scholarly journals Alternative corporate governance paradigm and corporate financing: Capital structure decisions in employee-governed firms

2015 ◽  
Vol 65 (2) ◽  
pp. 271-297 ◽  
Author(s):  
Matjaž Črnigoj ◽  
Dušan Mramor
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Credit Rationing ◽  
Cost Of Debt ◽  
Corporate Financing ◽  
Earnings Volatility ◽  
Internal Resources ◽  
Corporate Capital ◽  
Corporate Capital Structure ◽  
Structure Choice

Assuming an alternative corporate governance paradigm that puts employees in the firm’s governance structures, as well as understanding their objective functions, we investigate capital structure decisions in employee-governed firms. Examining corporate capital structure decisions in 12 European countries, we provide strong empirical evidence of employees’ conservatism in capital structure choice. We find that employee-governed firms operate with significantly lower leverage and that employee-governed firms are significantly less levered at the same amount of earnings volatility than firms governed by other stakeholders. We also find evidence that employee-governed firms, at least in some countries, rely on internal resources to a larger extent. However, we did not find evidence that employee-governed firms have to pledge more collateral to obtain debt financing. In addition to this, we find evidence that employee-governed firms choose debt of shorter maturity and, somewhat surprisingly, that employee-governed firms in some countries are faced with lower cost of debt compared to firms governed by other stakeholders and not higher cost of debt as expected because of credit rationing and limited borrowing capacity.

scholarly journals Managerial Views on Corporate Financing Decision

2017 ◽  
Vol 2 ◽  
pp. 65-90
Author(s):  
Prem Prasad Silwal
Keyword(s):  
Capital Structure ◽  
Equity Market ◽  
Primary Data ◽  
Corporate Financing ◽  
Financing Decisions ◽  
Corporate Capital ◽  
Predictive Variables ◽  
Corporate Capital Structure ◽  
The Cost ◽  
Structure Choice

This survey examines the extent financial executives use the assumptions and/or inputs of capital structure models generated by academicians in making corporate financing decisions. To gather the views, opinions and perceptions of financial managers regarding corporate capital structure practices a questionnaire survey was conducted. The primary data are used in this study, generated through field study based on questionnaire that obtained from the respondents. One hundred and fifty questionnaires were distributed and eighty six of which were collected and analyzed. Nepalese executives believe that excessive use of debt will increase the cost of fund in its capital structure and they also believe that capital structure evolve as the cumulative outcome of past attempt to time the equity market. Similarly, eighty one per cent of the respondents believe that EFWAMB ratio is one of the important predictive variables of the capital structure choice.

The influence of religion on the determinants of capital structure: the case of Saudi Arabia

2020 ◽  
Vol 11 (2) ◽  
pp. 472-497
Author(s):  
Somaiyah Alalmai ◽  
Abdullah M. Al-Awadhi ◽  
M. Kabir Hassan ◽  
Arja Turunen-Red
Keyword(s):  
Saudi Arabia ◽  
Capital Structure ◽  
Corporate Financing ◽  
Content Type ◽  
Explanatory Variables ◽  
Corporate Capital ◽  
Corporate Capital Structure ◽  
Internal Funds ◽  
Islamic Society ◽  
Potential Challenge

Purpose This study aims to investigate whether a religious environment affects a firm capital structure. Design/methodology/approach The authors use data from Saudi Arabia with a highly Islamic religious environment. The authors use an extreme bounds analysis (EBA), which provides a reliable analysis of the determinants of capital structure and aids the process of selecting explanatory variables when there is model uncertainty. Findings The authors find that firms in such an Islamic environment are relatively less leveraged compared to firms in a non-Islamic environment. The authors also find that firms located in an Islamic environment have different determinants of capital structure than firms located in a non-Islamic environment. Specifically, the Islamic society creates decision makers who are more risk averse, thus leading to a preference for corporate financing using internal funds. Practical implications The results imply a potential challenge for growth-seeking firms located in religious Islamic societies. Originality/value This study is one of the first to examine the determinants of corporate capital structure in Saudi Arabia using EBA.

scholarly journals Macroeconomic uncertainty, corporate governance and corporate capital structure

2018 ◽  
Vol 14 (3) ◽  
pp. 301-321 ◽  
Author(s):  
Yee Peng Chow ◽  
Junaina Muhammad ◽  
A.N. Bany-Ariffin ◽  
Fan Fah Cheng
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Good Governance ◽  
Policy Makers ◽  
Content Type ◽  
Corporate Capital ◽  
Macroeconomic Uncertainty ◽  
Corporate Capital Structure ◽  
Governance Quality ◽  
The Relationship

PurposeThe purpose of this paper is to examine how corporate governance moderates the relationship between macroeconomic uncertainty and corporate capital structure.Design/methodology/approachThis paper employs the two-step system generalized method of moments regression, considering a sample of 907 listed non-financial firms from seven Asia Pacific countries during the period 2004-2014.FindingsThis study finds that macroeconomic uncertainty has a significant negative impact on the capital structure decisions of firms. The results also reveal that the overall effect of macroeconomic uncertainty on capital structure among firms with better governance quality is significantly negative. The evidence suggests that corporate governance acts as an effective mechanism to curb the usage of leverage during times of high volatility. Further analysis shows that board independence, the separation between the roles of CEO and chairman of the board and blockholders’ ownership are effective governance mechanisms, whereas similar observations do not hold for board size and institutional ownership.Research limitations/implicationsThe findings of this study may be useful to policy makers to formulate appropriate policies to mitigate the adverse effects caused by macroeconomic uncertainty. This is important because macroeconomic uncertainty may have potential destabilizing effects on a country’s or region’s development by jeopardizing the firms’ ability to formulate sound investment, production and financing decisions. Additionally, the results suggest that good governance quality can act as a check and balance to ensure that firms use less leverage when they are facing volatility in the macroeconomic environment. These findings could help to reinforce the importance of good governance among policy makers of a country as well as managers of firms.Originality/valueThe authors make the first attempt to examine the moderating effect of corporate governance on the relationship between macroeconomic uncertainty and corporate capital structure.

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