Investment-cash flow sensitivity to internal capital markets and shareholding structure: evidence from Taiwanese business groups

Yeh, Yin Hua; Lin, James Juichia

doi:10.1007/s40821-020-00157-7

Cited by 4 publications

(6 citation statements)

References 24 publications

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“…The findings suggested that the group affiliation has a strong direct impact on firm's performance than NAFs (Gedefaw Birhanu and Wezel, 2020). The findings revealed that NAFs are more financially constrained than B.G AFs (Yeh and Lin, 2020). The results of this study showed that the diversified B.G AFs are more profitable and bear less financial constraints (Ellouze and Mnasri, 2020).…”

Section: Literature Reviewmentioning

confidence: 58%

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The Role of Financial Constraints in Business Environment; Evidence from Business Group Affiliated and Non-Affiliated Firms in Pakistan

Aslam¹,

Sohail²

2021

JBR

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The main purpose of this study is to investigate the relationship between Cash Flows, Growth Opportunities, Firm Size, Firm Age, Firm Performance, Investment, Financial constraints and Leverage between the B.G AFs and NAFs of Pakistan. Current study consists of the balanced panel data containing 86 B.G AFs vs. 90 NAFs of the Pakistan. This study covers the yearly data period from 2007 to 2017. The findings showed that the cash flows are positively correlated with the return on assets, investments, financial constraints, while leverage is negatively correlated with the financial constraints. The positive correlation between cash flows and return on asset is higher for the B.G AFs, which means the B.G AFs are more profitable than the NAFs. The correlation of cash flows with the investment and financial constraints is positive but lower for the B.G AFs, showing that AFs investment is less sensitive and less financially constrained than NAFs. The inverse correlation between leverage and financial constraints shows that the B.G AFs have easy access to the financial sources. The positive and higher correlation of growth opportunities with cash flows and return on assets shows that the AFs growth is higher than NAFs.

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Section: Literature Reviewmentioning

confidence: 58%

“…B.G AF's risk-taking power is less than non-group firms (Subramaniam, 2019). B.G AFs have low investment CF sensitivity (Yeh and Lin, 2020). There exists the inverse correlation between leverage and the performance of B.G AFs (Carney et al, 2011).…”

Section: Literature Reviewmentioning

confidence: 99%

The Role of Financial Constraints in Business Environment; Evidence from Business Group Affiliated and Non-Affiliated Firms in Pakistan

Aslam¹,

Sohail²

2021

JBR

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“…In most countries, firms grow as BGs, which are sets of legally independent entities bound by common controlling interests (Khanna & Yafeh, 2005 ). A vast body of literature documents the presence of BGs in emerging Asian and South American countries (Khanna & Yafeh, 2005 ) and in Western Europe and Asia (Belenzon et al, 2013 ; Zhang et al 2016 ; Yeh & Lin 2021 ). The key characteristic of a BG is the existence of internal markets that allow the allocation of strategic resources between affiliated firms.…”

Section: Theoretical Frameworkmentioning

confidence: 99%

Human resources slack and profitability: SMEs, large firms, and the role of business group affiliation

Lefebvre

2023

Eurasian Bus Rev

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This paper bridges behavioral theory of the firm arguments, the liability of smallness and the business groups literature to study the relationship between human resources slack and profitability. Specifically, the study proposes that both the negative and positive impacts of human resource slack are stronger for SMEs than for larger firms. Indeed, the risk-buffering capacity of slack is more important for smaller, more vulnerable firms, but at the same time, having slack reduces entrepreneurial risk-taking and increases internal rigidity. The study also proposes that business groups’ internal labor markets reduce both the benefits and limitations of holding human resources slack, leading to a weaker relation between human resources slack and profitability. The results, based on a large sample of French privately held firms, partly support our predictions. Overall, this paper extends our understanding of the importance of organizational structures in allocating and managing key strategic resources.

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“…The studies on emerging markets examine corporate investment by focusing on different dimensions. For example, the studies examine the determinants of corporate finance in China (Xu and Xu, 2019;Chan et al, 2012a, b;Yu et al, 2020;Vijayakumaran, 2021;Fu and Liu, 2015;Lin and Bo, 2012;Ding et al, 2013;Sun and Yamori, 2009;Xu et al, 2013;Wan and Zhu, 2011); in Taiwan (Hung and Kuo, 2011;Kuo and Hung, 2012;Tsai et al, 2014;Yeh and Lin, 2021;Hung and Tseng, 2009); in India (Lensink et al, 2003;Ghosh, 2006;Kumar and Ranjani, 2018;Bhaumik et al, 2012;Ganesh-Kumar et al, 2001;George et al, 2011;Gupta and Mahakud, 2019;Saeed and Vincent, 2012;Srinivasan and Thampy, 2017;Gupta et al, 2021;Altaf and Shah, 2018;Ameer, 2014). Investments are studied for Turkey (G€ ul and Tas ¸tan, 2020;Demir, 2008;Gezici et al, 2019); for South Korea (Rousseau and Kim, 2008;Ameer, 2014;Shin and Park, 1999;Ro et al, 2017); for Vietnam (see O'Toole and Newman, 2017); for Thailand (see Sitthipongpanich, 2017); for cross-country samples including some emerging markets (see Francis et al, 2011;Hanazaki and Liu, 2007;Ameer, 2014).…”

Section: Literature Review and The Potential Contribution Of The Pres...mentioning

confidence: 99%

“…Although there is a large literature on emerging markets and Latin American countries (Xu and Xu, 2019;Chan et al, 2012a, b;Yu et al, 2020;Vijayakumaran, 2021;Fu and Liu, 2015;Lin and Bo, 2012;Ding et al, 2013;Sun and Yamori, 2009;Xu et al, 2013;Wan and Zhu, 2011;Hung and Kuo, 2011;Kuo and Hung, 2012;Tsai et al, 2014;Yeh and Lin, 2021;Hung and Tseng, 2009;Lensink et al, 2003;Ghosh, 2006;Kumar and Ranjani, 2018;Bhaumik et al, 2012;Ganesh-Kumar et al, 2001;George et al, 2011;Gupta and Mahakud, 2019;Saeed and Vincent, 2012;Srinivasan and Thampy, 2017;Gupta et al, 2021;Altaf and Shah, 2018;Ameer, 2014;G€ ul and Tas ¸tan, 2020;Gezici et al, 2019, O'Toole andNewman, 2017;Sitthipongpanich, 2017;Francis et al, 2011;Hanazaki and Liu, 2007;Ameer, 2014; for Latin America, see Alvarez and Bertin, 2016;Kandilov and Leblebicio glu, 2012;Jaramillo et al, 1996;Demir, 2008;Pellicani et al, 2021;Crisostomo et al, 2014;Hasan and Sheldon, 2016;…”

Section: Introductionmentioning

confidence: 99%

The user cost of capital and corporate investment in the Latin American economies: a novel approach

Doruk

2023

ARLA

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PurposeIn the current study, corporate investment is examined by using a user cost of capital model for two important Latin American economies: Brazil and Mexico. In this paper, a dynamic user cost of capital model is employed. The extended model also accounts the investment model with the convex adjustment cost. Moreover, the link between structural change, financial liberalization and investment is also investigated. The present study, therefore, sheds new lights on the investment behavior of the Latin American emerging markets.Design/methodology/approachThe differenced generalized method of moments approach is employed to control the endogeneity, heteroscedasticity and autocorrelation for modeling the corporate investment over 20 years for both countries.Findings The findings indicate that the dynamic user cost of capital-based investment model explains the corporate investment in Brazil and Mexico. Especially, the interest rate and depreciation explain the investment behavior of nonfinancial firms in both countries. At the same time, structural change and financial liberalization do not have a significant impact on interest rates, an important user cost of capital.Originality/value This is the first study examines the corporate investment using dynamic user costs of capital approach for an emerging market. The user cost of capital-based investment models is clearly understudied models for emerging markets. This study is particularly important for emerging markets as investment models need to have a theoretical background.

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Investment-cash flow sensitivity to internal capital markets and shareholding structure: evidence from Taiwanese business groups

Cited by 4 publications

References 24 publications

The Role of Financial Constraints in Business Environment; Evidence from Business Group Affiliated and Non-Affiliated Firms in Pakistan

The Role of Financial Constraints in Business Environment; Evidence from Business Group Affiliated and Non-Affiliated Firms in Pakistan

Human resources slack and profitability: SMEs, large firms, and the role of business group affiliation

The user cost of capital and corporate investment in the Latin American economies: a novel approach

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