Surplus Funds Research Articles

Do Excess Funds Make Financially Constrained Firms Better Off? Evidence from IPOs in China

Firms in transition economies often suffer financial constraints. In initial public offerings (IPOs), however, many newly listed Chinese firms raise funds in excess of what is originally planned. This paper examines whether these excess IPO funds are wasted on value‐destroying spending or enable firms to take growth opportunities. After controlling for the endogeneity issue, we find that Chinese firms with excess IPO funds have better post‐IPO operating performance, especially those with limited financing channels. In revealing the mechanism, we find that excess IPO fundraising alleviates financial constraints and reduces the cost of debt.

Financial Literacy and its determinants: A Case of professionals’ in Sri Lanka

The main focus of this study is to identify the level of financial literacy and its determinants among professionals engaged in the fields of Medicine (Doctors), Engineering (Engineers), Management (Managers), Law (Lawyers) and other fields such as Aviation and Navigation (Captains and Pilots) as they can be considered as strategic decision makers of different fields in the country. Further they are assumed to be having accumulated wealth or excess funds for buying investment products. So, it is important to know whether they have the knowledge in effective utilization of their wealth. Study employed a descriptive survey design. A sample of 300 respondents from Colombo district was selected as it has the highest level of service sector employability. For the purpose of collecting data, a well-designed questionnaire was distributed under stratified random sampling technique based on a way that all 13 divisional secretariats in Colombo district were represented. The analysis (One-way ANOVA test results) revealed that, basic financial literacy (knowledge on time value of money, inflation, interest rates and real values) as well as the advanced financial literacy (knowledge on stocks, bonds, mutual funds, stock market, and portfolio diversification) among the respondents are at medium level, except doctors, lawyers, captains and pilots. Therefore, results concluded that all educated people are not financially literate. Linear regression results indicated that economic and financial education, self-analytical skills, monthly income level and the field of employment are as significant determinants of financial literacy. Those who are in the professions where there is lack of touch in economic and financial education are possessed with low financial knowledge. Therefore, it is important to implement a national strategy of improving economic and financial educational programmes especially for those who are not engaged in the fields of management.
 Keywords: Financial literacy, Financial and Economic education, Self-analytical skills

Humanitarian Response to Disasters with Funding Uncertainty: Alleviating Deprivation with Bridge Finance

Agencies that provide relief to disaster survivors raise funds from diversified sources, such as foundations, private donors, and lenders. The output of a relief operation, such as lives saved, is a function of several factors: disaster intensity, relief agency's effectiveness, and the size of donor fund. In an uncertain funding environment with delays, a stop‐gap loan can help decrease deprivation at the onset of disaster. When funding materializes, surplus fund net of loan and interest facilitates a second relief operation. We analyze a multistage framework in a game‐theoretic context to study the decisions of the parties involved: relief agency (loan sought and effectiveness), lender (interest rate), and donor (funding level). We find that the size of loan increases in funding delay, even though the lender increases interest rate. The donor increases funding to ensure a larger fund availability (net of loan and interest). While the uncertainty in funding delay motivates the relief agency to seek a larger loan, we find that the maximum number of survivors receiving aid decreases. In case of logistics delays, we find that the speed of response decreases in disaster intensity, enabling a larger number of survivors to receive aid as the cost of logistics decreases. It also increases the loan size and donor funding. However, the relief agency fails to cover all survivors if the disaster intensity is large as the response speed does not decrease below a threshold.

Effect of Cash Forecasting Practice on Performance of Commercial Banks in Kenya

The purpose of the study was to analyze the effect of cash forecasting practice on performance of commercial banks in Kenya. The study was based on Portfolio theory of Cash Management, Cash Management theory, Transaction Cost theory, Free Cash Flow theory and pecking order theory. The study used mixed research design which involves collecting and analyzing both qualitative and quantitative data. The target population of the study comprised of the 6913 employees in management and supervisory cadres in commercial banks in Kenya. Stratified sampling technique was used to identify the sample size in every stratum. Data collection instruments were both structured and unstructured questionnaires. Data collection methods were both primary and secondary. The data was analyzed using Statistical Program for Social Sciences (SPSS) windows version 21.Multiple linear regression analysis was carried out to analyze the determinants of cash flow management practice on performance of commercial banks in Kenya. Pilot test was carried out for validity and reliability of research instruments. Regression analysis was carried out to test the significant levels of one variable to the other in the study. ANOVA was carried out to test the hypotheses of the study. The study is significant to the banking sector and the government of Kenya in formulation of different financial decisions and in policy making. The results of the study indicate that all the independent variables have a significant positive effect on performance of Commercial banks Kenya . The findings reveal that commercial banks in Kenya carry out cash forecasting practice and that inflation rates influence interest rates in commercial banks in Kenya. Cash forecasting practice was found to be positively related to performance of commercial banks in Kenya. The study recommends that the management of commercial banks in Kenya should be enhanced through frequent audits to be able to curb interest rates especially the unanticipated inflation which adversely affects the functions of money by undermining wealth holders’ confidence in its ability to be used as medium of exchange and store of value. The firms should have plans for their cash needs and requirements during a projected period, particularly one year and above to enable them achieve their set goals in advance and reduce the cost of capital and increase the returns of excess cash. They should also make sure that the banks’ cash funds are in the optimal utilization and there are no extra borrowings. They should also focus on surplus funds to invest in marketable securities and that period of inflation is when lenders lose while borrowers gain because the real value of the debt declines. They should also maintain the minimum liquidity requirement as stated by the Central Bank of Kenya as both illiquidity and excess liquidity are financial diseases that can easily erode the profit base of a bank as they affect banks’ attempt to attain high profitability level. They should also put into consideration liquidity levels in pursuit of high profit for it can cause great illiquidity, which reduces the customers’ patronage and loyalty.

Board gender diversity, financial decisions and free cash flow: empirical evidence from Malaysia

PurposeThis study aims to explore the role of board gender diversity in enhancing the allocation of free cash flow (FCF). It examines the direct effect of board gender diversity, as well as its indirect effect, through debt and dividend policies, on the level of FCF.Design/methodology/approachThis study applies a three-stage least squares regression analysis for a sample of 367 Malaysian listed firms over the period 2011–2019.FindingsThe results show that female directors significantly deter the opportunistic behavior of managers. The authors find that gender diversity – as measured by the percentage of women on the board and the percentage of female independent directors are likely to reduce excess funds. Moreover, the results reveal a significant indirect effect of board gender diversity, through dividend payouts, on the efficient allocation of FCF. The results are consistent with those in prior studies that document the benefits of board gender diversity.Practical implicationsThe research findings are beneficial to policymakers, as it allows them to assess the importance of diversity on boards in the monitoring of the managers, particularly as it pertains to the allocation of excess funds. Furthermore, these findings have implications for regulators as they shed light on the importance to undertake measures and reforms to promote board effectiveness by the introduction of gender diversity.Originality/valueWhile prior research has examined the effect of board gender diversity on firm performance, the study is the first to investigate both the direct and indirect effect of board gender diversity on the allocation of FCF.

Free Cash Flow, Debt Policy and Profitability: Analysis the Investment Opportunity Set

The main purpose of investors investing in the capital market is to earn profits in the future. Investment is an alternative investment. If investors have excess funds, they will not let their funds idle. Funds can be invested in various forms, such as buying certain assets that tend to increase in price such as equipment, land, or gold or in the form of time deposits in banks, buying stocks and bonds in the financial market. The research objective to be achieved is to provide understanding and knowledge to the public, especially investors and creditors regarding free cash flow, debt policy, profitability and investment opportunity sets that can be used as a reference for further researchers as well as a reference for stakeholders (investors, creditors, and the government) in making decisions. relevant and reliable. The method used is quantitative research with secondary data taken from financial statements at idx with data collection techniques using purposive sampling method. Analysis of the data used is multiple linear regression with panel data. The population in this study is the property and real estate sub-sector listed on the Indonesia Stock Exchange, which was carried out for 3 years of observation, namely 2017-2019 totaling 120 data with 40 companies per year. The results showed that only the debt policy variable proxied by the debt equity ratio had a significant effect on the investment opportunity set, while the free cash flow and profitability variables proxied by the return on assets had an insignificant effect on the investment opportunity set.

The Role of Payment Tools Using Card to Stability of Sharia Banking Financial System

The financial system has a very strategic role in supporting economic activities. The financial system which is part of the economic system carries out an intermediary function that allocates funds from parties who experience excess funds (surpluses) to those who lack funds (deficit). Islamic financial system is a financial system that bridges between those who need funds and those who are excess funds through financial products and services that are in accordance with Islamic principles. The Development of Card Based Payment Instruments in Indonesia and the development of sharia banking in Indonesia experienced harmonious and positive growth from 2012 to 2020. If it is associated with the development of Card Based Payment Instruments that the author can conclude that the use of electronic cards such as credit cards, cards ATM and ATM debit cards have a very important and positive role for the development of sharia banking financial stability, namely sharia banking business activities because the use of electronic cards will further enhance sharia banking business activities, namely funding, lending, and services.

Evaluation of the Experience of the Inter-Bank Liquidity Management Fund: Sudan (2014-2019)

Islamic banks need instruments and Islamic financial products to help them utilize their excess liquidity to achieve earnings and help them in periods of liquidity shortage. That would reduce their dependency on central banks as the lender of last resort, especially since borrowing money on interest is prohibited in Islam. One option available for Islamic banks to manage their excess liquidity is establishment of a Sharīʿah-compliant investment fund. The research aims to assess the experience of the Inter-Bank Liquidity Management Fund in Sudan by introducing the fund, explaining how it complies with the Sharīʿah, how it was formed and managed, and by evaluating its performance during the period (2014-2019). This is in order to make the experience useful regionally and globally. The research adopted the historical and descriptive analytical methodology. The most important results were that the Interbank Liquidity Management Fund provided an opportunity to invest the surplus funds of banks in Sudan through the banks' contributions to the fund's capital. it has also contributed to reducing liquidity risks.

Determinan yang Berpengaruh pada Minat Investasi di Pasar Modal

Investing in the capital market is an alternative for people who want to invest their excess funds as well as being able to drive the economy in a country. This study aims to obtain empirical evidence regarding the determinants that influence investment interest in the capital market. Determination of the sample in this study using purposive sampling method with a sample of 105 students who have taken the capital market theory course and already have an account of effects. The data analysis technique used is multiple linear regression analysis. The results of the study indicate that investment understanding, motivation, and the bandwagon effect have a positive effect on investment interest in the capital market. This means that the higher the understanding of investment, motivation, and the bandwagon effect phenomenon that occurs, the higher the interest in investing in the capital market.
 Keywords: Investing Interest; Investment Understanding; Motivation; Bandwagon Effect.

Islamic Banking Third-party Funds Grouping uses the Data Mining Clustering

Islamic banking as an intermediary institution (intermediary) between people with excess funds and people who lack funds has a very important influence on the Indonesian economy. In this study, the third-party funds discussed were third-party funds of Islamic banking. The purpose of this study is to analyze the grouping of Islamic banking third-party funds on Indonesia’s economic growth over the past 11 years, from 2009 to 2019 using the K-means algorithm. The data of this study uses time-series data from Islamic banking statistics, namely data on third-party funds for Islamic banking financing sourced from the official website of the Financial Services Authority. The findings of this analysis are in the context of a clustering of Islamic banking third-party funds containing 2 clusters: low (C1) and high (C2). The results obtained are there are 7 data with low clusters and 4 data with high clusters. The results of calculations carried out manually and testing using Rapid Miner, produce the same data grouping.

Bank Borrowings by Asset Managers Evidence from U.S. Open-End Mutual Funds and Exchange-Traded Funds

In this note, we look into investment funds' access to and usage of bank credit, based on a new dataset on credit line (and other types of loan) extension by top bank holding companies to open-end mutual funds and ETFs in the United States. We find that the aggregate amount of bank lending to open-end funds and ETFs was small and greatly fluctuated across time. Bank credit, particularly in the form of credit lines, has offered funds a flexible liquidity source from which they can draw down cash in times of excessive fund outflows, such as during the onset of the COVID-19 pandemic outbreak. In particular, funds that hold relatively more illiquid assets, such as bank loan funds, are more reliant on bank credit lines.

Casino capitalism in the era of COVID-19: examining Macau’s pandemic response

Purpose This purpose of this paper is to explain Macau’s successful pandemic response through an analysis of its social, political and economic landscapes. In particular, it focusses on the economic relief brought by casino capitalism in this era of COVID-19. Design/methodology/approach As mobility is highly restricted during the coronavirus pandemic, digital technologies have become central to ongoing social science research. Thanks to videoconferencing programmes such as Zoom, Facetime and WhatsApp, the author was able to carry out virtual interviews with 13 local people from different sectors of Macau in July 2020. In addition to in-depth interviews, the author also undertook an extensive review of the Macau government’s pandemic policies. Findings This paper argues that the Macau government’s swift and effective coronavirus policies are deeply intertwined with the urban fabric and political economy of the city’s casino capitalism, which endowed the government with surplus funds and an infrastructure that enabled the implementation of an array of strict measures that few other countries could afford to subsidise. Factors that have led to Macau’s extraordinarily low rates of COVID-19 infections and deaths include: competent leadership and the public’s high compliance with mandatory health measures; the generous benefits and financial support for citizens and businesses; and the compulsory quarantine required of all incoming travellers, who are lodged in hotel rooms left empty when casino tourists stopped coming. All of these measures have been made possible by a political economy backed by the peculiarities of casino capitalism and its resultant tax revenues. Research limitations/implications Future research could compare the case of Macau with other small but affluent economies (ideally economies that do not depend on the gambling industry) to ascertain the role of casino capitalism in building up economic resilience. Originality/value Although previous studies tend to emphasise the negative impacts of casino capitalism, this paper shows how tax revenues and infrastructure from the gambling industry can make a contribution to the host society in times of crisis.

Capital Market and Economic Growth in Nigeria: An Autoregressive Distributed Lag (ARDL) Bounds Testing Approach

The role of the capital market in the growth and development of any economy need not be over-emphasized. The capital market is a complex institution and mechanisms through which economic units desirous to invest their surplus fund, interact directly or through financial intermediaries with those who wish to procure funds for their businesses. The Nigerian capital market started operations in mid-1961 with eight stocks and equities; with about seven United Kingdom (UK) firms quoted on the Nigerian Stock Exchange (NSE) which had, at the same time, dual quotations on the London Stock Exchange. This study examined the impact of the capital market on economic growth in Nigeria from 1981 to 2018. The expo facto research design was adopted for this study. The time-series data for the study were sourced from CBN statistical bulletin. Autoregressive Distributed Lag (ARDL) was used with the aid of e-view 10 software. The ARDL Bounds test revealed the existence of a long-run relationship among the variables. The result revealed that market capitalization has positive and insignificant effects on economic growth both in the short and long run. There is unidirectional causality among the variables. The study recommended that regulatory authorities should restore confidence in the market by ensuring transparency and fair trading dealings and transactions in the market to enhance economic growth. There should be an improvement in the moribund market capitalization, by encouraging more foreign investors to participate in the market, maintain a state of the art technology like automated trading and settlement practices, electronic fund clearance, and eliminate physical transfer of shares.

Role of Fintech in Transforming Financial Services Sector in India: An Empirical Study of Benefits and Challenges

Financial institutions are the intermediaries that connect those having surplus funds with those looking for the funds. In addition to this, the role of financial institutions is much more in making the transactions happen, such as banking institutions. The last few years have been revolutionary for the financial sector, wherein the methods of making payments and transactions have drastically changed. This period has witnessed the evolution of a new range of financial institutions, which the primarily tech-based organizations, hence known as FinTech companies or institutions. With the emergence of alternative payment methods, people have adopted the services of FinTech companies with excitement. The present study is descriptive in nature and discusses the benefits and challenges of FinTech and its role in transforming the financial sector in India. The study is based on the data collected from experts in the field of finance and technology. The sample size of the study is 140. Mean, and T-test was applied to analyze the data. The study concludes that India has a vast potential for start-ups to grow and flourish due to Fintech, which has India as an attractive market across the world. FinTech services have boosted the economy of the countries. It is also found that Fintech has played a significant role in the Transforming Financial Services Sector in India.

МОДЕЛЮВАННЯ ДОСТАТНОСТІ ФІНАНСОВОГО ЗАБЕЗПЕЧЕННЯ ПОТОЧНИХ ВИРОБНИЧИХ ПЕРІОДІВ ДЛЯ ГОТЕЛЬНИХ ПІДПРИЄМСТВ

The article dwells upon investigation into the issue of providing the adequate financing level of firms’ operational period attained by creation and employment of the suggested economic mathematical toolkit. Its nucleus is the firm’s special stabilizing surplus fund operated with the set of the following models: model for the fund’s elaboration, its adaptive mathematical model and algorithmic model for the fund’s management (implemented via designed computer program). The mathematical model of special stabilizing surplus fund, as well as calculation of its amount for every next industrial period is being set forward in the paper. Both indispensable and sufficient condition of special stabilizing surplus fund’s organization is being enunciated. In order to estimate the volume of special stabilizing surplus fund, an analytical approach of «temporary money cost» is applied to expenditure function analysis. Thereby, we suggest the following approach to handling the issue of cash flow leveling within each step of calculation. Furthermore, the author suggests an approach brought forward in order to estimate the effect of resorting to special stabilizing surplus fund in the course of either one or several industrial periods. Purpose of the article is implementation of such a short-term prognostication technique as proportional predictive method. The methods applied include: proportional predictive method, dialectical method, observation method, critical and contrastive analysis and synthesis method. The decision was made to repudiate the approach implying creation of econometric models of time series dynamics for the present research due to the lack of statistical data. This article also aims at improving evaluation methods of financial state of a certain company at a definite period of time. The research held is based on the statistical data on business activities over the year of 2020 provided by the hotel «Dnister» (Ukraine).

Auditing Scientology: Reexamining the Church's 501(c)(3) Tax Exemption Eligibility

The Church of Scientology is one of the most discussed religions of the modern era, and its beliefs and practices have been shrouded in controversy since its emergence in the 1950’s. Shortly thereafter, the Internal Revenue Service recognized Scientology as a valid religious organization, thus granting certain governmental protections and benefits afforded to religious organizations in this country, including tax exemption. After a decades-long battle between the Church and the IRS, the IRS eventually granted a blanket tax exemption to all Scientology organizations under Section 501(c)(3) of the Internal Revenue Code. However, the Church’s current practices and activities raise significant concerns that warrant a reexamination of its tax exemption eligibility. The Church engages in activities that are substantially commercial by requiring payment from Scientologists to practice the religion and improve their spiritual standing. Additionally, the Church violates the fundamental national public policy that freedom of speech should not be suppressed simply because two parties disagree, a foundation of our nation that is trounced by Scientology’s Fair Game policy. Further, the Church facilitates private inurement of top executives and influential celebrity members by expending excessive funds for their personal benefit. For these reasons, the IRS should reevaluate the tax exemption status of each individual Scientology organization, or risk undermining judicial decisions and creating the dangerous precedent that persistent attacks on governmental agencies will in turn lead to leniency and submission. Should the IRS investigate and determine that all Scientology organizations comply with the requirements of Section 501(c)(3), then retention of their tax exemption status would be completely warranted; however, to permit such activities to continue without question would undoubtedly defeat the principles behind tax exemption and raise legitimate concerns regarding the fairness of IRS decisions.

Impact of behavioural dispositions on risk endurance of individual investors: an application of multiple discriminant analysis

For the rapid development of an economy, investment of excess funds is essential. But in today's dynamic environment, individual investor's decision-making is influenced by several factors such as behavioural dispositions, where emotions play a crucial role in investing. Further, investment decisions are also influenced by the risk-tolerant behaviour of investors. The present study attempts to know the impact of behavioural biases on the risk endurance level of investors. For the study, a sample of 720 individual investors has been taken from it, 600 investors have responded from the state of Rajasthan. A structured questionnaire has been prepared to include statements of investors' behavioural biases and risk-taking ability. The analysis has been done using the technique of Multiple Discriminant Analysis. It has been concluded that behavioural biases impact the risk-taking capacity, and further investors have been categorised into three groups viz. Risk Intolerant investors, Conservative moderate investors and rational confident investors.

Do working capital management practices influence investment and financing patterns of firms?

PurposeThe present study aims to investigate the impact of working capital management (WCM) practices on the investment and financing patterns of listed nonfinancial companies in Pakistan for a span of 10 years.Design/methodology/approachThe study is based on secondary financial data of 354 listed nonfinancial Pakistani firms during the period of 2005–2014. The two-step generalized method of moment (GMM) regression estimation technique is employed to ensure the robustness of results.FindingsEmpirical testing reveals that: excessive funds tied up in working capital have a negative impact on the investment portfolio of sample firms. Besides, a negative relationship between change in fixed assets and excess net working capital posits that, eventually, firms use idle resources tied up in short-lived assets to boost their investment activities. Furthermore, larger working capital levels were associated with higher leverage ratio which indicates that firms with inefficient WCM policies have to rely heavily on long-term debt to meet their short-term financing requirements. Additional results indicate that firms that take more time to sell inventory and convert receivables to cash, make more use of debt. Results of cash management models illustrate that cash-rich firms have lower leverage levels which signal the strong financial health and internal revenue generation capability of such firms.Originality/valueThere is a dearth of empirical studies that examine the implications of WCM decisions on a firm's capital structure. Besides, these studies are only confined to how a WCM policy influences the long-term investment activities of a firm. The research contributes to the extant literature by empirically revealing a link between the WCM practices and the firm's long-range investment and financing patterns. Hence, financial managers shall account for the impact of their short-term financial management decisions on the capital structure of the firm.

Rescuing model and system of failed bank

Referring to the provisions of Law Number 7 of 1992 and its amendments to Law Number 10 of 1998 concerning Banking, it is explained that a Bank is a business entity that collects funds from the public in the form of deposits and distributes them to the public in the form of credit and or other forms of to improve the standard of living of the wider community so that the banking industry greatly affects the overall stability of the economy because banking institutions are intermediary institutions that bridge people who do not need their funds (surplus) to be deposited in banking institutions as deposits and distributed by these institutions to people who need them in a productive form of distribution. The role of banking institutions is systemic; in other words, banking is an important part of the economic system which will cause a multiplier effect if it is not healthy or in this case, it becomes a failed bank. The main function of banking in macroeconomic policy infrastructure is indeed directed in the context of how to make money effectively and efficiently to increase economic value, which requires the role of regulation in the economic sector as a rule for the essence and existence of banking institutions in carrying out their operations. This study is normative legal research that uses several approaches namely: the statute approach, the case approach, the historical approach, and the conceptual approach carried out with juridical concepts of banks, failed banks, bank restructuring, macroprudential and microprudential. The objective of this study is to comprehensively explain the model and system for rescuing failed banks that meet the benefits principles.

Financial Control Systems and Financial Systems Theory: Free Cash Flow and Profitability Nexus: a Comparative Study of Manufacturing Firms in Nigeria and Ghana

In Financial Systems, the impact of Free Cash Flow (FCF) on the performance of a company has been in the center of academic discourse in recent years. Several studies have tried to ascertain the nature and magnitude of the relationship between free cash flow and firm profitability with conflicting results coming from different scholars. The main objective of this research work was to examine the impact of FCF on the profitability of quoted manufacturing firms in the Nigerian and Ghana stock exchanges. Data were pooled from twenty (20) different companies (ten each from Nigeria and Ghana) for a period of six years (2012 – 2017). A panel data estimation model was used to measure the impact of FCF and other performance metrics on the Return on Assets (ROA), which is our chosen profitability measure. The results show a positive but insignificant relationship between FCF and ROA both for Ghana and Nigerian manufacturing firms. Also, sales growth showed a positive impact on profitability of both countries while leverage negatively impacted on profitability. with Ghana being significant at 5%. The implication of the findings of the study is that it makes no business sense for companies to keep piling up excess funds beyond that which is needed for transactional purposes. The similarity between the results from Ghana and Nigeria in most of the variables shows that the findings of this study can be generalized to other countries. Based on the findings of the study, we recommend that the management of companies should strive to keep only the minimum needed free cash flow while the rest should be invested in other projects with positive net present value