Cost of Debt and Corporate Profitability

Santosuosso, Pierluigi

doi:10.5539/ibr.v7n2p13

Cited by 7 publications

(11 citation statements)

References 63 publications

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“…So it can be explained that good profitability can reduce the risk of inability to meet the company's obligations (default risk), thereby reducing the cost of debt. Several research findings that have been carried out support the results of this study, namely research by Santosuosso (2014), Magnanelli and Izzo (2017), Safiq et al (2018), and Sherly and Fitria (2019), which show an inverse relationship between profitability and cost of debt.…”

Section: Discussionsupporting

confidence: 87%

“…Profitability is a ratio used to assess the company's capacity to generate profits and a measuring tool for the level of management effectiveness (Kasmir, 2016: 196). The inability of the company to generate positive profits is considered a sign of economic difficulties, and the resulting factors can increase the possibility of a corporate crisis and the cost of debt from debt financing (Santosuosso, 2014). The effect related to profitability on the cost of debt is explained in the research of Safiq et al (2018), where it can be stated that profitability harms the cost of debt.…”

Section: Introductionmentioning

confidence: 99%

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The Effect of Profitability and Financial Leverage on Cost of Debt Moderated Earnings Management

Ruslim

Muspyta²

2021

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This study aims to determine the effect of profitability and Financial Leverage on the Cost of Debt, and the role of Earnings Management as a moderating variable. In this study, profitability is measured by the ratio of return on equity, financial leverage is measured by the proxy debt ratio, earnings management as measured by discretionary accruals, and cost of debt is measured by the ratio of interest expense divided by the average total debt. The population in this study are publicly traded companies listed on the IDX, and the sample used is manufacturing companies listed on the IDX for the 2016-2019 period. Based on the purposive sampling method, the samples obtained were 69 manufacturing companies and 276 observations. The results showed that profitability has a negative effect on the cost of debt, while financial leverage has no effect on the cost of debt, earnings management cannot weaken the negative effect of profitability on the cost of debt and earnings management cannot weaken the negative effect of financial leverage on the cost of debt.

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Section: Discussionsupporting

confidence: 87%

Section: Introductionmentioning

confidence: 99%

The Effect of Profitability and Financial Leverage on Cost of Debt Moderated Earnings Management

Ruslim

Muspyta²

2021

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“…Cost of debt and corporate risk of insolvency can be enhanced because of high degree of leverage. (Santosuosso, 2014). Total equity over financial debt is tested to measured leverage.…”

Section: Leveragementioning

confidence: 99%

“…The authors examined that the impact of growth on cost of debt due to increase the probability of default. The first assumption of researcher (Santosuosso, 2014) depends on the cost of debt and firm growth to find out inverse relationship among variables. Result raised another major issue of corporate finance.…”

Section: Growthmentioning

confidence: 99%

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Impact of Probability to Default on Sugar Sector Using Firm Level Variables

Islam¹,

Nabi

2015

J Eco Info

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It is noticed that there are many running sugar mills in Pakistan which are facing problem of liquidity. They are not able to clear their legal liabilities. Banks are unwilling to give loans to the sugar mills because of unprecedented crisis. These crises create probability to default for firms and it is a vast concern to investors / creditors, borrowing firms, and governments. For smooth working of sugar sector, it is very important to know all factors which are creating unprecedented crisis for the sector because in recent times Punjab Government auctioned Chishtia-Sugar-Mills (Sargodha), Abdullah-Sugar-Mills (Okara), Abdullah-II Sugar-Mills (Sargodha), HaseebWaqas-Sugar-Mills (Nankana-Sahib) and Colony-Sugar-Mills (Khanewal) and stocks of these companies Shakar Ganj-I Sugar-Mills (Jhang), ShakarGanjâ€“II Sugar-Mills (Jhang), Hussain-Sugar-Mills (Faisalabad) and Brother- Sugar-Mills (Kasur) were taken in custody because dues of sugarcane farmers were unpaid. Therefore, sugar mills owners are willing to know the importance of probability to default on sugar sector. Because of this, the importance of sugar sector and factors which are causing liquidity for sugar companies were discussed in this research.

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The influence of carbon performance on the financial debt of listed companies in an emerging economy: Does company size matter?

Ganda

2021

Bus Strat Dev

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This paper analyses the extent to which the impact of carbon performance on corporate financial debt varies according to company size. The system Generalized Method of Moments (GMM) and the Fixed Effects Panel Threshold regression models are deployed to consider 107 South African listed companies (CDP South Africa) spanning the period 2014–2018. The GMM outcomes demonstrate that carbon performance is negatively significant to firm financial debt in all the regression equations in the short‐run settings (both with and without interaction terms) and the long‐run setting (except for the ROA regression without interaction term, which is just negative). Moreover, the interaction term, carbon performance × company size is also significant and negatively related to debt in short‐run contexts (except for the ROA regression with an interaction term that is just negative) for all equations. In the long run, the interaction term is also significant and negatively related to debt in all the regressions analysed in this paper. The panel threshold regression framework highlights a threshold level of 7.4268 below (above) which the financial debt of small (large) companies, decreases (increases) when carbon performance increases. Granger causality findings and policy suggestions are also presented.

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Cost of Debt and Corporate Profitability

Cited by 7 publications

References 63 publications

The Effect of Profitability and Financial Leverage on Cost of Debt Moderated Earnings Management

The Effect of Profitability and Financial Leverage on Cost of Debt Moderated Earnings Management

Impact of Probability to Default on Sugar Sector Using Firm Level Variables

The influence of carbon performance on the financial debt of listed companies in an emerging economy: Does company size matter?

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