Internal capital markets, ownership structure, and investment efficiency: Evidence from Taiwanese business groups

Lin, James Juichia; Yeh, Yin Hua

doi:10.1016/j.pacfin.2020.101284

Cited by 13 publications

(9 citation statements)

References 33 publications

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“…It is argued that inventory adjustment could serve as a temporary substitute for sources of financing needed for fixed investments (Hong, 2004), as well as an internal financing instrument for business operation (Bechmann and Ma, 2016). High funds availability and low capital cost enable managers to alleviate their concerns on financing restrictions and devote more energy to investment activities (Lin et al, 2020). In this way, aside from the benefits of investment fluctuation mitigation, inventory stickiness may be conducive to further improving investment efficiency.…”

Section: The Mediating Role Of Investment Efficiencymentioning

confidence: 99%

Does sticky inventory management improve productivity?

Wang

Hou

Zhu

2021

JMTM

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PurposeThe purpose of this study is to demonstrate the nonlinear relationship between inventory stickiness and productivity, with investment efficiency being a mediator and environmental dynamism being a moderator.Design/methodology/approachUsing a large panel data collected from 1,479 Chinese listed manufacturing enterprises over the period from 2010 to 2020, this research employs the instrumental variable method combined with two-stage least squares estimators to explore the inverted-U-shaped relationship between inventory stickiness and productivity. Furthermore, the mediating role of investment efficiency and the moderating role of environmental dynamism are demonstrated via two three-model systems.FindingsAs its core, productivity initially increases with inventory stickiness until a turning point at the end of the sample, beyond which the incremental effect of inventory stickiness on productivity become negative. That is, an inverted U-shaped relationship between inventory stickiness and productivity is found to exist. Moreover, further mediated moderation analysis highlights that investment efficiency is a key mediator of this relationship, whereas environmental dynamism is a key moderator.Practical implicationsManagers ought to gauge carefully against the tradeoffs between inventory stickiness and productivity. In general, over 90% of manufacturing enterprises have great potential to increase productivity by implementing sticky inventory management. In addition, managers are suggested to place emphasis on investment management and environmental strategy.Originality/valueThis paper contributes to the current understanding about productivity by illustrating and verifying the nonlinear effect of sticky inventory management. It may be the first study to empirically demonstrate the mediating effect of investment efficiency and the moderating effect of environmental dynamism on the relationship between inventory stickiness and productivity.

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Section: The Mediating Role Of Investment Efficiencymentioning

confidence: 99%

Does sticky inventory management improve productivity?

Wang

Hou

Zhu

2021

JMTM

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“…The aforementioned factors make the internal capital market in a business group (Choi et al, 2019). Different studies have concluded that financing decisions of business groups affiliates are usually determined by inter-party transactions and loan guarantees (Kim et al, 2019;Lin & Yeh, 2020).…”

Section: Business Group Affiliation and Debt Policy Consistencymentioning

confidence: 99%

Consistency of Debt Policy: An Intrinsic Role of Business Group Affiliation

Rasheed¹,

Khan²,

Naqvi³

et al. 2021

LJB

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The debt structure remains an area of indispensable concern for businesses across the globe. The organizations are facing difficulty to achieve an optimal capital structure due to inconsistent debt policy. This study investigates the firm's debt policy consistency over a period of twenty-two years after its establishment by observing leverage, debt maturity, debt granularity, and debt specialization as important measures. It has employed a unique dataset covering all the non-financial Pakistani firms listing from 1997 to 2018. The results depict that a firm's debt policy remains remarkably consistent over time, confirming that the initially adopted debt policy is a significant determinant of its future debt policies. However, it is noteworthy that the consistency of the debt policy has shown a declining trend due to the firm's age and size. Additionally, we have examined the effect of business group affiliation on the consistency of debt policy, with further segregation in terms of the financial firm's presence in a group or not. The findings show that a group affiliated firm has more access to the debt market than an unaffiliated firm. Further, the existence of a financial firm in a group serves as an extended financial market that help them to survive in a distress situation. This study will assist the managers in understanding the significance of initial debt policy on the continuity of future policies that help them in financial decision-making.

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“…Whether an investment behaviour is efficient or not can be most intuitively judged from the fact of whether actual investment expenditure level is maintained at a reasonable investment expenditure level (Lin & Yeh, 2020;Richardson, 2006). Under most circumstances, enterprise investment behaviours are inefficient: actual investment expenditure level is higher than reasonable investment expenditure level, namely OI; alternately, actual investment expenditure level is lower than reasonable investment expenditure level, namely, UI.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

“…When the residual error was negative, the actual newly increased investment expenditure level was lower than the reasonable one, manifested by UI. By reference to the research of Lin and Yeh (2020), newly increased investment expenditure Model (2) was constructed in this study based on the Richardson (2006) model to measure investment efficiency. The residual error of model (2) was the measurement of investment efficiency.…”

Section: Model Setting and Variable Definitionsmentioning

confidence: 99%

“…Tobin's Q value is universally adopted as the measure of investment opportunity. In view of the persistence of enterprise investment behaviours, the investment behaviours in the current period are markedly influenced by the investment opportunity in the previous period (Lin & Yeh, 2020;Richardson, 2006). Thus, the Tobin's Q value in the previous period is introduced in the model to measure the investment opportunity in the previous period.…”

Section: Industrymentioning

confidence: 99%

See 1 more Smart Citation

Can cross-listing improve investment efficiency? Empirical evidence from China

Hong

Jasinskas

2020

Economic Research-Ekonomska Istraživanja

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With two views of 'premium' and 'discount,' traditional cross-listing motivation theory emphasises the effect of cross-listing on enterprise performance. The effect of cross-listing on enterprise performance is yet uncertain, manifesting that unknown factors play intermediate roles between them. To clarify the influence mechanism of cross-listing on enterprise performance, this study overcame the limitations in simple verification of the relationship between cross-listing and enterprise performance, and returned to the origin of cross-listing, namely, enterprise financing activity. Thus, the relationship between cross-listing and enterprise investment efficiency was analysed to determine the influence mechanism of cross-listing on enterprise performance. Based on financial data of A þ H cross-listed enterprises and A-share listed enterprises in Mainland China during 2008-2018, the effect of crosslisting on enterprise inefficient investment behaviours was empirically analysed. Results showed that 58.12% of the listed enterprises in China underwent under-investment (UI). Among them, cross-listed enterprises universally underwent over-investment (OI). Cross-listing remarkably remitted UI, but it further expanded OI. Overall, cross-listing led to the deterioration of investment efficiency. The effect of cross-listing on investment efficiency was discussed by combining basic economic activities of enterprises. Cross-listing theory was further enriched and perfected, and suggestions and countermeasures for improving enterprise performance by elevating investment efficiency were put forward.

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Internal capital markets, ownership structure, and investment efficiency: Evidence from Taiwanese business groups

Cited by 13 publications

References 33 publications

Does sticky inventory management improve productivity?

Does sticky inventory management improve productivity?

Consistency of Debt Policy: An Intrinsic Role of Business Group Affiliation

Can cross-listing improve investment efficiency? Empirical evidence from China

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