The Leverage Effect On Financial Performance A Review Of Empirical Evidence
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The Leverage Effect On Financial Performance A Review Of Empirical Evidence
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Author : John Joseph
language : en
Publisher: GRIN Verlag
Release Date : 2018-06-22
The Leverage Effect On Financial Performance A Review Of Empirical Evidence written by John Joseph and has been published by GRIN Verlag this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-06-22 with Business & Economics categories.
Seminar paper from the year 2018 in the subject Business economics - Business Management, Corporate Governance, , language: English, abstract: The International Financial Reporting Standards (IFRS) is a high quality and principle based reporting standards that remove many accounting alternatives. It is therefore, consequently expected to limit the management’s discretion and lessen practices on earnings management. Quite the opposite, some researchers argue that the flexibility in IFRS and its fair value pre-eminence might afford greater opportunities for firms to manage earnings. It is this inaptness which incited and aggravated the conduct of this study. This study applies a desktop review to investigate the worldwide existing empirical research evidence on the effect of IFRS on earnings management post- IFRS adoption and in relation to other reporting standards and reports whether the results are indistinguishable between developed and developing economies. Accounting research in developed economies has long identified earnings management as a means by which managers manipulate financial reports to mislead other stakeholders on the underlying economic performance of the firm. However, earnings management research did not receive much attention in developing countries such as Nigeria until recently. The findings reveal that the existing empirical crams and conclusions there on are mixed, inconsistent and difficult to generalise. This indicates the pressing need for country, especially Nigeria to engage on studies of this nature. The study further, stumbles on the fact that IFRS can indistinctly benefit both developing and developed markets when coupled with appropriate effective enforcement machinery. Substantially, the results entail that IFRS is a critical determinant for quality reporting but not a ‘prima facie’ guarantor for quality reporting.
Corporate Financial Distress And Bankruptcy
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Author : Edward I. Altman
language : en
Publisher: John Wiley & Sons
Release Date : 2010-03-11
Corporate Financial Distress And Bankruptcy written by Edward I. Altman and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-03-11 with Business & Economics categories.
A comprehensive look at the enormous growth and evolution of distressed debt, corporate bankruptcy, and credit risk default This Third Edition of the most authoritative finance book on the topic updates and expands its discussion of corporate distress and bankruptcy, as well as the related markets dealing with high-yield and distressed debt, and offers state-of-the-art analysis and research on the costs of bankruptcy, credit default prediction, the post-emergence period performance of bankrupt firms, and more.
The Debt Equity Choice
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Author : Ronald W. Masulis
language : en
Publisher:
Release Date : 1988
The Debt Equity Choice written by Ronald W. Masulis and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1988 with Business & Economics categories.
Empirical Capital Structure
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Author : Christopher Parsons
language : en
Publisher: Now Publishers Inc
Release Date : 2009
Empirical Capital Structure written by Christopher Parsons and has been published by Now Publishers Inc this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with Business & Economics categories.
Empirical Capital Structure reviews the empirical capital structure literature from both the cross-sectional determinants of capital structure as well as time-series changes.
A Theoretical And Empirical Study Of The Effect Of Financial Leverage And Taxes On The Behavior Of The Regulated And Unregulated Firm Under Uncertainty
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Author : Janet S. Thatcher
language : en
Publisher:
Release Date : 1981
A Theoretical And Empirical Study Of The Effect Of Financial Leverage And Taxes On The Behavior Of The Regulated And Unregulated Firm Under Uncertainty written by Janet S. Thatcher and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1981 with categories.
Capital Structure Dynamics In Indian Msmes
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Author : Nufazil Altaf
language : en
Publisher: Palgrave Macmillan
Release Date : 2021-01-19
Capital Structure Dynamics In Indian Msmes written by Nufazil Altaf and has been published by Palgrave Macmillan this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-01-19 with Business & Economics categories.
This book examines the capital structure dynamics in Indian MSMEs, offering empirical evidence to better understand the financial practices within entrepreneurial settings. Altaf and Shah in this book assess the financing pattern of Indian MSMEs, response of capital structure determinants to different macroeconomic states, links between working capital and capital structure, cash flow volatility and capital structure and also the impact of credit risk on capital structure and firm performance relationship. This book enthuses the audience looking to understand newer dynamics of capital structure and its interplay in the Indian MSMEs.
Impact Of Leverage On Financial Performance Of The Organization
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Author : Wsi Chohan
language : en
Publisher:
Release Date : 2017
Impact Of Leverage On Financial Performance Of The Organization written by Wsi Chohan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
The purpose of this research article is to evaluate whether in Pakistani context an increase in leverage positively or negatively impact on performance of organization. This research was conducted using secondary data sourced from KSE and SBP. The sample of this study comprises of 50 companies. The objective of this study is to analyze the effects of leverage on the performance measures to better understand the dynamics and determinants of performance within the Pakistani companies. In particular, this study's findings suggest that leverage is negatively related to performance.
Business Environment And Firm Entry
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Author : Leora Klapper
language : en
Publisher: World Bank Publications
Release Date : 2004
Business Environment And Firm Entry written by Leora Klapper and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with Business law categories.
"Using a comprehensive database of firms in Western and Eastern Europe, we study how the business environment in a country drives the creation of new firms. Our focus is on regulations governing entry. We find entry regulations hamper entry, especially in industries that naturally should have high entry. Also, value added per employee in naturally "high entry" industries grows more slowly in countries with onerous regulations on entry. Interestingly, regulatory entry barriers have no adverse effect on entry in corrupt countries, only in less corrupt ones. Taken together, the evidence suggests bureaucratic entry regulations are neither benign nor welfare improving. However, not all regulations inhibit entry. In particular, regulations that enhance the enforcement of intellectual property rights or those that lead to a better developed financial sector do lead to greater entry in industries that do more R & D or industries that need more external finance"--National Bureau of Economic Research web site.
Financial Statement Analysis And Security Valuation
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Author : Stephen H. Penman
language : en
Publisher:
Release Date : 2010
Financial Statement Analysis And Security Valuation written by Stephen H. Penman and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with Financial statements categories.
Valuation is at the heart of investing. A considerable part of the information for valuation is in the financial statements.Financial Statement Analysis and Security Valuation, 5 e by Stephen Penman shows students how to extract information from financial statements and use that data to value firms. The 5th edition shows how to handle the accounting in financial statements and use the financial statements as a lens to view a business and assess the value it generates.
Leverage And Debt Maturity
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Author : Eilnaz Kashefi Pour
language : en
Publisher:
Release Date : 2012
Leverage And Debt Maturity written by Eilnaz Kashefi Pour and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
This thesis aims to add empirical evidence to the corporate finance literature by looking at the financing decisions with a specific application to small companies in the context of the UK relatively highly regulated Main market, versus the lightly regulated Alternative Investment Market (AIM). I do this by gathering data on all quoted dead and alive companies in both markets from 1995 to 2008. I then split my sample firms in each market into different size groups and test my hypothesis within and across each group and each market. The thesis consists of six chapters. After an introductory chapter, I review the existing literature on capital structure and debt maturity controversies with an emphasis on recent empirical work. The next three chapters consist of three research papers. The first paper looks at the capital structure decisions of companies quoted in AIM and Main market across different size groups. In the second research paper, the maturity structure of debt is investigated in both markets. The third research paper tests the determinants of the delisting decision, particularly the effect of leverage using a sample of AIM companies. In the last chapter, I provide a summary of the main conclusions of the study and highlight some promising ideas for future research. The first empirical chapter analyses the drivers of leverage across firms' sizes and market of quotation. I find that companies that are listed on the Main market have higher leverage than those listed on AIM. My results show that AIM companies are subject to higher business risk and tend to have lower profitability and tangible assets. In addition, in both markets, small companies are different from large firms in their level of leverage, tangibility of assets, and profitability, suggesting that the drivers of the financing choice are size dependent. Interestingly, the impact of taxation is limited to only large companies in both markets. Similarly, the impact of the agency conflict is also limited to large companies, as for small firms I find a positive relationship between leverage and growth opportunities, in contrast to the predictions of the agency theory. These results suggest that size rather than market of quotation is more likely to explain firms' leverage. However, I find that the market of quotation affects their speed of adjustment toward target leverage ratios. Using the dynamic model of capital structure, I find that in the Main market, small companies adjust more rapidly than large firms, suggesting that they rely more on bank debt and thus result in lower costs of adjustment. In contrast, large firms on the AIM adjust more rapidly than small companies, suggesting that small AIM companies are subject to the highest costs of adjustment as they have the highest business risk and the lowest profitability. The second empirical paper investigates the determinants of the structure of debt maturity across firms' size groups in both markets. I find that firms quoted in the Main market use longer maturity of debt in contrast to their AIM counterparts. However, the structure of debt maturity is different between small and large companies, as small companies use shorter debt maturity. Moreover, I find that the determinants of debt maturity are relatively different across the two sets of markets, suggesting that the market of quotation, are likely to affect the structure of debt maturity. Particularly, the effect of leverage is mixed in those markets. In the Main market, companies with higher leverage use more long-term debt in contrast to those quoted in the AIM. In line with my results in the previous chapter, I find that the speed of adjustment depends on the market of quotation. Using a dynamic framework, I find that companies have a target debt maturity, but, while in the AIM large companies adjust more rapidly than small companies, I find the opposite in the Main market. I also contribute to the literature by assessing the impact of firm's life cycle on its choice of debt maturity. I use a sample of newly listed firms and assess the evolution of the maturity structure of their debt four years after their IPO. I find strong differences across the two markets. In the Main market, my empirical evidence shows that in contrast with small companies, large companies change the structure of their debt maturity significantly as they are more likely to use longer maturity of debt in the post-IPO period. While in the AIM, the structure of debt maturity is not affected by size as neither large companies nor small companies change their debt maturity significantly. In the last empirical chapter, I study the impact of leverage on the delisting decision. I address the following questions: Do firms delist from the stock market because they are unable to raise equity capital and redress their balance sheet? Previous studies state that raising equity capital is one of the main benefits of stock market quotation. I expect firms that are not likely to take advantage of this benefit to have higher listing costs and more likely to delist. I use leverage as a proxy variable and a sample of voluntary delisting from AIM. I find that delisted companies have higher leverage as they did not raise equity capital over their public life. My results suggest that companies with higher leverage are more likely to delist voluntarily. These results hold even after controlling for agency conflicts, liquidity, and asymmetric information. I also investigate how the market reacts to the delisting announcement. I find that on the announcement date, stock prices decrease significantly. However, this reaction is not consistent with previous studies that report positive excess returns for companies that go private through different forms of buyouts. The voluntary delisting does not deliver good news to the market and hence voluntary delisting leads to a decrease in stock prices. I also find that firms that increased their leverage in the year prior to the delisting decision generate significantly lower excess returns than other firms. I compare my results to firms that delisted from the AIM but moved to the Main market. I find that that these firms generate statistically higher and positive returns than the remaining firms that delisted voluntarily. My results highlight the negative impact of leverage and a lack of equity financing on firms' market valuation. My results contribute to the literature and to policy making in several ways. First, I test various controversial and new hypotheses by focussing on differences in institutional settings between the AIM and the Main market. The former is less regulated and it is more likely to attract younger, high growth, and riskier companies. These differences allow me to test various hypotheses developed in previous literature relating to the financing choices of firms. In addition, I provide a deeper analysis of the impact of size on the firms' financing choices. I focus on the differences in leverages across the two, markets, changes in maturity from the IPQ dates, and the drivers of the decision and timing from the IPQ date of companies in the UK. Unlike previous studies, I show that the theoretical determinants of leverage, such as taxation and agency costs, across firms' size groups are not homogeneous, independently of the market quotation. However, I find significant differences across the two markets in terms of dynamic changes in leverage. In addition, my results highlight the impact of leverage on the decision to delist, and imply that policy makers need to facilitate the financing of companies when they list on the market, so that the benefits of listings outweigh the costs, and firms will not rush to voluntary delisting.