Trade‐Off, Pecking Order, Signaling, and Market Timing Models

Miglo, Anton

doi:10.1002/9781118266250.ch10

Cited by 31 publications

(11 citation statements)

References 74 publications

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“…The literature has suggested that a firm's funding choices and capital structure decisions are related to its assessment of issues such as asymmetric information, taxes, agency problems, and bankruptcy costs (Miglo, 2011). Firms with high financial leverage tend to remain at elevated levels for decades (Lemmon et al, 2008).…”

Section: Global Malmquist Productivity Indexmentioning

confidence: 99%

Assessing the financial performance of airlines in the Asia-Pacific region

Huang

2021

Investment Management and Financial Innovations

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In recent years, the aviation industry in the Asia-Pacific region has experienced rapid growth. Despite facing thin and volatile profit margins, the region’s airlines continue to expand their capacity by using high financial leverage, raising concerns of whether they are utilizing such financial leverage effectively and how it affects their stock performance. Using the global Malmquist productivity index and the conditional value-at-risk measure, this study investigates the financial performance of 22 Asia-Pacific-based airlines during 2016–2019. The empirical results reveal that only three full-service airlines were able to maintain continued improvement in financial efficiency during the sample period. The excessive use of financial leverage among low-cost carriers is documented. To assess the sources of financial inefficiency, this study decomposed the global Malmquist productivity index into two components: efficiency change and technical change. The results show that while there was a trend toward efficiency catch-up among the carriers, the number of airlines that demonstrated sufficient technical change declined significantly, indicating the need to implement technological innovation to deliver better financial outcomes. Regarding the airline’s stock return performance, airlines that achieved continuously superior performance in deploying financial resources also saw the lowest downside risk in their stock returns, reinforcing the importance of devoting more attention to indebtedness and the effectiveness with which financial resources are used. The findings of this study offer suggestions to airlines in managing their capital structure and enhancing their financial stability.

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Section: Global Malmquist Productivity Indexmentioning

confidence: 99%

Assessing the financial performance of airlines in the Asia-Pacific region

Huang

2021

Investment Management and Financial Innovations

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“…The empirical evidence regarding whether firms follow the pecking order is mixed, as mentioned in Miglo (2011). The negative reaction to equity issues, or, in general, to leverage reducing transactions, usually finds empirical support.…”

Section: Signalling Under Asymmetric Informationmentioning

confidence: 99%

Zero-Debt Policy under Asymmetric Information, Flexibility and Free Cash Flow Considerations

Miglo

2020

JRFM

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We build a model of debt for firms with investment projects, for which flexibility and free cash flow problems are important issues. We focus on the factors that lead the firm to select the zero-debt policy. Our model provides an explanation of the so-called “zero-leverage puzzle”. It also helps to explain why zero-debt firms often pay higher dividends when compared to other firms. In addition, the model generates new empirical predictions that have not yet been tested. For example, it predicts that firms with zero-debt policy should be influenced by free cash flow considerations more than by bankruptcy cost considerations. Additionally, the choice of zero-debt policy can be used by high-quality firms to signal their quality. This is in contrast to most traditional signalling literature where debt serves as a signal of quality. The model can explain why the probability of selecting the zero-debt policy is positively correlated with profitability and investment size and negatively correlated with the tax rate. It also predicts that firms that are farther away from their target capital structures are less likely to select the zero-debt policy when compared to firms that are close to their target levels.

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“…y Corresponding author, Birmingham City University, anton.miglo@bcu.ac.uk. For a review of major capital structure theories see, among others, Harris and Raviv (1991) and Miglo (2011Miglo ( , 2016.…”

Section: Introductionmentioning

confidence: 99%

A New Capital Structure Theory: The Four-Factor Model

Miglo

2020

SSRN Journal

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This article presents a new capital structure model based on four factors well documented in literature: asymmetric information, taxes, bankruptcy costs and decision-makers' overcon…dence. The model can simultaneously explain several facts about capital structure including those that remain puzzling from existing theories point of view eg. negative correlation between debt and pro…tability; why …rms issue equity etc. Unlike many advanced research on capital structure, a closed-form solution is obtained for most results.

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Trade‐Off, Pecking Order, Signaling, and Market Timing Models

Cited by 31 publications

References 74 publications

Assessing the financial performance of airlines in the Asia-Pacific region

Assessing the financial performance of airlines in the Asia-Pacific region

Zero-Debt Policy under Asymmetric Information, Flexibility and Free Cash Flow Considerations

A New Capital Structure Theory: The Four-Factor Model

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