Financial leverage, debt maturity, future financing constraints and future investment

Poursoleiman, Ehsan; Mansourfar, Gholamreza; Abidin, Sazali

doi:10.1108/imefm-10-2019-0430

Cited by 15 publications

(14 citation statements)

References 61 publications

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“…From the neoclassical theory perspective, firms invest up to the point where the marginal benefits equal marginal costs (Gomariz and Ballesta, 2014). In imperfect markets, however, corporations fail to make efficient investments in every case (Poursoleiman et al ., 2020). Therefore, the most important issue regarding firms' investment in an imperfect market is not the volume or level, but the efficiency.…”

Section: Related Literature and Hypotheses Developmentmentioning

confidence: 99%

Business sustainability performance and corporate financial performance: the mediating role of optimal investment

Poursoleyman

Mansourfar

Homayoun

et al. 2022

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PurposeEmploying a large sample consisting of 3,701 corporations domiciled in developed and emerging countries, this paper aims to analyze the mediating role of investment efficiency in the association between business sustainability performance and corporate financial performance.Design/methodology/approachFour different aspects of corporate sustainability offered by the ASSET4 database are used as proxies for business sustainability performance, including economic, corporate governance, social and environmental dimensions. In addition to these aspects, the aggregate measure of business sustainability performance is also employed. In order to test the association between business sustainability and corporate performance via investment efficiency, ordinary least squares, fixed-effect, random-effect and generalized method of moments statistical models were employed.FindingsThe results suggest that business sustainability performance is positively associated with corporate financial performance, indicating that sustainable corporations enjoy higher financial performance. Moreover, Sobel, Aroian and Goodman tests confirm that investment efficiency mediates the positive relationship between business sustainability performance and financial performance. Finally, further analyses show that the positive association between sustainability performance and investment efficiency is stronger for those firms headquartered in developed countries than in those located in emerging nations.Originality/valueThis paper contributes to the literature by investigating how growth opportunities advance the influence of business sustainability to corporate financial performance using a large sample from 43 countries.

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Section: Related Literature and Hypotheses Developmentmentioning

confidence: 99%

Business sustainability performance and corporate financial performance: the mediating role of optimal investment

Poursoleyman

Mansourfar

Homayoun

et al. 2022

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“…Another stream of research investigates the impacts of CSR reporting on information asymmetry from the output perspective. In other words, researchers believe that if CSR reporting can mitigate the information asymmetry between the parties, then lower levels of information asymmetry can result in the reduction in external financing costs and better access to financial resources because lower levels of information asymmetry are associated with the reduction in external financing costs (Poursoleyman, Mansourfar, & Abidin, 2020 , 2022 ). Employing an international setting consisting of 3594 firms from 31 stock indices, García‐Sánchez et al ( 2019 ) found that CSR reporting is negatively associated with financial constraints.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Corporate social responsibility and COVID‐19: Prior reporting experience and assurance

Poursoleyman

Mansourfar

Nazari

et al. 2022

Business Ethics Env & Resp

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The novel COVID‐19 has created an exogenous shock to capital markets and, hence, an ideal opportunity for researchers to assess whether CSR‐related activities provide an insurance‐like mechanism to protect firms against the shock. Using a large sample of 4361 firms domiciled in 40 countries, we investigate the roles of CSR reporting and assurance in the negative consequences of COVID‐19 on firm value. The results confirm that prior CSR reporting experience buffers firms against the adverse effects of the health crisis. The results also support that not only does the assurance on CSR reports create a buffering effect against the health crisis, but it also intensifies the buffering effects of prior CSR reporting experience against the pandemic. Moreover, using difference‐in‐difference method for testing the link between CSR reporting and firm value, we show that the positive association of reporting and assurance with firm value is more pronounced during the pandemic as compared with the years preceding it. The results of this study are robust to various analyses. Replicating the analyses to the context of the global financial crisis, we find that prior CSR reporting experience and assurance provide similar buffering effects when a market is exposed to various exogenous shocks. The results also hold for the mandatory disclosure regimes. By distinguishing first and subsequent reports and assurance, we show that, unlike subsequent CSR reports and assurance, the initial ones cannot mitigate the negative effects of the crisis on firm value, indicating that stakeholders take into account longer‐term CSR reporting experiences. Aside from reporting and assurance aspects of CSR, we analyze the role of CSR report's quality and accuracy and show that the adoption of Global Reporting Initiatives (GRI) frameworks can enhance socially responsible firms' resilience against systematic shocks.

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“…Various theories have been put forward to explain the causes of falling stock prices concerning financial market mechanisms and investor behavior. On explaining how the phenomenon of falling stock prices occurs, it can be noted that a decrease in a company's stock price increases its financial and operating leverage, and, in turn, results in fluctuations in stock returns, and this symmetrical reaction leads to a negative skew of stock returns [35][36][37]. According to modern financial theories, the value of a stock is equal to the sum of the present value of its future cash flows.…”

Section: Research Background and Hypotheses Developmentmentioning

confidence: 99%

Macroeconomic Factors and Stock Price Crash Risk: Do Managers Withhold Bad News in the Crisis-Ridden Iran Market?

et al. 2021

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The present study aims to investigate the effects of macroeconomic variables on stock price crash risk in the economically uncertain conditions of Iran’s market. This study also seeks to examine whether there is a significant relationship between some firm characteristics and falling stock prices. The sample of the study includes 152 Iranian companies listed on the Tehran Stock Exchange (TSE) between 2014 and 2019. Furthermore, the research model has been estimated using a fixed effect pattern, and the DUVOL (down-to-up volatility) measure is defined as a proxy for stock price crash risk. Consistent with our expectations, the results show that there is a positive association between the inflation and unemployment rates and stock price crash risk, whereas the GDP and exchange rates are correlated negatively with crash risk. In fact, with rising inflation and unemployment, on the one hand, the amount of savings and the purchasing power of the people have decreased, and on the other hand, it has reduced the sales of companies due to the increase in the pricing of manufactured products. In Iran’s economically uncertain situation due to sanctions, managers are trying to overstate financial performance and conceal bad news to have better access to financing; so, when the total amount of bad news accumulated over time reaches a tipping point, it leads to a stock crash. It also appears that when the exchange rate rises, Iranian investors prefer to buy companies’ shares to maintain the purchasing power of their money. Outcomes also confirm that larger firms and those with higher Return on Assets (ROA) are more sensitive to crash risk.

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Financial leverage, debt maturity, future financing constraints and future investment

Cited by 15 publications

References 61 publications

Business sustainability performance and corporate financial performance: the mediating role of optimal investment

Business sustainability performance and corporate financial performance: the mediating role of optimal investment

Corporate social responsibility and COVID‐19: Prior reporting experience and assurance

Macroeconomic Factors and Stock Price Crash Risk: Do Managers Withhold Bad News in the Crisis-Ridden Iran Market?

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