Debt Financing Decisions by European Firms

2011 ◽  
Author(s):  
Victoria Krivogorsky ◽  
Gun-Ho Joh
Keyword(s):  
Debt Financing ◽  
Financing Decisions

scholarly journals Corporate Governance Quality and Capital Structure Decisions: Empirical Evidence from Canada

2019 ◽  
Vol 6 (9) ◽  
pp. 303-311
Author(s):  
Dan Lin ◽  
Lu Lin
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Empirical Evidence ◽  
Composite Index ◽  
Free Cash Flow ◽  
Debt Financing ◽  
Cost Of Debt ◽  
Financing Decisions ◽  
Governance Quality ◽  
Corporate Governance Quality

This study examines the relationship between corporate governance quality and capital structure of firms listed on the S&P/TSX composite index between 2009 and 2012. Using an aggregate corporate governance index, this study finds support for the outcome hypothesis, which argues that capital structure is an “outcome” of corporate governance quality. Governance quality is found to be positively associated with firms’ leverage. Firms with lower governance quality have lower leverage as these firms’ managers do not like to have only little free cash flow leftover or have extra constraints imposed by debt financing. In contrast, firms with higher governance quality are more leveraged because these firms have lower agency costs and thus lower cost of debt financing. As a result, they can take on more debts. The empirical evidence from this study illuminates important links between governance quality and financing decisions of firms.

scholarly journals Convertible Debt: Financing Decisions and Voluntary Conversion under Ambiguity

2015 ◽  
Vol 15 (4) ◽  
pp. 599-611 ◽  
Author(s):  
Elettra Agliardi ◽  
Rossella Agliardi ◽  
Willem Spanjers
Keyword(s):  
Debt Financing ◽  
Convertible Debt ◽  
Financing Decisions

scholarly journals Determinants of capital structure and its impact on corporate governance: An emerging market empirical study

2017 ◽  
Vol 1 (1) ◽  
pp. 17-32 ◽  
Author(s):  
Maqbool Ahmad ◽  
Basheer Ahmed ◽  
Munib Badar
Keyword(s):  
Decision Making ◽  
Corporate Governance ◽  
Capital Structure ◽  
Audit Committee ◽  
Emerging Market ◽  
Debt Financing ◽  
Debt Ratio ◽  
Return On Assets ◽  
Financing Decision ◽  
Financing Decisions

This research endeavored to explore two schemes of literature pertains to capital structure i.e. antecedents and consequences of debt borrowing on firm specific and corporate governance factors. This research explores the determinants of capital structure to ascertain whether the financing decisions are optimal or not. Non-financial sector firms accumulated 70% of total firms listed on Pakistan Stock Exchange (PSX). To conclude proposed research, unbalance panel data for 160 non-financial firms listed at PSX from 2007 to 2011 is selected. Results revealed that Return on assets contributes 25% influence on financing decisions regarding debt. Similarly Debt borrowings affect negatively in overall profits. However, its intensity differs within different levels of its determinants. Corporate Governance CG index is negatively associated with debt ratio. Return on assets in terms of size of firm is impacted 29%. Institutional Ownership and debt financing has found a negative association with one and each other. Ownership concentration and debt ratio have strong positive binding between them. Significance of Board Size holds only 2% in debt financing decision making whereas CEO duality holds 68% significance in debt financing decision making. Audit Committee independence and debt ratio are also negatively related. Non-executive directors are found with no influence on capital structure decision making. Board Independence is positively related with leverage and found with no particular implementation of debt financing decisions makings. The outcome of this study can be used to provide managerial information whether their financing decisions are optimal or not and how they should enhance the scope of their financing decisions.

Corporate social responsibility disclosure and debt financing

2019 ◽  
Vol 20 (4) ◽  
pp. 394-415 ◽  
Author(s):  
Amal Hamrouni ◽  
Rim Boussaada ◽  
Nadia Ben Farhat Toumi
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Stock Exchange ◽  
Panel Data Analysis ◽  
Debt Financing ◽  
Content Type ◽  
Financing Decisions ◽  
Csr Reporting ◽  
Csr Disclosure ◽  
Corporate Social

Purpose The purpose of this paper is to examine how corporate social responsibility (CSR) reporting influences leverage ratios. In particular, this paper aims to determine whether firms with higher CSR disclosure scores have better access to debt financing. Design/methodology/approach This paper uses a panel data analysis of non-financial French firms listed on the Euronext Paris Stock Exchange and members of the SBF 120 index from 2010 to 2015. The environmental, social and governance (ESG) disclosure scores that are collected from the Bloomberg database are used as a proxy for the extent of ESG information disclosures by French companies. Findings The empirical results demonstrate that leverage ratios are positively related to CSR disclosure scores. In addition, the results show that the levels of long-term and short-term debt increase with the disclosure of ESG information, thus suggesting that CSR disclosures play a significant role in reducing information asymmetry and improving transparency around companies’ ESG activities. This finding meets the lenders’ expectations in terms of extrafinancial information and attracts debt financing sources. Research limitations/implications The research is based only on the quantity of the ESG information disclosed by French companies and does not account for the quality of the CSR disclosures. The empirical model omits some control variables (e.g. the nature of the industry, the external business conditions and the age of the firm). The results should not be generalized, since the sample was based on large French companies for 2010–2015. Practical implications France is a highly regulated context that places considerable pressure on French firms in terms of CSR policies. The French Parliament has adopted several laws requiring transparency in the environmental, social, and corporate governance policies of French firms. In this context, firms often regard CSR policies as constraints rather than opportunities. This study highlights the benefits that result from transparent CSR practices. More precisely, it provides evidence that the high disclosure of ESG information is a pull factor for credit providers. Originality/value This study extends the scope of previous studies by examining the value and relevance of CSR disclosures in financing decisions. More precisely, it focuses on the relatively little explored relationship between the extent of CSR disclosures and access to debt financing. This paper demonstrates how each category of CSR disclosure information (e.g. social, environmental and governance) affects access to debt financing. Moreover, this study focuses on the rather interesting empirical setting of France, which is characterized by its highly developed legal reforms in terms of CSR. Achieving a better understanding of the effects of ESG information is useful for corporate managers desiring to meet lenders’ expectations and attract debt financing sources.

scholarly journals The Importance of Capital Investment and Debt Financing in Deriving Shareholders’ Value; A Literature Survey

2021 ◽  
pp. 22-30
Author(s):  
Muzammil Hanif ◽  
Mohd Norfian Alifiah
Keyword(s):  
Decision Making ◽  
Capital Investment ◽  
Cash Flows ◽  
Debt Financing ◽  
Strategic Decision ◽  
Capital Investments ◽  
Managerial Decision ◽  
Financing Decisions ◽  
Free Cash Flows ◽  
Interest Payments

Shareholders’ value is the most important goal and an integral part of the companies’ strategic decision-making process. When a corporate performs well and creates value for its shareholders, it benefits the whole economy. The past studies concluded that efficient decision making in the areas of capital investments and debt financing can ensure high financial performance and shareholders’ value creation. This paper thoroughly reviews the literature on impact of capital investment and debt financing decisions on shareholders’ value. Capital investment is a very important managerial decision because it increases company's economic profit. However, past studies have found that not every time the capital investment results in increasing the value as it may vary with the level of investment. Moreover, debt financing lowers the free cash flows due to the payment of fixed interest payments, thus lowering shareholders' return and value. Therefore, this paper recommends the need of further research to better understand the effect of capital investment and debt financing decisions on shareholders’ value.

scholarly journals Do South African state-owned entities follow the pecking order theory of capital structure?

2021 ◽  
Vol 10 (1) ◽  
pp. 25-33
Author(s):  
Ferina Marimuthu ◽  
Stephanie Caroline Singh
Keyword(s):  
South African ◽  
African State ◽  
Order Theory ◽  
Debt Financing ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Investment Projects ◽  
Financing Decisions ◽  
Internal Funding ◽  
Section Sample

In corporate finance, the pecking-order theory suggests that companies adhere to a particular financing hierarchy, with internal funding taking preference over external funding, and debt financing taking preference over equity. This paper examines whether South African state-owned entities prioritize their financing sources as predicted by the pecking-order theory. A financing deficit variable comprising various cash flow-based components was used to test the theory. A panel regression model was employed using panel data estimators. Using a cross-section sample of 33 state-owned entities from 1995 to 2018, the study finds no evidence that South African state-owned entities follow a pecking order to finance investment projects. The pecking order theory proposition that costs of adverse selection are dominant for lower levels of leverage provides a reason for the financing deficit coefficient not being close to unity and hence an indication that the SOEs in South Africa do not follow the pecking order behavior in their financing decisions, an indication that South African capital market is still developing.

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