, production quantities, and financing strategies. The financing strategy of a slightly capital-constrained manufacturer depends on the usage fee charged by the EB platform. The manufacturer prefers non-financing support if the usage fee rate is too high; otherwise, the manufacturer prefers accessing funds from the EB platform. A moderately capital-constrained manufacturer prefers EB platform financing if the financing rate charged by the EB platform financing is slightly higher than that charged by the supplier. Also, a moderately capital-constrained manufacturer prefers EB platform financing if the usage fee rate is relatively low; otherwise, supplier credit financing is preferred. Furthermore, a heavily capital-constrained manufacturer prefers mixed financing if the financing rate charged by the EB platform is higher than that charged by the supplier; otherwise, the manufacturer prefers EB platform financing. When the usage fee is endogenous, the EB platform financing mode is better than the non-financing mode for both the capital-constrained manufacturer and the EB platform. Furthermore, the above conclusions are robust when the retail price is endogenous.

The Impact of Various Mode of Financings in Reducing Inequality in Various Groups of Countries

The existence of Islamic bank not always provide positive impact to the real sector of economy. Declining inequality is one of the expected significant impacts with appyling mode of financing as instrument to relize that. This study aims to investigate the impact of mode of financing was applied by Islamic bank to reduce inequality among countries of IsDB Group. World bank data and IDB data of Islamic banks are employed as samples from 1977 to 2018. The results show that equity and leasing have a positive effect and significant to reduce inequality for low income countries, where the leasing or ijarah have the most effective impact than all. In addition, instalment sale of financing has a significant impact to reduce inequality for middle-income countries, loan is being the only significant mode of financing to reduce inequality in all IDB countries. Unfortunately, Mudharabah, PLS (profit and loss sharing), Murabahan and Istishna have not significantly impact to reduce inequality

Corporate Strategic Aggressiveness, Credit Cycle and Debt Default

In recent years, corporate debt default events occur frequently and accelerate in China. The debt default entities have gradually spread to state-owned enterprises, urban investment platforms, and listed companies. Constrained by the indirect mode of financing, commercial banks’ non-performing loan ratio is rising and their risk exposure is expanding in China. The continuous outbreak of debt default events and the continuous rise of bank non-performing loan ratios reflect the persistence of debt default in a period of time in China, which accumulating systemic risks in the financial sector through chain reactions, and even triggering financial crisis. Therefore, corporate debt default has become one of the major risks faced by China currently. It can not only help companies prevent and control debt default risks, but also help the financial sector better control macro financial risks to explore the main influencing factors of corporate debt default.The existing literature mainly studies the influencing factors of corporate debt default from the perspective of strategic differences. This paper combines with the reality of Chinese enterprises, re-examines the strategy from the perspective of three-dimensional balance of growth, profitability and risk, and explores the influence mechanism of enterprise strategic aggressiveness on debt default. By constructing a moderated mediating effect model, this paper puts credit cycle, which is an important factor affecting the external financing environment of enterprises, into the research framework, and further explores the moderating effect of credit cycle on the above two relationships. The results show that: Strategic aggressiveness is the main inducement of debt default; strategic aggressiveness can increase corporate default risks by negatively affecting investment efficiency, and also by positively affecting asset financial debt ratio（short-term loans for long-term investment）; credit tightening（easing）boosts（eases）the possibility of debt default for strategic aggressive enterprises, which will also indirectly adjust the impact of strategic aggressiveness on debt default by negatively affecting the relationship between investment efficiency and debt default, and also by negatively affecting the relationship between asset financial debt ratio（short-term loan for long-term investment）and debt default.On the basis of redefining the concept of strategic aggressiveness, this paper constructs the measurement index to provide theoretical support for the follow-up empirical research of strategic aggressiveness. It is helpful for managers to deepen the theoretical understanding to the influencing factors of corporate debt default and the mechanism of strategic aggressiveness, fully consider the supporting ability of their own funds to the implementation of the strategy when formulating corporate strategy, and avoid adopting radical financing strategies that rely excessively on financial liabilities or even short-term loans for long-term investments. It is also useful to provide theoretical support for the financial sector to understand the effect of credit policy implementation and better control macro financial risks. In response to the structural high-leverage problem faced by China at the present stage, avoiding the excessive deleveraging policy, the government should adopt the policy of deleveraging step by step, so as to help enterprises pass the top area of credit cycle smoothly.

Information integration framework for a public–private partnership system of an urban railway transit project (Part A: System architecture)

The public–private partnership (PPP) financing mode has developed rapidly since its introduction into China's municipal engineering construction. However, successful PPP projects are rare due to the lack of a scientific information integration system. This study proposes an information integration framework of the risk and reward mechanism for urban rail transit (URT) PPP projects on the basis of data and knowledge warehouses. The proposed information integration framework is the core decision-making mechanism of URT project financing and further operation in China in recent decades. It can provide a supporting reference for URT project management in other countries.