Corporate debt structure and economic recoveries

Grjebine, Thomas; Szczerbowicz, Urszula; Tripier, Fabien

doi:10.1016/j.euroecorev.2017.09.013

Cited by 18 publications

(5 citation statements)

References 45 publications

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“…During the depression period, stock prices went down, and the expected cost of financial distress increased the chances of bankruptcy. Agency relationships become more severe in this situation; information and monitoring also are cost increases that induce organizations to use debt specialization strategy [67]. The trade-off, pecking order, and market timing theories also support this relationship.…”

Section: Macroeconomicmentioning

confidence: 88%

“…Stock market factors are inversely related to the leverage only when this decision is taken under unfavorable market conditions [64]. When firms increase the debt ratio in their capital structure, it may adversely impact their stock prices because debt-related interest payments reduce the dividend payments [33,67]. That is why both stock market factors, dividend payout ratio and dividend yield, are negatively related to the debt specialization decision of the organizations [15].…”

Section: Stock Marketmentioning

confidence: 99%

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Core Predictors of Debt Specialization: A New Insight to Optimal Capital Structure

et al. 2021

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Debt structure composition is an essential topic of discussion for the management of capital structure decisions. Researchers made extensive efforts to understand the criteria for selecting debts, specifically, to know about the reasons for debt specialization, concealed in identifying its predictors. This question is essential not only for establishing the field of debt structure but also for the financial managers to design corporate financial strategy in a way that leads to attaining an optimal debt structure. Sophisticated financial modeling is applied to identify the core predictors of debt specialization, influencing the strategic choices of optimal debt structure to address this issue. Data were collected from 419 non-financial companies listed at the Karachi Stock Exchange from 2009 to 2015. This study has validated debt specialization by showing that short-term debts maintain their position over the years and remain the most popular type of loan among Pakistani firms. Further, it provides a comprehensive view of the cross-sectional differences among the firms involved in debt specialization by applying a holistic approach. Results show that small, growing, dividend-paying companies, having high expense and risk ratios, followed the debt specialization strategy. This strategy enables firms to reduce their agency conflicts, transaction costs, information asymmetry, risk management and building up their good market reputation. Conclusively, we have identified the gross profit margin, long-term debt to asset ratio, firm size, age, asset tangibility, and long-term industry debt to asset ratio as reliable and core predictors of debt specialization for sustainable business growth.

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Section: Macroeconomicmentioning

confidence: 88%

Section: Stock Marketmentioning

confidence: 99%

Core Predictors of Debt Specialization: A New Insight to Optimal Capital Structure

et al. 2021

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“…This development is evident in the improvement in financial innovation and regulations, corporate governance, and a general improvement in financial market efficiency, transparency, and competition. Therefore, well-developed capital markets are drivers of economic growth (Beck & Levine, 2004;Caporale et al, 2004Caporale et al, , 2009Carlin & Mayer, 2003;Didier et al, 2020;Laeven, 2014) and financial stability (Gambacorta et al, 2014;Giesecke et al, 2014;Grjebine et al, 2018;Hsu et al, 2014;Langfield & Pagano, 2016).…”

Section: Pension Fund Investments and Capital Market Developmentmentioning

confidence: 99%

“…The capital market is a playing ground for investors, providing the needed financial instruments to ensure financial stability. The market offers a myriad of financial instruments that allow for access to funds, diversification, risk management, and the pursuit of attractive investment opportunities and, by implication, plays a significant role in ensuring overall financial stability (Gambacorta et al, 2014;Giesecke et al, 2014;Grjebine et al, 2018;Hsu, et al, 2014;Langfield & Pagano, 2016). Also, the capital market stimulates economic growth by providing access to capital for businesses and entrepreneurs; through initial public offerings (IPOs) and corporate bonds, companies can raise funds for expansion and innovation (Beck & Levine, 2004;Caporale et al, 2004Caporale et al, , 2009Carlin & Mayer, 2003;Didier et al, 2015Didier et al, , 2020Laeven, 2014).…”

Section: Introductionmentioning

confidence: 99%

Pension Fund Investments and Capital Market Development in Nigeria: The Moderating Role of Inflation

Dibal,

Haruna,

Onyejiaku

et al. 2023

Global Journal of Emerging Market Economies

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Pension fund investment is a significant source of finance for the capital market in Nigeria. It increases the availability of funds for firms to acquire for expansion, stimulating economic growth and development. However, high inflation rates can have a negative impact on the effectiveness of pension fund investment in the capital market in Nigeria. This study investigates whether inflation enhances or reduces the effect of pension fund investment on capital market development in Nigeria. Monthly time series data from January 2013 to February 2020 were utilized using the ARDL model. The findings revealed that pension fund investments have a long- and short-run effect on capital market development in Nigeria. Our study also established that inflation reduces the negative impact of total domestic debt securities on total market capitalization both in the long- and short-run, which is the novelty of this study. The study contributes to the Modern Portfolio Theory, thereby establishing the role of inflation in determining the effect of pension fund investment on capital market development in Nigeria. JEL Classification G10, G23

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“…It has become difficult for scholars and financial managers to decide the best composition of debt structure. Prior research focused on the traditional capital structure options (Grjebine et al 2018). Therefore, much debate in corporate finance has reflected the managers' decisions about selecting the best capital structure combination (Lewis and Tan 2016).…”

Section: Introductionmentioning

confidence: 99%

Debt Market Trends and Predictors of Specialization: An Analysis of Pakistani Corporate Sector

Khan

Qadeer

Mata

et al. 2021

JRFM

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Recently, debt structure research has started focusing on the strategic perspective of financing choices, particularly to understand the reasons for debt specialization (DS). This paper examines trends of specialization over time and industry by using a comprehensive dataset on types of debt employed by the public limited companies during 2009–2018. The objective of the current study is to analyze the effect of debt market conditions by identifying significant predictors of DS. Time-series and cross-sectional results confirm the existence of DS, which is further validated by the findings of the cluster analysis. The empirical results indicate that overall, 61% of the companies solely rely on a single type of debt, mostly on short-term obligations accompanied by long-term secured and other debts. Moreover, small, mature, rated, group-affiliated, and low-leverage companies incline more towards this strategy. Credit rating, debt maturity, financial and interest coverage ratios serve as the primary determinants of the debt market that are significantly associated with the measures of DS. The results contribute to the capital structure literature by specifying that financing choice has an important implication in deciding the debt structure composition of the organizations.

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Corporate debt structure and economic recoveries

Cited by 18 publications

References 45 publications

Core Predictors of Debt Specialization: A New Insight to Optimal Capital Structure

Core Predictors of Debt Specialization: A New Insight to Optimal Capital Structure

Pension Fund Investments and Capital Market Development in Nigeria: The Moderating Role of Inflation

Debt Market Trends and Predictors of Specialization: An Analysis of Pakistani Corporate Sector

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