Capital Structure Variability and Corporate Bankruptcy Risk

2012 ◽  
Author(s):  
Dror Parnes
Keyword(s):  
Capital Structure ◽  
Corporate Bankruptcy ◽  
Bankruptcy Risk

The Impact of CEOs’ Characteristics on Corporate Leverage: Indian Scenario

2020 ◽  
pp. 097226292095459
Author(s):  
Rupinder Kaur ◽  
Balwinder Singh
Keyword(s):  
Capital Structure ◽  
Negative Relationship ◽  
Inverse Association ◽  
Bankruptcy Risk ◽  
Middle Income ◽  
Factors Affecting ◽  
Share Ownership ◽  
Financing Decisions ◽  
Ceo Tenure ◽  
The Impact

Ever since the prominent work by Modigliani and Miller (1958), much research has been undertaken in trying to identify the factors affecting the capital structure. Lately, behavioural finance has begun to take hold of a more prominent position in trying to explain aspects of finance which traditional research has failed to clarify. In fact, a growing body of empirical evidence suggests that manager-specific characteristics significantly influence firms' financing decisions. The limited work carried out in lower-middle income countries drives us to thoroughly investigate the role played by CEOs’ characteristics in determining corporate financing decisions. Employing a sample of 307 non-financial firms listed in Nifty 500 index, the panel regression results indicate that CEO tenure is significantly and positively associated to firm’s leverage for the possible reason that a long tenure of CEO reflects strong networks and alliances with important stakeholders that allow the CEO to compose, foster, and support risky initiatives like raising debt. Further, the level of leverage is higher at organizations where CEOs are younger on account of the fact that career and financial securities are imperative to a greater extent for older executives; therefore they may evade risky engagements that may interfere with their securities. The results also display that CEO share ownership has a significantly negative relationship to leverage because these executives have a large share of their personal wealth capitalized in the firm in the shape of firm-specific human capital and common stock holdings. This makes managerial insiders unwilling to use the optimum amount of debt funding for the firm for the reason that additional bankruptcy risk associated with higher levels of debt may arise. The findings thus put forward that recurrent job changes among the senior officials should be discouraged because the subsequent short-term focus and dearth of firm-specific knowledge might promote risk evasion. It shows that elder executives desire a more conservative capital structure whereas younger executives endeavour to take more risk. So, there is a need to bring diversification in the management so as to take advantage from the skills and services of the young. The inverse association between CEO share ownership and firm leverage specifies that board of directors and the shareholders should be stringent in checking managers to make sure they perform as per the interests of shareholders. It seems that while making capital structure decisions risk seeking behaviour favouring high corporate leverage is important and should be encouraged.

scholarly journals Corporate Bankruptcy Prediction in Poland Against the Background of Foreign Experience

e-Finanse ◽  
2019 ◽  
Vol 15 (1) ◽  
pp. 10-19
Author(s):  
Błażej Prusak
Keyword(s):  
Developed Countries ◽  
The United States ◽  
Bankruptcy Prediction ◽  
Corporate Bankruptcy ◽  
Bankruptcy Risk ◽  
Global Trends ◽  
Financial Variables ◽  
Selection Of ◽  
Scientific Achievements ◽  
Corporate Bankruptcy Prediction

AbstractIn highly developed countries, research in the field of bankruptcy risk prediction has been conducted for many years. For example, in the United States, which can be considered a pioneering country, the first publications appeared in the early twentieth century. In Poland, due to political and economic reasons, the interest in this issue dates back to the early 1990s. For this reason, this publication attempts to answer the following questions: 1) What is the level of advancement of the research into predicting bankruptcies of enterprises in Poland? 2) How does it compare to worldwide trends? Therefore, the main aim of this study is to present and evaluate the scientific achievements of Polish authors in the field of corporate bankruptcy prediction and compare them to global trends. Literature analysis was adopted as the research method and shows that initially in Poland only very simple tools were used to assess the risk of bankruptcy of enterprises. With time, however, advanced methods began to be introduced and new models included non-financial variables. Also, research on the selection of the samples was conducted. Currently, the level of research and applied tools do not differ from those used in highly developed countries.

scholarly journals Applying appropriate models to predict bankruptcy for Vietnamese listed construction companies

Accounting ◽  
2022 ◽  
Vol 8 (2) ◽  
pp. 101-110 ◽  
Author(s):  
Thi Hong Thuy Nguyen ◽  
Lan Phuong To ◽  
Kien Phan Trung ◽  
Thi Thuy Hang Dang
Keyword(s):  
Panel Data ◽  
Stock Market ◽  
Capital Structure ◽  
Asset Management ◽  
Financial Statements ◽  
Risk Models ◽  
Bankruptcy Risk ◽  
Construction Companies ◽  
State Management ◽  
Business Size

This study focuses on assessing the suitability and condition of various bankruptcy risk models applied to construction companies listed on the Vietnam Stock Market. In this study, the panel data were collected from the disclosed financial statements of the companies from 2012 to 2017. Through the assessment, bankruptcy risks are predicted for the companies that are experiencing initial signals such as delisting, compulsory supervision. In the next step, interviews were conducted to justify which of the following factors may indicate the companies at the risk of being bankrupted: asset management, capital structure, business size, and/or state management.

scholarly journals The Commitment Role of Equity Financing

2018 ◽  
Vol 17 (4) ◽  
pp. 1232-1260 ◽  
Author(s):  
Matthias Fahn ◽  
Valeria Merlo ◽  
Georg Wamser
Keyword(s):  
Capital Structure ◽  
Debt Financing ◽  
Negative Consequences ◽  
Equity Financing ◽  
Bankruptcy Risk ◽  
Optimal Capital Structure ◽  
Tax Shields ◽  
Optimal Capital ◽  
Financing Behavior

Abstract Existing theories of a firm’s optimal capital structure seem to fail in explaining why many healthy and profitable firms rely heavily on equity financing, even though benefits associated with debt (like tax shields) appear to be high and the bankruptcy risk low. This holds in particular for firms that show a strong commitment toward their workforce and are popular among employees. We demonstrate that such financing behavior may be driven by implicit arrangements made between a firm and its managers/employees. Equity financing generally strengthens a firm’s credibility to honor implicit promises. Debt, however, has an adverse effect on the enforceability of these arrangements because too much debt increases the firm’s reneging temptation, as some of the negative consequences of breaking implicit promises can be shifted to creditors. Our analysis provides an explanation for why some firms only use little debt financing. Predictions made by our theory are in line with a number of empirical results, which seem to stay in contrast to existing theories on capital structure.

scholarly journals The algorithms for the environmental finance based on adjusted present value models

2019 ◽  
Vol 91 ◽  
pp. 08021 ◽  
Author(s):  
Oksana Pirogova ◽  
Evgeny Gorin ◽  
Vladimir Plotnikov
Keyword(s):  
Capital Structure ◽  
Credit Rating ◽  
Weighted Average ◽  
Theoretical Models ◽  
Free Cash Flow ◽  
Bankruptcy Risk ◽  
Logistic Regression Models ◽  
Tax Shield ◽  
Bankruptcy Costs ◽  
The Cost

The article discusses the direction of modification of methods for calculating the optimal capital structure based on compromise theories and, in particular, the method of adjusted cost, which involves taking into account the benefits and costs of debt financing. The tools presented in the article can be used in the practice of environmental financing. The algorithm for calculating the value of the enterprise based on free cash flow is considered, which allows choosing the capital structure from the condition of maximizing the value of the enterprise. The considered theoretical models do not give a complete picture of how to take into account the effect of the tax shield and the possible costs of financial difficulties in making practical decisions related to capital structure. Alternative approaches to the calculation of individual elements and parameters of the method, such as the probability of bankruptcy, are offered. In particular, it was offered to consider logistic regression models for assessing the risk of bankruptcy, as well as to modify the methodology for calculating bankruptcy risk based on a credit rating, taking into account the dependence of the cost of borrowed capital on the level of financial leverage in the enterprise. Further, it is recommended to use a weighted average for the probability of risk of bankruptcy, as well as to carry out adjustment of the value of bankruptcy costs, taking into account the weighted average of the assessment.

Analysis of Factors Affecting Capital Structure in Food and Beverage Manufacturing Company

2018 ◽  
Vol 1 (2) ◽  
pp. 1-14
Author(s):  
Nur Hajja Aini ◽  
St Habibah
Keyword(s):  
Capital Structure ◽  
Firm Size ◽  
Significant Influence ◽  
Fixed Effects ◽  
Random Effect Model ◽  
Manufacturing Companies ◽  
Business Risk ◽  
Growth Opportunities ◽  
Food And Beverage ◽  
The Capital Structure

The purpose of this research to analyze the influence of firm size, liquidity, growth opportunities, tangibility asset, and business risk to the capital structure of listed food and beverage manufacturing companies in Indonesia and Vietnam Stock Exchange from 2010 to 2016. The result shows that the fixed effects model should be appropriate for this study as compared to the random effect model. Capital structure significantly differences between the two countries. Firm size has a positive but insignificant influence on the capital structure in Indonesia, whereas it has a positive and a significant influence on the capital structure in Vietnam. Liquidity has a negative and significant influence on the capital structure both in Indonesia and Vietnam. Growth opportunities have a negative but insignificant influence on the capital structure both in Indonesia and Vietnam. Asset tangibility has a positive but insignificant influence on the capital structure in Indonesia, but it has the negative but insignificant influence on the capital structure in Vietnam. Ultimately, the business risk has a negative and significant influence on the capital structure in Indonesia but has a positive and insignificant influence on the capital structure in Vietnam.

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