Short-term Debt Research Articles

External Debt Financing and Real Earnings Management: Evidence from Malaysian Family Group Affiliation

The role of external debt in an emerging country with highly concentrated ownership is expected to raise the expropriation risk by the controlling shareholders as wider separation between cash flow and control rights might increase borrowing cost. This study investigates external debt financing role in exacerbating real earnings management (REM) in family group affiliation firms with complex pyramidal structure. A sample of 1,170 firm-year observations was collected covering 2006 until 2015. The Hausman test was used to determine the estimation method of fixed and random effects regression of each REM activity of the suspected firms towards short-term debt (STD) and long-term debt (LTD). We found a significant positive relationship between STD and REM. STD might motivate stringent monitoring by lenders and encourage family firms to manipulate earnings, possibly to avoid violating debt covenants and to portray healthy financial conditions to mask their entrenchment behavior. We have also found less manipulation of REM with LTD, as lack of tight monitoring by lenders might less likely trigger earnings manipulation. This study provides additional input to users of financial information in making informed decisions. This study, however, only documents the results in family group affiliation firms. Hence, causality of debt in non-family group affiliation firms also requires further theoretical and empirical examination. We argue that this is the first study to examine external debt financing effect on REM in family group affiliation firms in Malaysia.

Business Cycles and Capital Structure Choices: Evidence from India

The paper explores variations in leverage ratios of industries grouped on the basis of business cycles – as growth industry, defensive industry and cyclical industry. Leverage is measured using Total debt to Net worth ratio, Long term debt to Net worth ratio and Short term debt to Net worth ratio. The debt ratios of industries are evaluated during two time phases– Phase I (2008/09 to 2012/13) and Phase II (2013/14 to 2017/18). The sample consists of 172 companies randomly selected from the largest 500 companies in India. The results suggest significant variations in the debt ratios of industries in each of the time phases. The results also show statistically significant variations in total and long-term debt ratios between Phase I and Phase II. The study is distinct as it gives a new insight into the capital structure decisions of industries using a novel industrial classification base.

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

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

CAPITAL STRUCTURE AND PERFORMANCE OF MANUFACTURING COMPANIES ON BURSA MALAYSIA

The study is carried out to examine the impact of capital structure on the performance of Malaysian manufacturing listed corporations. Specifically, the study attempts to investigate the relationship between short-term debt (STD), long-term debt (LTD), total assets (TA) and debt to equity (DE) on the return on equity (ROE) of manufacturing companies listed on Bursa Malaysia. To achieve this objective, the data is collected from the annual data of 30 Malaysian manufacturing companies listed on Bursa Malaysia from 2010 to 2017. The annual reports of the selected companies are available on the Bursa Malaysia webpage. In this study, the data is analyzed using Eviews 9 software. The findings of the study show that total assets (TA) and debt to equity (DE) have negative significant effect on the return on equity (ROE) whereas short-term debt (STD) and long-term debt (LTD) have positive significant relationship with firm financial performance. The study thus contributes towards better understanding on the relationship between the capital structure and performance of the manufacturing companies in Malaysia.

Institutional investor horizons, information environment, and firm financing decisions

We provide evidence that the investment horizons of institutional shareholders affect firms’ financing decisions. We find that short-term institutional ownership positively affects firms’ likelihood of equity relative to debt issues, the size of equity issues, and the likelihood of long-term relative to short-term debt issues. Firms held more by short-term institutions have lower financial leverage and longer debt maturities. These results suggest that short-horizon institutions, backed by buy-side research, improve the transparency of the information environment, which allows firms to issue more information-sensitive securities. Our findings suggest that institutional investor horizons influence firms’ financing decisions by shaping their information environment.

Liquidity and Activity Analysis on Profitability at PT Eastparc Hotel TBK 2019-2021 (Pandemic Conditions)

The COVID-19 pandemic has had a continuous impact on various sectors, including the economic and tourism sectors, which has caused a decline in production, consumption, and operations in all aspects including maintaining the company's existence and safe and stable profitability. This study aims to analyze profitability using methods from liquidity ratios and activity ratios based on PT Eastparc Hotel Tbk's financial statements from 2019-2021. Data collection method through theory from several literature reviews with time series data collection techniques. The data analysis method used is descriptive quantitative using financial ratio analysis tools, with a research period of the last 3 years (2019 – 2021). The results of the analysis of CR's liquidity ratio for 3 years during the pandemic show that the company PT Eastparc Hotel Tbk has not been able to pay debts that must be immediately met with current assets. QR and CAR show that the company's condition is not good in 2021 This condition means that the company still needs time to sell some of its other current assets to pay its obligations. The results of the Activity ratio show that the company's performance is not good and able to maximize the capacity of its fixed assets. Meanwhile, inventory turnover shows good company conditions in maximizing inventory so as not to accumulate in warehouses in excess quantities (productive) increasing profitability. Meanwhile, the working capital turnover ratio in 2019 was not good, but there were improvements in the last two periods, namely 2020 and 2021. The results of the financial ratio analysis show that PT Eastparc Tbk.'s financial performance during the 3 periods of the pandemic was quite good, after improving its ability to pay short-term debt through the sale of securities, collecting even though inventory turnover was slow and had a relationship in line with the decline in profitability generated by the company.

印度尼西亚和土耳其旅游业上市公司在covid 19爆发时的财务分析

COVID-19 outbreak is global disease that impact most of industries in the world. Tourism is one of industry shocked by COVID-19. Curfew policy and social distance caused most of tourism sector such as tourism, hotel, and restaurant were closed. The purpose of this study is to analyze financial statement of tourism industries in Indonesia and Türkiye using financial ratio analysis. We employ financial analysis of credit (risk) analysis and profitability analysis during lockdown. We employ 27 financial statements of tourism firms in both countries in 2020. Based on the result, we found that profitability ratio that have significant differences in both countries such as ROA, ROE, and net margin. Although other measurement such as, current asset ratio, quick ratio, asset turn over, debt to equity ratio, and short term debt to equity ratio have no significant. The result informs that tourism of listed firms in Indonesia and Türkiye have significantly difference in profitability ratio. However, capability of managing liquidity, utilizing asset and managing capital structure and solvency has no significant difference. The result implies that tourism industries both in Indonesia and Türkiye have similar issues in liquidity, utilizing asset, and solvency, because they have to face diminishing income during COVID-19. Hence, it will effect on the liquidity.

Green Credit Policy and Short-Term Financing for Long-Term Investment: Evidence from China’s Heavily Polluting Enterprises

In 2012, China issued the “Green Credit Guidelines” policy to guide the green transformation of companies, and at the same time, the investment and financing behaviors of heavy polluters during the green transition have received widespread attention. In the view of the investment and financing maturity structure, we take China’s A-share listed enterprises from 2009 to 2021 assamples, and construct a difference-in-differences (DID) model to examine the implication of the green credit policy on the short-term financing for long-term investment (SFLI) of heavy polluters. We found that: (1) green credit policy can reduce the level of SFLI of heavy polluters; (2) the size of short-term debt and the level of over-investment can play a mediating effect, and government subsidies can weaken the relationship between green credit policy and SFLI; (3) this effect is more significant when directors, supervisors, or senior executives have a financial institution background. (4) this effect is not significant in enterprises with bank-firm shareholding relationships and a stronger innovation intensity; (5) the effect is more significant in areas with stronger environmental regulations. This paper argues that heavily polluting enterprises should reduce short-term debt financing and over-investment, so, to solve the problem of investment and financing term mismatch under the credit risk; banks should prevent the credit rent-seeking problem caused by the equity association between banks and enterprises, and promote the consistency of green credit standards. The government can provide subsidies to enterprises in green transformation and strengthen the construction of regional environmental regulations in order to guide the smooth innovation and upgrading of heavy polluters. Our research expands the study of the micro-economic consequences of green credit policy, providing references for how to reduce maturity mismatch risk and guide the smooth transformation of heavy polluters from the multi-perspective of the government, banks, and enterprises, thus helping to promote companies’ smooth transit.

Bond Ratings in Non-Financial Companies Listed on the Indonesian Stock Exchange

In order for a company to exist and survive, one of them can be achieved through the company's financing sources. The company in this case requires capital or funds. The need for capital or funds can be financed with own capital in the form of short-term or long-term debt obtained from one of them, namely bonds. This study aims to analyze the effect of leverage, liquidity, profitability and company size on bond ratings of non-financial companies. In this study, using multiple linear regression analysis methods with the SPSS 25 program to process the data. The data used is secondary data which is the annual financial statements of non-financial companies on the Indonesia Stock Exchange in 2019- 2021. The observation data used is 132 data. The results of this study indicate that leverage, liquidity do not contribute to bond ratings, profitability is able to contribute to bond ratings, and company size is able to contribute to bond ratings.

Pengaruh Piutang Dan Utang Jangka Pendek Terhadap Pendapatan Pada PT. Astra International Tbk

The purpose of this research is to determine the effect of short-term receivables and debt on income at PT. Astra International Tbk. This research shows that there is a discrepancy between theory and financial reports at PT. Astra International Tbk. In 2020 and 2021, income decreased, receivables increased in those years, namely 2020 and 2021, while income decreased, and short-term debt increased in 2018 and 2021, and income also increased. The formulation of the problem in this research is whether short-term receivables and debts have an effect on income at PT. Astra International Tbk. The discussion in this research is related to the field of accounting which discusses financial report analysis. The theory used in this research is regarding company income, namely the company's ability to fulfill its short-term obligations, receivables, namely company claims to other parties whose maturity is less than one year, and short-term debt, namely the company's obligations to other parties which must be paid immediately within a period of time. less than one year. The type of research used in this research is quantitative research. The data source used is secondary data obtained via the website www.idx.co.id. Data processing in this research was carried out using SPSS version 23. Data analysis techniques used descriptive tests, normality tests, linearity tests, classical assumptions, hypothesis testing, and multiple linear regression analysis. The results of this research show that there is a partial influence between the receivables variable and the income variable with a calculated t value of 3.264901 > ttable with a value of 2.026192. Partially, short-term debt has an effect on income with a calculated t value of 15.93768 > t table with a value of 2.026192.

The Impact of Capital Structure on Financial Performance of Agricultural Listed Companies in China Based on Multiple Linear Regression Model and Data Mining

Background: With the transformation and upgrading of the economy, the market capitalization scale of agricultural listed companies has become larger and larger, but the problems caused by the unreasonableness of their capital structure have become increasingly prominent. This study aims at examining the relationship between capital structure and financial performance of agricultural listed companies in China.
 Methods: Secondary data are obtained from annual financial statements of the sampled firms over the period 2018-2022, and analyzed statistically using multiple regression models. The capital structure indicators refer to total debt ratio (TDR), short-term debt ratio (STDR), and long-term debt ratio (LTDR), and return on assets (ROA) and return on equity (ROE) are the performance proxies.
 Results: The results reveal that TDR and STDR have strong negative relationships with ROA and ROE, while LTDR has insignificant correlations with financial performance.
 Conclusion: The outcomes imply that agricultural companies should pay regular attention to the gearing ratio and strive to maintain good capital mix. They should depend less on short-term debt and could properly employ more of long-term debts in financing to improve profitability and promote sustainable development.

Capital generates green: Evidence from China's national innovation system policy

A national innovation system (NIS) is instrumental in enhancing a country's innovation potential, with its system effectiveness largely contingent upon the development of financial markets. The impact of financial innovation within the NIS framework has yet to be thoroughly investigated despite this connection. This study exploits a recent policy shock in China that includes financial innovation as part of national supply-side reform. A difference-in-differences analysis reveals that firms in areas with greater financial innovation have exhibited a significant increase in green innovation following this policy. Mechanism analyses show that, after the policy shock, financial innovation has increased firms' long-term loan ratio and credit loan ratio while reducing the cost of debt, thereby improving corporate maturity match and reducing their propensity to resort to short-term debt for long-term investment projects. These results provide novel insight into how NIS-integrated financial innovation enhances system effectiveness and promotes green innovation.

Debt maturity structure, credit ratings and audit fees: new evidence

PurposeThis research aims to revisit Gul and Goodwin (2010), which focuses on exploring the relationship between debt maturity structure, credit ratings and audit fees. Furthermore, the authors investigate whether this association varies based on firm size, firm life cycle and financial reporting quality.Design/methodology/approachTo investigate the research question, the authors use an extended sample period, 2004–2017, in comparison to the sample period, 2003–2006, used in Gul and Goodwin (2010). The authors use ordinary least squares regression as a baseline methodology along with two-stage least-squares regression and change analysis to control for endogeneity concerns.FindingsAccording to Gul and Goodwin (2010), auditors charge lower audit fees for firms with higher short-maturity debt and better credit ratings, indicating a lower likelihood of financial misreporting. Further, Gul and Goodwin (2010) find that lower credit rated firms benefit more from short-term debt. Primarily, the findings are consistent with Gul and Goodwin (2010) and provide further evidence that the beneficial effects of short-maturity debt for firms with poor ratings are evident for small firms, firms in the growth stage of their life cycle and firms with poor earnings quality.Practical implicationsThe findings imply that practitioners in the audit profession and investors should take a more nuanced and comprehensive approach to varied firm and financial factors, taking into consideration the intricate relationships between many elements impacting a firm’s financial health. As a result, audit professionals may give more accurate appraisals of a firm’s financial condition, and investors can make better investment decisions.Originality/valueThe authors reconfirm the findings of Gul and Goodwin (2010) using an extended sample. The findings are novel, which evidence that the lower audit fees for rated firms with short-maturity debt are moderated by firm size, life cycle and financial reporting quality.

Effect of Firm Size on Short Term Debt of Firms Listed on the Nairobi Securities Exchange, Kenya

The capacity of a firm, the diversity and number of production capabilities, or the quantity and multiplicity of services a firm may simultaneously give to its consumers can all be considered as part of the firm's size. Short-term obligations should be used to fund short-term assets. The study evaluated the effect of firm size on short term debt on companies listed on Nairobi securities exchange. The study was anchored on agency theory and the growth firm theory. The study utilized descriptive research design. The study used secondary data from annual accounting report of quoted firms on Nairobi securities exchange. Data analysis was performed in order to convert obtained data into a format that can be used for interpretation and conclusion, therefore analysis was based on panel data, the analysis was based on panel regression. Result demonstrated a negative and significant effect between firm size and short term debt. The study recommends that management of firms’ especially larger firms should access long term financing which can be more long term investment which can enhance firms’ growth and competitiveness and smaller firms should not rely on short term debt.

The effect of extreme rainfall on corporate financing policies

In recent years, a series of intense precipitation events has drawn public attention to the issue of extreme rainfall. This study examines the impact of precipitation anomalies on corporate financing policies and reveals that firms tend to increase their utilization of long-term debt (while decreasing their reliance on short-term debt), enhance cash reserves, and reduce cash dividend payouts in response to heightened occurrences of extreme rainfall. We provide empirical evidence indicating that such weather events can have adverse effects on firms' operational activities. The influence of extreme precipitation is particularly pronounced in sectors sensitive to rainfall, firms with geographically concentrated factories, non-state-owned enterprises, and those located in cities with limited financial institutions. Overall, this research demonstrates that firms are inclined to adjust their financing policies in response to extreme rainfall events, underscoring the significance of financial resilience in managing climate risks and shedding light on firms' financing decisions.

Revisiting the puzzle of capital structure determinants: an empirical study based on UK firms

PurposeThis study aims to measure impact of several firm-specific factors on alternative measures of leverage. The authors also aim to study impact of the subprime crisis on such associations.Design/methodology/approachThe authors utilized an unbalanced panel data of 973 firm-year observations on 47 UK listed non-financial firms for the years 1990–2019. Book-based and market-based long-term and total leverage measures have been used as explained variables. The explanatory variables are profitability, size, two measures of growth, asset tangibility, non-debt tax shields, firm age and product uniqueness. Fixed effect and random effect models with clustered robust standard errors have been utilized for data analysis. To find the effect of subprime crisis, original dataset was split to create pre-crisis and post-crisis datasets.FindingsThe authors find that profitability significantly reduces leverage while firms having more tangible assets use significantly more debt in capital structure. Firm size and non-debt tax shield have statistically insignificant positive impact on leverage. Having more unique products reduces use of external debt, albeit insignificantly. Growth, when measured as market-to-book ratio, has inconsistent impact, whereas capital expenditure insignificantly reduces leverage. Age is found to be an insignificant predictor of leverage. After the subprime crisis, firms started relying more on internal fund instead of external debt, more particularly short-term debt. Having more collateral is gradually becoming more important for availing external debt.Research limitations/implicationsData limitations restrict generalization of the findings.Originality/valueThis is one of the pioneering attempts to show how subprime crisis altered the theoretical domain of capital structure research in the UK.

A Global Analysis of the COVID-19 Pandemic and Capital Structure in the Consumer Goods Sector

Understanding a company’s capital structure is essential for optimizing financial resources amid the challenges posed by the COVID-19 pandemic. This research examines how the pandemic affected the capital structures of global consumer goods companies across industries, market types, and regions. In this study, a fixed effects model was employed to analyze panel-data regression data spanning from 2018 to 2022, encompassing 1491 companies across 80 countries. The results revealed a significant and positive impact of COVID-19 on capital structure in the initial two years, contrasting with a negative trend in the third year, notably in the short-term debt to total assets ratio. The pandemic’s influence on the capital structure varied across sectors, markets, and regions, starting with a consistent positive impact before shifting to a negative and significant effect. The study provides valuable insights for businesses, policymakers, and researchers grappling with the financial implications of external shocks like the pandemic. It underscores the importance of prudent financial decision-making, leveraging the opportunities stemming from a conservative debt approach, and the growing reliance on short-term debt while staying adaptable in response to evolving market dynamics and economic changes.

A Threshold Analysis of the Short-Term Capital Structure and Firm Performance Nexus in Nigeria

The focus of the research is to examine the relationship between short term capital structure and firm performance and to identify the presence of a safe short term debt-equity threshold in this regard. Consequently, the study utilized the Panel threshold regression estimation technique using complete data from listed manufacturing firms in the Nigerian Stock Exchange for 2018-2022. The data analytics used for the study includes descriptive statistics, the correlation analysis and finally, the threshold regression. Our results identified the presence of a threshold effect for the effect of short term debt to equity ratio (STDEQTY) on ROA indicator of financial performance but not for TOBINQ. In the threshold, where STDEQTY threshold ≥ 3.45%, the coefficient (λ1) is -28.73 and thus the result suggests that points beyond this level may be most risky and should be avoided. In this regard, it is important to for manufacturing firms to adjust their STDEQTY ratios much lower than the identified threshold to move from the region of negative returns on assets. Furthermore, the study identified the presence of a threshold effect for the effect of TDEQTY on ROA indicator of financial performance but not for TOBINQ. The study concludes that manufacturing firms in Nigeria indeed engage considerable debt obligations for their operations and have a high appetite for debt financing. However, while this ordinary makes the firms less debt averse, it is recommended that managers reduce the extent of their debt obligations. In addition, the efficiency, under-development and high market imperfections has not made it easy for firms to seek equity financing and hence the strong reliance on debt. Hence, Regulatory Authorities need to focus on implementing policies to improve the efficiency of the equity markets.

The Influence of Liquidity and Solvability on the Bond Ratings of Indonesia stock exchange : Evidence From the Raw Materials Sector

Bonds are issued by companies and government agencies seeking capital with long-term debt. Bonds still carry risks for investors, namely the possibility of default, like other financial assets . Bond ratings are one indicator that can be used to measure this risk. Liquidity and sovability ratios can be used as indicators that can assess a company's capacity to pay all short and long term debts on time. The aim of this research is to examine the influence of liquidity ratios and solvency ratios on the bond ratings of basic materials sector companies listed on the Indonesia Stock Exchange. The objects of observation in this research are all public companies in the basic materials sector which are listed on the Indonesia Stock Exchange and whose bonds are rated by PT. Pefindo during the 2017-2021 period. Observations were taken using a purposive sampling technique because they have certain criteria. The method used in this research uses panel data regression analysis techniques with the help of E-Views 12. The research results show that 1) liquidity can be used as a benchmark to influence the rating of a bond and 2) the solvency ratio cannot be used as a benchmark that can influence the rating of a bond.
 
 Key words: bonds; bond ratings; liquidity ratio; solvency ratio; cash ratio; debt to equity ratio

Research on U-shaped relationship between short-term debt for long-term use and supply chain enterprise default risk: Evidence from Chinese listed firms.

This paper empirically investigates the impact mechanism of short-term debt for long-term use and the default risk of supply chain firms with the data of Chinese A-share listed firms from 2007 to 2021. The study shows that there is a significant U-curve relationship between short-term debt for long-term use and supply chain firms' default risk, and too high or too low a level of short-term loans and long-term investments will worsen firms' default risk. In addition, firm performance plays an mediating effect in the process of short-term debt for long-term investment affecting the default risk of supply chain firms. Finally, customer effect and firm heterogeneity play a moderating role in the impact of short-term loans and long-term investments on the default risk of supply chain firms, and the U-shaped relationship will be strengthened under the high-intensity customer effect. This study has important theoretical and practical significance for analyzing the impact of default risk contagion in supply chain enterprises.