Short-term Debt Research Articles

Zero leverage and dividend policy

This study investigates zero leverage firms and their choice to pay dividends among New Zealand (NZ) listed firms for the period 2007 – 2021. Overall our findings indicate that after allowing for financial constraints limiting firm debt capacity and firm preference for financial flexibility, firm priority to pay dividends affects firm debt levels. Additional analysis shows that dividend paying firms with growth opportunities will increase short-term debt to maintain dividend payments.

Debt, Profitability, and Corporate Social Responsibility – A Political Economic Theory Analysis

This study aims to provide empirical evidence of the effect of short-term debt (STD), long-term debt (LTD), and return on assets (ROA) on corporate social responsibility disclosure (CSRD) and how the impact the Covid-19 pandemic (covid) has on the effect of STD, LTD, and ROA on CSRD. The research sample is a manufacturing company listed on the Indonesian stock exchange and observed from 2015 to 2021. Our study shows that STD does not affect CSRD, but LTD has a negative effect on CSRD. Based on CSRD indicators (social, environmental, economic disclosure), the results show that LTD has a negative effect on social and environmental disclosure. However, LTD has a positive effect on economic disclosure. The covid has caused LTD to have a positive effect on CSRD. These results show that during the covid, which caused a decline in financial performance, companies used CSRD as a tool to gain legitimacy and build investor confidence in the company’s financial performance. This study also shows that ROA has a positive effect on CSRD, and the covid has no effect on the effect that ROA has on CSRD.

Systemic bias of IMF reserve and debt forecasts for program countries

Countries experiencing balance of payments (BOP) crises may obtain IMF loans to stabilize external accounts. These loans require IMF programs that outline performance targets to ensure forecasted recovery trajectories. Two key indicators of external account performance are reserves and short-term external debt (“STdebt”). Extensive literature evaluates IMF forecasts, but reserves and STdebt have not been studied. We construct a database of nearly 300 BOP crisis countries with IMF BOP programs from 1992–2019. Reserve forecasts are shown to be systematically biased and inefficient, a result that is startlingly persistent across (a) degrees of capital mobility, (b) trade openness, (c) exchange rate regimes, (d) inflation, and (e) country income levels. We show the bias is driven by deeply pessimistic IMF reserve forecasts that underestimate reserves and systematically ignore information known at the time of the forecast. STdebt forecasts are also inefficient but with an optimistic bias, systematically underestimating future debt. If STdebt is used to peg reserve requirements, the optimistic bias of STdebt forecasts may drive the pessimistic bias of reserve forecasts.

Capital Structure and Financial Performance: Panel Evidence from Quoted Manufacturing Firms in Nigeria (2011–2020)

In literature, there is a divided view on capital structure and financial performance which necessitated the examination of a panel evidence from selected quoted manufacturing firms in Nigeria. Data set were gathered from annual reports of 14 selected quoted manufacturing firms from 2011 to 2020. The data were analysed via panel full least square multiple regression technique as four hypotheses were tested while the outcome of the regression analysis gave acceptance of the second hypothesis in its null state declaring statistical link between total debt to total equity and return on assets of manufacturing entities in Nigeria. However, the findings were on the rejection side of the first, third and fourth hypotheses relating to total debt, long term debt, and short term debt to total assets. In light of the findings, it is suggested that Management of manufacturing corporations that are active on the stock market should strive to increase their long term debt to total assets so as to improve their business operations and by extension, their financial performance. This recommendation is in alignment with the findings of this study, which established that there is a beneficial link between capital structure and financial performance.

The Impact of Debt Financing on the Value of a Company: the Case of North Macedonian Companies

Abstract The purpose of this paper is to determine the relation between a company’s indebtedness and its value. We used a sample of 20 North Macedonian companies, listed on the Macedonian Stock Exchange (MSE) mandatory listing, and the data for 6 years’ time span. In the paper, we use Panel Data models (Pooled OLS regression, Fixed and Random Effects models) to estimate the relation between debt financing and the company’s value measured by return on assets (ROA) and Tobin’s Q. According to the results of short-term debt has a statistically significant and negative impact, while the return on investments in human capital (HCROI), company’s size and current ratio have a positive and statistically significant impact on the ROA. When investigating the impact of indebtedness on a company’s value measured by Tobin’s Q, short-term and long-term debt have positive and statistically significant effects. Our research suggests that while debt increases a company’s indicators for market performance, it also decreases the company’s accounting operating performance. Therefore, when analyzing a company’s value, investors should be considering not only Tobin’s Q, which can be sometimes regarded as a market-to-book value ratio, but also to look at the fundamental ratios, such as ROA, ROE (return on equity) and EPS (earnings per share).

The impact of the global financial crisis and the European sovereign debt crisis on the capital structure of firms in Europe: do SMEs, and listed firms respond the same?

This study examines the evolution of the capital structure of European firms during the global financial crisis and European debt crisis. We compare the experiences of SMEs, listed firms and private firms in different industries and investigate the role of country and institutional factors in affecting capital structure. We find that SMEs, private firms, and non-listed firms experience lower declines in leverage relative to large firms during the global financial crisis and the European debt crisis. During these crises’ periods, SMEs experience steeper declines in debt maturity, which suggests reliance on short term debt that carries high roll over risks. This behaviour is protracted for firms in the agriculture industry. Both the global financial crisis and EU debt crisis have asymmetric effects on leverage, long term debt issuance and debt maturity across different industries, and across firms of different sizes. Moreover, in countries with more developed financial systems, stronger frameworks for insolvency, resolving firm insolvency, and strong systems for shareholder suits, and director liability, SMEs experience much lower reduction in leverage and debt maturity. This finding suggests that institutional factors help attenuate adverse capital supply shocks.

How do industry tournament incentives affect firm debt maturity?

Our study investigates the effect of external industry tournament incentives on debt maturity structure. Prior research shows that industry tournament incentives motivate managers to employ more risky strategies. Recognizing this stronger tendency for risk-taking, creditors may shorten debt maturity and subject managers to more frequent scrutiny by debt markets. Consistent with this notion, our results show that stronger industry tournament incentives lead to significantly more short-term debt. This effect is more pronounced in firms with low credit quality, in areas with a high density of firms from the same industry, and in industries with more CEO positions.

Effect of Capital Structure on the Performance of Brewery Firms in Nigeria

The impact of capital structure on the performance of Nigerian brewery firms was investigated in this study. The precise aims for this research were as follows: determine the effects of long- term debt financing, short-term loan financing, and equity financing on the profit for the year of brewery enterprises in Nigeria. It was decided to use an ex – post facto study design. The study's analytical technique was a random panel regression model, with descriptive statistics and the unit root test as preliminary tests. Long-term loan financing, short-term debt financing, and equity financing all have a substantial impact on the profit of Nigerian brewery enterprises for the year. The study concluded that a firm's capital structure should be carefully constructed to protect the interests of stock holders, shareholders, and the firm's financial needs.

THE EFFECT OF SHORT-TERM DEBT, LONG-TERM DEBT, TANGIBILITY, SALES GROWTH, FIRM SIZE, AND DEBT TO ASSET RATIO ON THE PERFORMANCE OF MANUFACTURING COMPANIES

This study aims to obtain empirical evidence regarding the effect of short-term debt, long-term debt, tangibility, sales growth, firm size, and debt to asset ratio on the performance of manufacturing companies listed on the Indonesia Stock Exchange for the 2019-2021 period. The amount of data in this study was 243 samples with purposive sampling method. The test used in this study is the classical assumption test and uses multiple linear regression methods, and data processing using EViews 12 and IBM SPSS 26. The dependent variable in this study is company performance with the proxy Return on Asset (ROA), where the results obtained are sales growth has a positive effect on company performance, firm size and tangibility have a negative effect on company performance, and short-term debt, long-term debt, and debt to asset ratio have no negative effect on company performance.

Crowded out from the beginning: Impact of government debt on corporate financing

Using hand-collected data on corporate bond and stock offerings, we identify the impact of government debt on corporate financing during World War I. The early twentieth century provides a unique opportunity to identify the impact of government debt on private financing because during this period (1) firms announced the amount they wanted to raise before each security offering and (2) the Treasury issued debt in discrete intervals. We identify the impact of Treasury issues by comparing differences in the amount firms offered to the amount they actually raised when the Treasury was borrowing to when the Treasury was not in the market. We find that long-term government bond offerings negatively affect both amount of long-term corporate bonds and dividend paying stocks issued. In contrast, we find no effect on short-term debt issue. Our findings suggest that investors view stable dividend paying stocks a close substitute for relatively safe long-term bonds.

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.

Capital structure and financial performance of listed non-financial firms in Ghana

Capital structure and its impact on firm performance is a key issue in finance, and there are a number of theories and empirical papers that explain this relationship. Using secondary data from listed companies that have traded on the Ghana Stock Exchange (GSE) from 2016 to 2020, the study specifically examines the effect of short-term debt, long-term debt, and total debts on the operational efficiency of listed non-financial companies in Ghana. The study shows that a firm's return on assets decreases as its amount of debt accumulation rises. Also, some firm-specific variables have small but significant impacts on enterprises' profitability. The study recommends that, to ensure that there is adequate cash available for the company's ongoing operations, corporate finance managers should ensure working capital is managed properly and responsibly. Also, in the extreme case where a short-term borrower facility is unavoidably required and must be acquired, the study advises administrators to make sure that the total amount of short-term obligations taken on as a percentage of the capital structure is less than the sum of non-current liabilities and equity in total assets.

Debt Financing and Performance of Indigenous Oil and Gas Operators: Some Selected Marginal Fields in Nigeria

The objectives of marginal fields were amongst other factors to create wealth, stimulate indigenous participation and increase government revenue from oil and gas. Several challenges have hindered the potential role of marginal field development and inadequate finance is a major setback. This study analyzed the relationship between debt finance and the performance of marginal oil fields in Nigeria. Feasible generalized least square and Panel spatial correlation consistent fixed effects methods were used to analyze data from 2011 to 2021. Return on Asset (ROA) and Return on Equity (ROE) were performance measures used as explained variables. Debt indicators are long term debt and short-term debts. Size and taxation were control variables. Findings show long-term debt and short-term debt have inverse and significant impact on performance. Equity was preferred by indigenous oil and gas companies to debt finance, as high debt policy results in lower performance. The study recommends shareholders and managers of marginal fields to focus on strategic debt policy that will enhance their access to finance and increase firms’ values.

The challenges of maturity mismatch in investment and financing for sustainable development of carbon-intensive enterprises.

To contribute to the research on the role of financial activities in corporate development, this study addresses the critical issue of short-term debt financing for long-term investment (SDFLI) and its impact on the sustainable development of carbon-intensive enterprises in China. By analyzing panel data from the A-share listed carbon-intensive enterprises in China spanning from 2010 to 2021, this study aims to shed light on the significance of this phenomenon and its implications. The empirical findings reveal the existence of a maturity mismatch between investment and financing in carbon-intensive enterprises, which exerts a significant negative impact on total factor productivity (TFP) and poses challenges to their sustainable development. Furthermore, the adverse effects of maturity mismatches vary across different types of enterprises based on factors such as ownership, industry characteristics, financing constraints, and internal controls. The results of the mediation effect model demonstrate that maturity mismatch hampers the sustainable development of carbon-intensive enterprises by reducing investment efficiency and increasing agency costs. Additionally, the moderating role of innovation in carbon-intensive enterprises between maturity mismatch and sustainable development is also examined. This research provides insights to establish policies for facilitating sustainable development in carbon-intensive enterprises.

Interest Rate Risk and Financial Performance of Investment Banks in Kenya

This paper addresses the ascendancy of interest rate risks on the performance of investment banks in Kenya. Methodologically the study was guided by positivist philosophy. The study applied an explanatory sequential mixed method design which allows for both quantitative and qualitative approaches. The population of the study was drawn from 16 investment banks operating in Kenya. Quantitative data was obtained from the annual financial statements of 16 investment banks operating in Kenya. The data was collected using data collection sheets for the years 2011 to 2019 to compute financial ratios. Primary data was analyzed qualitatively using thematic analysis to validate the quantitative data results (using an interview guide tool) from interviewees composed of managers in the investment banks, the Exchange, and the Regulator. Both descriptive and inferential analysis methods were employed in the analysis. The regression results reveal that interest rate risk by investment banks in Kenya has a low but positive and significant influence on the financial performance of investment banks in Kenya. From the empirical evidence and conclusion, investment banks should consider leveraging bank debts to improve performance. However, this should be accompanied by enhancing effective management of interest rates by buying short-term debt instruments such as treasury bills and bonds with short-term maturities, use of financial hedging instruments including forwards, swaps, futures, and options, as well as non-financial hedging methods such as cash flow netting.

Analisa Laporan Keuangan Gudang Garam dan HM Sampoerna pada Masa Peralihan Covid-19

This research was conducted to analyze how impacted the Indonesian cigarette industry was on the Covid-19 Pandemic phenomenon by analyzing the liquidity ratio (current ratio and quick ratio), activity ratio (receivables turnover ratio, inventory turnover ratio, fixed asset turnover ratio and total asset turnover ratio), and debt ratio by taking a sample of PT. Gudang Garam, Tbk and a comparison will be made with PT. HM Sampoerna, Tbk uses financial reports for the 2020-2021 financial year. The research method used is a qualitative descriptive method by collecting, processing, analyzing and presenting data descriptively with a sample of the financial statements of PT. Gudang Garam, Tbk and PT. HM. Sampoerna, Tbk for the 2020-2021 financial year. The research results obtained from comparing the financial performance of PT. Gudang Garam, Tbk with PT. HM. Sampoerna, namely the two companies are both liquid companies, able to pay off their short-term debt obligations, while for the activity ratio, PT. HM. Sampoerna has a pretty good score compared to PT. Gudang Garam, while for the debt ratio of PT. Gudang Garam, Tbk has a better ability to guarantee its debts than PT. HM. Sampoerna.

Study on the Debt Repayment Ability of Real Estate Enterprises: Taking Jiangsu Tianyuan as an Example

With the changing economic situation in recent years, real estate companies, as the backbone of the industry in China, face increasingly fierce market environments. In order to ensure long-term survival, accurately predicting the future development and trends of the company is crucial. The ability to repay debts plays a vital role in this regard. This paper primarily analyzes and summarizes the debt repayment issues of Jiangsu Tianyuan Real Estate in its current operational development phase. Specifically, it addresses the problems of low financial leverage, unreasonable debt structure, and inadequate short-term debt repayment plans. To address these issues, recommendations are proposed, including increasing the company's financial leverage, planning the debt structure rationally, and developing reasonable short-term debt repayment plans. It is hoped that these suggestions can provide a theoretical basis for enhancing the debt repayment ability of real estate companies in the future

Busy board and corporate debt maturity structure

Prior literature has examined the effectiveness of the busy board by evaluating two competing hypotheses: quality point of view and busyness point of view. In response to these views, we argue and validate social identity theory, in the sense that, to maintain their entrenchment, managers of firms with busy boards tend to avoid monitoring from short-term debtholders by reducing short-term debt financing. The magnitude of the negative effects increases when busy board members are independent directors compared to non-independent directors. The negative effect of a busy board is more pronounced in firms with lower CEOs' firm-related wealth, less experienced directors, and more foreign directors on the board. Further analysis shows that managers of firms with busy boards also increase cash holdings, decrease capital investment, and increase their entrenchment. Results are robust to alternative (information asymmetry) hypotheses, propensity score matching, entropy-balanced approach, and instrumental variable approach. We interpret our results as managers' ex-ante preclusion of external monitoring from short-term debtholders.

Debt Maturity and Institutions: Does Creditor Protection Matter?

This study aims to investigate the relationship between creditor protection and the debt maturity structure of corporations in the Gulf Cooperation Council (GCC) countries. The GCC countries enjoy large GDPs, growing capital markets, especially the Islamic bonds (Sukuk) market, and negligible tax environments. Nonetheless, the GCC countries’ financial systems are still dominated by banks, and their private investments are held by concentrated investors. The study utilizes firm-level financial data and country-level institutional data obtained from the World Bank Governance Indicators and Doing Business databases and applies the two-stage least square estimator to test its hypotheses. The findings indicate that stronger regulatory effectiveness is associated with long debt maturities, while better creditor protection is associated with short debt maturities. The latter finding suggests that managers and owners have incentives to utilize short-term debt in economies characterized by stronger liquidation and insolvency rules to avoid the loss of control in the case of a firm default. This finding has policy implications in terms of the importance of considering the dual influence of institutional reforms on the supply of and demand for long-term capital.

Coordinating monetary and fiscal policies in Britain during the French Wars (1793–1821)

Abstract Relying on new quantitative and qualitative data, we analyze how the United Kingdom financed the French Wars (1793–1821). We show that policy makers adjusted monetary and fiscal policies in four regimes. 1) tax-smoothing; 2) suspending the gold standard, real bills, war taxation; 3) the Bank of England's price support of government securities; 4) return to the old order. Under the price support regime, the Bank of England maintained the market value of public short-term debt by purchasing large amounts of it. Our findings suggest that in this context fiscal news shocks rather than fluctuations in the money supply caused inflation.