The Impact of the Leverage Ratio on Client Clearing

2018 ◽  
Author(s):  
Gerardo Ferrara ◽  
Jonathan Acosta Smith ◽  
Francesc Rodriguez Tous
Keyword(s):  
Leverage Ratio ◽  
The Impact

Role of Credit Rating in determining Capital structure: Evidence from Non-Financial sector of Pakistan

2020 ◽  
Vol 38 (3) ◽  
Author(s):  
Shoaib Ali ◽  
Imran Yousaf ◽  
Muhammad Naveed
Keyword(s):  
Capital Structure ◽  
Credit Rating ◽  
Least Square ◽  
Annual Data ◽  
Leverage Ratio ◽  
Financial Decisions ◽  
Financial Firms ◽  
High Level ◽  
The Impact ◽  
The Capital Structure

This paper aims to examine the impact of external credit ratings on the financial decisions of the firms in Pakistan.  This study uses the annual data of 70 non-financial firms for the period 2012-2018. It uses ordinary least square (OLS) to estimate the impact of credit rating on capital structure. The results show that rated firm has a high level of leverage. Moreover, Profitability and tanagability are also found to be a significantly negative determinant of the capital structure, whereas, size of the firm has a significant positive relationship with the capital structure of the firm.  Besides, there exists a non-linear relationship between the credit rating and the capital structure. The rated firms have higher leverage as compared to the non-rated firms. The high and low rated firms have a low level of leverage, while mid rated firms have a higher leverage ratio. The finding of the study have practical implications for the manager; they can have easier access to the financial market by just having a credit rating no matter high or low. Policymakers must stress upon the rating agencies to keep improving themselves as their rating severs as the measure to judge the creditworthiness of the firm by both the investors and management as well.

scholarly journals Empirical Investigation of Symmetric and Asymmetric Target Adjustment Models: Capital Structure of Non-Financial Firms in Jordan

2017 ◽  
Vol 9 (3) ◽  
pp. 133 ◽  
Author(s):  
Bashar K. Abu Khalaf
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Interaction Model ◽  
Firm Characteristics ◽  
Leverage Ratio ◽  
Financial Firms ◽  
Large Size ◽  
Amman Stock Exchange ◽  
Target Leverage ◽  
The Impact

The different capital structure theories propose the possible asymmetric behavior of capital structure. Thus, this paper empirically investigates whether non-financial Jordanian firms follow symmetrical or asymmetrical adjustment model. Then, an interaction model with the size and profitability (firm characteristics) investigated the impact of low/high profit and small/large size on the adjustment of leverage towards the target leverage ratio. This paper covered the period of 14 years (2002-2015) for a total of 110 companies listed on Amman Stock Exchange (75 industrial and 35 services). Results indicate that although Jordanian firms seek a target leverage ratio, their adjustment towards that target is Asymmetrical and high profitable and large companies tend to adjust faster than low profitable and small size companies.

scholarly journals Determinan Manajemen Laba Perusahaan di Sektor Konsumsi

2019 ◽  
Vol 3 (2) ◽  
pp. 96
Author(s):  
Muhammad Fajri
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Cash Flow ◽  
Institutional Ownership ◽  
Free Cash Flow ◽  
Earning Management ◽  
Managerial Ownership ◽  
Leverage Ratio ◽  
Good Corporate Governance ◽  
The Impact

The aim of this research is to provide empirical evidence on the impact of good corporate governance, free cash flow, and leverage ratio on earnings management. Good corporate governance is measured by audit committee’s size, the proportion of independent commissioners, institutional ownership, and managerial ownership. Discretionary accrual is the proxy of earning management. This research used 28 consumer goods companies listed in Indonesia Stock Exchange from 2016 to 2018. Data were analyzed using panel data with random effect model. Based on the result of analysis concluded that all components of good corporate governance (audit committee’s size, the proportion of independent commissioners, institutional ownership, and managerial ownership), have no significant effect on earnings management, on other hand leverage ratio has a negative effect and no significant on earning management, and free cash flow has a positve and no significant effect on earnings management

scholarly journals The Impact of Banking Competition on Firm Credit Risk and Leverage

SAGE Open ◽  
2021 ◽  
Vol 11 (4) ◽  
pp. 215824402110615
Author(s):  
Chengxiao Feng ◽  
Zhubo Li ◽  
Zhen Peng
Keyword(s):  
Default Risk ◽  
Credit Constraints ◽  
Contingent Claims ◽  
Claims Analysis ◽  
Banking Competition ◽  
Leverage Ratio ◽  
Contingent Claims Analysis ◽  
Credit Risks ◽  
Default Risks ◽  
The Impact

A firm’s default risk is closely related to its macrofinancial stability. As financial reform deepens, banking competition may ease firms’ credit constraints, encouraging them to increase their leverage and default risks. This study uses contingent claims analysis to examine firms’ asset–liability ratio and default distance. We find that companies have low leverage and low overall default risks. Moreover, a pro-cyclical effect exists between leverage and economic growth. As banking competition becomes more intense, the default risk decreases, but firms’ leverage ratio rises significantly. The impact is more prominent for highly leveraged firms. Our findings also indicate that utilizing the contingent claims analysis method to measure firms’ leverage and default risks provides more accurate results. Moreover, we provide empirical evidence of the impact of banking competition on firms’ leverage and credit risks. The results suggest that enhancing financial competition has a positive effect on easing credit constraints and reducing default risks.

scholarly journals Risk Governance Structure and Firm Performance: An (Exploratory) Empirical Study in Indian Context

2018 ◽  
Vol 1 (2) ◽  
Author(s):  
M.V. Shivaani
Keyword(s):  
Firm Performance ◽  
Governance Structure ◽  
Risk Governance ◽  
Governance Structures ◽  
Economic Implications ◽  
Leverage Ratio ◽  
Governance Index ◽  
Difference Gmm ◽  
The Impact ◽  
The Relationship

The study attempts to explore the relationship between riskgovernance structureand firm performance. In perhaps the first of its kind attempt, a normative framework for risk governance structures is being put forward. Based on the framework, an index indicating strength/quality of risk governance structures is proposed. Then, the impact of risk governance structure on firm performance is gauged. To this end, the study makes use of constituents of S&P CNX500 index and covers a ten year period from April 1, 2005 to March 31, 2015.To control for potential endogeneity among variables of interest, the study makes use of a robust and reliable methodology,‘difference-GMM’. In addition, to ensure completeness of results, the study employs control variables such as recession dummy, firm’s age, size, and growth rate and leverage ratio. The results suggest that robust risk governance structures do not necessarily lead to better firm performance. In fact, risk governance index is negatively related to both ROA and ROE. The relationship is not statistically significant but has wide economic implications. A prominent implication being, mere constitution of risk management committee and appointment of CRO will not improve firm performance; regulators and companies need to ensure that governance structures are not too rigid, excessively risk averse and ineffective and inefficient in decision making. Given the simplicity and reliability of the proposed risk governance index, and the recommendations put forth in the paper, the study is expected to be of immense utility in an important yet neglected area of risk governance.

Credit Risk Measurement, Leverage Ratios, and Basel III

2017 ◽  
pp. 86-116
Keyword(s):  
United States ◽  
The United States ◽  
Basel Iii ◽  
Holding Companies ◽  
Leverage Ratio ◽  
Basel Committee ◽  
Legislative Changes ◽  
Credit Risk Measurement ◽  
The Impact ◽  
The U.S

The Basel III Leverage Ratio, as originally agreed upon in December 2010, has recently undergone revisions and updates – both in relation to those proposed by the Basel Committee on Banking Supervision – as well as proposals introduced in the United States. Whilst recent proposals have been introduced by the Basel Committee to improve, particularly, the denominator component of the Leverage Ratio, new requirements have been introduced in the U.S to upgrade and increase these ratios, and it is those updates which relate to the Basel III Supplementary Leverage Ratio that have primarily generated a lot of interests. This is attributed not only to concerns that many subsidiaries of US Bank Holding Companies (BHCs) will find it cumbersome to meet such requirements, but also to potential or possible increases in regulatory capital arbitrage: a phenomenon which plagued the era of the original 1988 Basel Capital Accord and which also partially provided impetus for the introduction of Basel II. This paper is aimed at providing an analysis of the recent updates which have taken place in respect of the Basel III Leverage Ratio and the Basel III Supplementary Leverage Ratio – both in respect of recent amendments introduced by the Basel Committee and proposals introduced in the United States. As well as highlighting and addressing gaps which exist in the literature relating to liquidity risks, corporate governance and information asymmetries, by way of reference to pre-dominant based dispersed ownership systems and structures, as well as concentrated ownership systems and structures, this paper will also consider the consequences – as well as the impact - which the U.S Leverage ratios could have on Basel III. There are ongoing debates in relation to revision by the Basel Committee, as well as the most recent U.S proposals to update Basel III Leverage ratios and whilst these revisions have been welcomed to a large extent, in view of the need to address Tier One capital requirements and exposure criteria, there is every likelihood, indication, as well as tendency that many global systemically important banks (GSIBS), and particularly their subsidiaries, will resort to capital arbitrage. What is likely to be the impact of the recent proposals in the U.S.? The recent U.S proposals are certainly very encouraging and should also serve as impetus for other jurisdictions to adopt a pro-active approach – particularly where existing ratios or standards appear to be inadequate. This paper also adopts the approach of evaluating the causes and consequences of the most recent updates by the Basel Committee, as well as those revisions which have taken place in the U.S, by attempting to balance the merits of the respective legislative updates and proposals. The value of adopting leverage ratios as a supplementary regulatory tool will also be illustrated by way of reference to the impact of the recent legislative changes on risk taking activities, as well as the need to also supplement capital adequacy requirements with the Basel Leverage ratios and the Basel liquidity standards.

scholarly journals The impact of a higher leverage ratio on the South African economy

2019 ◽  
Author(s):  
Rob Davies ◽  
Laurence Harris ◽  
Konstantin Makrelov
Keyword(s):  
South African ◽  
The South ◽  
Leverage Ratio ◽  
The Impact

scholarly journals Abnormal Returns, Corporate Financial Policies and the Dynamics of Leverage: Empirical Evidence from Non-Financial Sector of Pakistan

2020 ◽  
Vol 6 (1) ◽  
pp. 153-166
Author(s):  
Kashif Hamid ◽  
Zahid Hussain ◽  
Muhammad Mudasar Ghafoor
Keyword(s):  
Financial Performance ◽  
Random Effect ◽  
Abnormal Returns ◽  
Market Value ◽  
Financial Sector ◽  
Financial Policies ◽  
Leverage Ratio ◽  
Market Values ◽  
The Impact ◽  
Leverage Dynamics

The aim of this study is to evaluate impact of corporate financial policies and the dynamics of leverage on financial performance of non-financial sector in Pakistan. In this study we used the data from Fertilizer, Chemical and Cement sector for the period 2008-2017. Abnormal return has been taken as dependent variable and Change in cash to lagged market values, Change in EBIT to lagged market values, Change in dividend to lagged market value, Net Financing to lagged market value, Lagged cash values to lagged market values, Lagged cash values to lagged market values crossed by change in cash to lagged market value, Change in total assets net of cash to lagged market values, Change in interest to lagged market values, Operating leverage, Financial leverage, Total leverage, Leverage ratio, Leverage ratio to change in cash crossed by lagged market values  and  WACC are taken as explanatory variables. OLS, Fixed effect and Random effect models has been used to express the impact of these variables on return. Hence it is concluded that leverage dynamics are significant contributors in designing the corporate financial policies. Corporate financial policies have significant impact on the financial performance of the non-financial sector of Pakistan.

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