Dynamic Capacity Choice, Dynamic Capital Structure, and Credit Risk

PurposeThe purpose of this paper was to investigate the impact of credit risk-taking on financial and social efficiency and examine the relationship between credit risk, capital structure and efficiency in the context of Islamic microfinance institutions (MFIs) compared to their conventional counterparts.Design/methodology/approachThe stochastic frontier approach was used to estimate the financial and social efficiency scores, in a first step. In a second step, the impact of risk-taking on efficiency was evaluated. The authors also took into account the moderating role of capital structure in this effect using the fixed and random effects generalized least squares (GLS) with a first-order autoregressive disturbance. The used dataset covers 326 conventional MFIs and 57 Islamic MFIs in six different regions of the world over the period of 2005–2015.FindingsThe overall average efficiency scores are less than 50%, where CMFIs could have produced their outputs using 48% of their actual inputs. IMFIs record the lowest financial (cost) efficiency that is equal to 28% on average. The estimation results also reveal a negative impact of nonperforming loan on financial and social efficiency. Finally, the moderating effect of leverage funding on the relationship between credit risk-taking and financial efficiency was confirmed in CMFIs. However, leverage seems to moderate the effect of risk-taking behavior on social efficiency for IMFIs.Originality/valueThis paper makes an initial attempt to evaluate the effect of risk-taking decision and its implication on efficiency and MFIs' sustainability. Besides, it takes into consideration the role played by the mode of governance through the ownership structure. In addition, this research study sheds light on the importance of the financial support for the development and sustainability of these institutions, which in return, contributes to a sustainable economic development.

Download Full-text

Farm capital structure choice: theory and an empirical test

Agricultural Finance Review ◽

10.1108/afr-08-2012-0041 ◽

2014 ◽

Vol 74 (1) ◽

pp. 115-132 ◽

Cited By ~ 4

Author(s):

Feng Wu ◽

Zhengfei Guan ◽

Robert Myers

Keyword(s):

Theoretical Model ◽

Capital Structure ◽

Credit Risk ◽

Choice Theory ◽

Empirical Test ◽

Theoretical Framework ◽

Comparative Statics ◽

Content Type ◽

Structure Choice ◽

Capital Structure Choice

Purpose – The purpose of this paper is to provide a unified theoretical framework that explains farm capital structure choice. Design/methodology/approach – The framework accommodates different credit access scenarios and heterogeneous risk profiles of borrowers. It recognizes that the costs of capital are endogenously determined, reflecting the degree of credit risk and accessibility to credit markets. Based on the proposed model and the comparative statics derived thereof, the paper empirically tests the impacts of different factors on capital structure choice. Findings – Based on the theoretical framework, the paper derived the impacts of different factors on capital structure choice using comparative statics. Results suggest that the potential determinants of capital structure have varying effects at different ranges of leverage. Empirical evidence supports the theoretical model. Originality/value – Despite all of previous work on various aspects of farm capital structure choice, a framework that encompasses each of the different assumptions and scenarios is still lacking. The theoretical model integrates credit risk models and accommodates endogenous cost of capital, providing a comprehensive framework for studying farm capital structure choice and its determinants. The results provide insights that could help policy makers and lenders develop effective instruments to manage, monitor, and influence the financial leverage of farms at different quantiles of debt ratio.

Download Full-text

Capital structure and profitability: An empirical study of South African banks

Corporate Ownership and Control ◽

10.22495/cocv14i1p1 ◽

2016 ◽

Vol 14 (1) ◽

pp. 8-19 ◽

Cited By ~ 1

Author(s):

Kudzai Raymond Marandu ◽

Athenia Bongani Sibindi

Keyword(s):

Capital Structure ◽

Credit Risk ◽

South African ◽

Time Series Data ◽

Emerging Market ◽

Strong Relationship ◽

Capital Adequacy ◽

Series Data ◽

Bank Capital ◽

The Relationship

The bank capital structure debacle in the aftermath of the 2007-2009 financial crises continues to preoccupy the minds of regulators and scholars alike. In this paper we investigate the relationship between capital structure and profitability within the context of an emerging market of South Africa. We conduct multiple linear regressions on time series data of big South African banks for the period 2002 to 2013. We establish a strong relationship between the ROA (profitability measure) and the bank specific determinants of capital structure, namely capital adequacy, size, deposits and credit risk. The relationship exhibits sensitivity to macro-economic shocks (such as recessions), in the case of credit risk and capital but is persistent for the other determinants of capital structure.

Download Full-text

Determinan Leverage Optimal Di Bursa Efek Indonesia

Majalah Ilmiah Bijak ◽

10.31334/bijak.v17i1.829 ◽

2020 ◽

Vol 17 (1) ◽

pp. 94-107

Author(s):

Purwanto Widodo ◽

Juardi Juardi

Keyword(s):

Capital Structure ◽

Dynamic Models ◽

Stock Exchange ◽

Dynamic Panel Data ◽

Method Of Moment ◽

Manufacturing Companies ◽

Macroeconomic Factors ◽

Trade Off ◽

Optimal Leverage ◽

Dynamic Capital Structure

Research on capital structure, recently characterized by the use of dynamic capital structure. The use of dynamic capital structure basically wants to know the existence of optimal leverage as hypothesized by Trade-Off Theory and Speed off Adjustment (SOA) to optimal leverage. This research tries to overcome this problem, by using dynamic panel data by using company characteristics and macroeconomic factors. The use of General Method of Moment (GMM) to overcome the problem of econometrics due to the use of dynamic models. Samples taken from manufacturing companies listing on the Indonesia Stock Exchange 2009-2015. The inference model and the determinant behavior of capital structure can be explained by Trade-Off Theory and Pecking Order Theory. The variable characteristics of the company and macro economy are significant and are marked according to the hypothesis. The findings of this study include: the influence of profitability, size, tangibility, growth opportunity and business risk. In addition, on average companies in Indonesia can increase their debt to utilize tax shields

Download Full-text

The influence of firm, industry and concentrated ownership on dynamic capital structure decision in emerging market

Journal of Asia Business Studies ◽

10.1108/jabs-04-2019-0109 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Razali Haron ◽

Naji Mansour Nomran ◽

Anwar Hasan Abdullah Othman ◽

Maizaitulaidawati Md Husin ◽

Ashurov Sharofiddin

Keyword(s):

Capital Structure ◽

Emerging Market ◽

Generalized Method Of Moments ◽

Dynamic Environment ◽

Order Theory ◽

Ownership Concentration ◽

Content Type ◽

Dynamic Panel Model ◽

The Impact ◽

Dynamic Capital Structure

Purpose This study aims to evaluate the impact of firm, industry level determinants and ownership concentration on the dynamic capital structure decision in Indonesia and analyses the governing theories. Design/methodology/approach This study uses the dynamic panel model of generalized method of moments-System (one-step and two-step) by using a panel data from 2000 to 2014 to examine the relationship between the determinants and leverage. The results are robust to the various definitions of leverage, heterogeneity, autocorrelation, multicollinearity and endogeneity concern. Findings Growing firms and firms operating in a highly concentrated industry use high level of debt, taking advantage of the tax shield (trade-off theory). However, if the firms are operating in a highly dynamic environment, they take on less debt as to avoid bankruptcy risk. Firms in Indonesia opt for debt financing perhaps to act as a controlling mechanism to mitigate agency conflicts that may exist between the large controlling shareholders and the minority. Aged and highly profitable firms with high tangible and intangible assets and liquidity level operating in a high dynamic environment follow the pecking order theory. Research limitations/implications This study does not perform each industry regression individually. All the industries are pooled together, as the main focus of this study is to examine the factors affecting leverage of firms in general without giving particular attention to individual industry. Originality/value The insights on the impact of ownership concentration and industry characteristics are novel especially on Indonesia, thus fill the gap in the literature.

Download Full-text