Banking relationship, relative leverage and stock returns in Japan

Teng, Min; Si, Jiwen; Hachiya, Toyohiko

doi:10.1016/j.pacfin.2016.09.002

Cited by 7 publications

(5 citation statements)

References 31 publications

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“…The previous review highlights the positive aspect of leverage, especially attenuating agency costs associated with free cash flows, which in turn increase firm value (e.g. Miller and Modigliani, 1966;Jensen, 1986;Min et al, 2016;Khan et al, 2021). Based on this argument, we hypothesise that:…”

Section: Corporate Financial Policies and Firm Valuementioning

confidence: 85%

“…Furthermore, Kim and Stulz (1988) documented a significant positive relationship between issuing Eurobonds and excess returns. Likewise, Min et al. (2016) found that leverage positively impacts stock returns.…”

Section: Literature Review and Empirical Hypothesesmentioning

confidence: 98%

“…Other studies, however, have postulated the positive aspect of leverage (e.g. Miller and Modigliani, 1966;Jensen, 1986;Min et al, 2016;Khan et al, 2021).…”

Section: Introductionmentioning

confidence: 99%

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The underlying mechanisms of the relationships between corporate financial policies and firm value: flexibility and agency theory perspectives

El-Ansary

Hamza

2022

APJBA

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PurposeThis paper aims to discover the underlying mechanisms by which corporate financial policies, cash holdings, capital structure and dividend payouts, transmit their effects on firm value in the “Middle East and North Africa” (MENA) emerging markets.Design/methodology/approachThe authors employ a novel integration of path modelling with parallel multiple mediation analysis to empirically test the hypothesised indirect effects through the mechanisms represented by the value of financial flexibility (VOFF) and agency costs.FindingsThe authors do not find any evidence of the association between cash holdings, dividend payouts, and firm value when the mechanisms through the VOFF and agency costs are considered. While these two forces, i.e. the VOFF and agency costs, have balanced mediation effects on the relationship between cash holdings and firm value, they represent equivalent and complementary mechanisms by which dividend payouts transmit their positive impact on firm value. Moreover, we document a significant negative partial mediation effect of agency costs on the relationship between leverage and firm value; however, we do not find any evidence supporting the mediation effect of the VOFF on such a relationship.Originality/valueThis paper sheds new light on the forces that govern the nature of the relationships between corporate financial policies and firm value.

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Section: Corporate Financial Policies and Firm Valuementioning

confidence: 85%

Section: Literature Review and Empirical Hypothesesmentioning

confidence: 98%

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The underlying mechanisms of the relationships between corporate financial policies and firm value: flexibility and agency theory perspectives

El-Ansary

Hamza

2022

APJBA

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“…According to the results, the most preferred financial ratio estimates of stock analysts had predictive power on stock returns after 1 year. Because of the research that examined the relationship between leverage and stock returns, Teng, Si & Hachiya (2016) demonstrated a positive relationship between stock returns and leverage. Chong and Kim (2018) tested whether the volatility of the capital structure systematically affects stock returns.…”

Section: Literaturementioning

confidence: 99%

Investigation of Financial Factors Affecting the Income of Share Certificates: An Example of Industrial Companies

Avcı¹

2020

isarder

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This study attempted to determine the factors that affect the stock returns of industrial enterprises operating in the Istanbul Stock Exchnge. In addition, it was investigated whether the deteriorated economic indicators caused a change in investors' decisions in 2018. Design/methodology/approach-For this purpose, logistic regression analysis was performed for 2017-2018 by using the financial ratios of 147 enterprises in the industrial sector. In the analysis, the stock return rate as a dependent variable, and return on equity, market value / book value, price / earnings, receivables turnover rate, asset turnover rate, inventory turnover rate, debt ratio, gross profit margin, and main operating profit margin ratios as independent variables were used. Findings-According to the results of the analysis, equity profitability ratio had a significant effect on stock returns in 2017, while the debt ratio and the main operating profit margin ratio had a significant effect in 2018. Discussion-When the results of both years were analyzed, it was seen that the financial factors on stock returns changed, thus it can be said that there was a change in the investors' decisions.

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“…Third, besides extending our relationship-banking study to emerging countries, this Indonesian study also adds more insights to other literature that has adopted the banking-relationship data of a single Asian country as their research sample, such as Japan (Hoshi et al , 1990; Teng et al , 2016), China (Selmier, 2013) and India (Srinivasan and Thampy, 2017). More specifically, to the best of our knowledge, our study complements other literature on the Indonesian banking industry (Hidayat et al , 2012; Mulyaningsih et al , 2015; Soedarmono et al , 2017) by being the first Indonesian study to examine the impact of lending relationships on bank loan spreads.…”

Section: Introductionmentioning

confidence: 99%

Lending relationships, credit ratings and bank loan spreads: evidence from Indonesian listed companies

Chandera¹,

Setia-Atmaja²

2020

IJMF

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PurposeThis study examines the impact of firm-bank relationships on bank loan spreads and the mitigating role of firm credit ratings on that impact.Design/methodology/approachThe study sample consists of Indonesian publicly listed companies for the period 2006 to 2016; bank-loan data was extracted from the Loan Pricing Corporation Dealscan database. For the degree of firm-bank relationships, the data on each loan is manually computed, using five different methods taken from Bharath et al. (2011) and Fields et al. (2012). All of the regression analyses are controlled for the year fixed effects, heteroscedasticity, and firm-level clustering. To address the endogeneity issues, this study uses several methods, including partitioning the sample, running nearest-neighbour and propensity score matching tests, and using instrumental variables in two-staged least-squares regression models.FindingsIn line with relationship theory and in opposition to the hold-up argument, this study finds that lending relationships reduce bank loan spreads and that the impact is more noticeable among non-rated Indonesian firms. Specifically, each additional unit in the total number of years of a firm-bank relationship and the number of previous loan contracts with the same bank are associated with 7.34 and 9.15 basis-point decreases, respectively, in these loan spreads.Practical implicationsCorporations and banks should maintain close, long-term relationships to reduce the screening and monitoring costs of borrowing. Regulators should create public policies that encourage banks to put more emphasis on relationships in their lending practices, especially in relation to crisis-prone companies.Originality/valueTo the best of the authors’ knowledge, this is the first study to examine the impact of lending relationships on bank loan spreads in Indonesia. The study offers insights on banking relationships in emerging markets with concentrated banking industries, underdeveloped capital markets and prominent business-group affiliations.

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Banking relationship, relative leverage and stock returns in Japan

Cited by 7 publications

References 31 publications

The underlying mechanisms of the relationships between corporate financial policies and firm value: flexibility and agency theory perspectives

The underlying mechanisms of the relationships between corporate financial policies and firm value: flexibility and agency theory perspectives

Investigation of Financial Factors Affecting the Income of Share Certificates: An Example of Industrial Companies

Lending relationships, credit ratings and bank loan spreads: evidence from Indonesian listed companies

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