Search Results (386)

This paper studies the effects of leasing on credit risk and access to credit. The repossession of a leased asset is generally easier than the enforcement of collateral associated with securing a standard loan agreement. We argue that this greater efficiency in enforcement mitigates, ceteris paribus, the counterparty’s moral hazard. To test this hypothesis, we developed a credit rationing model in which income is privately observed and non-verifiable, and financial intermediaries share credit risk information about borrowers. Financial contracts that are more rapidly enforced, such as in leasing, enable the screening of relatively safer projects or credit rationing reduction. We provide empirical evidence consistent with this prediction for the Italian credit market and considerations for the effects of monetary policy variables on the model’s equilibrium. Full article

This study examines the accounting determinants of the capital structure of Portuguese firms in the textile, clothing, and leather sectors, based on a sample of 6469 firms over the period 2010–2022, using panel data models. The relevance of this study lies in its focus on specific industrial sectors characterized by a high predominance of small and medium-sized enterprises (SMEs) and a strong dependence on bank financing. In addition to the traditional analysis of leverage determinants, this study introduces a conditional approach to accounting variables based on firms’ structural characteristics, namely size and age. Robustness checks and data treatment procedures were conducted to mitigate the potential impact of outliers in the financial variables. The results show that profitability, liquidity, and risk negatively affect indebtedness, whereas asset structure and growth exert positive effects. The effective tax rate has a negative impact on debt. Firm size and age significantly condition the relationship between variables. SMEs’ financing decisions exhibit differentiated patterns depending on firm size and age. The findings support the predictions of the Pecking Order Theory and, to a lesser extent, the Trade-Off Theory. The study highlights the importance of considering firm heterogeneity when designing financing policies and strategies for Portuguese SMEs. Full article

This paper examines whether government debt financing crowds out private consumption in South Africa or whether household behaviour is consistent with Ricardian equivalence. Using quarterly data from 1960Q1 to 2025Q1, the study employs a Bayesian time-varying parameter framework that accommodates non-stationarity, structural change, and evolving fiscal transmission mechanisms, and is complemented by a Markov-switching Bayesian VAR as a robustness check. All variables are expressed relative to GDP to avoid scale effects, and inference is based on posterior distributions. The results reveal pronounced state dependence in the debt–consumption relationship. In earlier decades, increases in the debt-to-GDP ratio are associated with statistically meaningful declines in the private consumption share, consistent with crowding-out or precautionary behaviour under weaker fiscal credibility. Over time, however, this negative association weakens and converges toward neutrality, with post-2010 estimates indicating no significant effect of debt on consumption. Conditioning on fiscal stance and financial conditions shows that debt does not exert an independent influence on consumption once government expenditure, tax revenue, and interest rates are taken into account. A constant-parameter Bayesian benchmark masks these dynamics, producing an average effect close to zero. Evidence from a Markov-switching Bayesian VAR similarly finds no persistent regime-specific crowding-out effects. Overall, the findings suggest that observed debt–consumption linkages in South Africa operate primarily through broader fiscal and macroeconomic conditions rather than debt accumulation itself, highlighting the importance of fiscal credibility and policy composition. Full article

Corporate financial policy requires managers to balance financing, investment, and payout decisions while maintaining sufficient financial flexibility to respond to unexpected shocks and investment opportunities. Despite the importance of financial flexibility, limited empirical evidence exists on its determinants in African capital markets. Using panel data from 106 non-financial firms listed on the Johannesburg Stock Exchange over the period 2000–2019, this study examines the determinants of financial flexibility. Financial flexibility is identified by comparing actual and predicted leverage and classifying firms with persistent spare debt capacity as financially flexible. The main empirical model is estimated as a random-effects linear probability model with heteroscedasticity-robust standard errors. The results show that financial flexibility is significantly negatively associated with leverage and Tobin’s Q, indicating that firms with higher debt levels and stronger growth opportunities are less likely to preserve borrowing capacity. Retained earnings and financing cost show weak negative associations at the 10% significance level, while dividend payout, profitability, cash holdings, and tangibility are statistically insignificant. The study contributes to the corporate finance literature by providing new evidence from an African emerging market context, incorporating payout policy into the financial flexibility framework, and showing how leverage discipline and growth-related financing demands shape firms’ financial flexibility. Full article

This study examines whether the board of commissioners’ monitoring intensity (BOCM) moderates the relationship between corporate social responsibility disclosure (CSRD) and the cost of debt (COD). Using an unbalanced panel dataset of 1516 firm-year observations from companies listed on the Indonesia Stock Exchange during 2018–2023, this study applies Moderated Regression Analysis (MRA) to test the proposed relationships. The results show that CSRD is negatively associated with COD, indicating that greater CSR transparency reduces borrowing costs. More importantly, BOCM significantly moderates this relationship. The interaction between BOCM and CSRD suggests that stronger board of commissioner monitoring weakens the marginal effect of CSRD on COD, implying that intensive monitoring may partly substitute for the risk-reducing role of CSR disclosure in determining COD. In addition, BOCM has a direct negative effect on COD, suggesting that creditors value the active board of commissioners’ monitoring as an internal governance mechanism that lowers perceived financing risk. These findings extend the literature by demonstrating that the effectiveness of CSRD in reducing COD depends on the strength of BOCM. This study offers practical implications for regulators and firms seeking to enhance governance quality, improve disclosure credibility, and reduce financing costs. Full article

To address escalating climate challenges, China has implemented a multi-tiered low-carbon policy framework aimed at achieving carbon peaking and carbon neutrality, profoundly reshaping firms’ strategic and financial behaviors. Using a panel of Chinese listed firms from 2007 to 2022, this study examines how low-carbon policies affect corporate earnings management choices and the underlying mechanisms. The results show that low-carbon policies significantly restrain accrual-based earnings management while simultaneously promoting real earnings management, indicating a clear substitution effect; these findings remain robust across multiple robustness checks. Mechanism analyses reveal that rising financing costs and enhanced digital transformation induced by low-carbon policies curb accrual-based earnings management, whereas increased financial risk and weakened debt-paying ability stimulate real earnings management. Further heterogeneity analyses suggest that the inhibitory effect on accrual-based earnings management is stronger among firms subject to greater analyst coverage and media scrutiny, while the shift toward real earnings management is more pronounced among firms with weaker profitability and those located in regions with lower innovation capacity. Overall, this study deepens the understanding of the microeconomic consequences of low-carbon policies and provides policy-relevant insights for refining green regulatory frameworks and promoting sustainable corporate development. Full article

This study examines whether IAS 38-recognized identifiable intangible assets (excluding goodwill) are associated with corporate leverage in Thailand, an emerging bank-dominated financial system, and whether that relationship changed after the COVID-19 shock. Panel on listed firms supports a stepwise design. Estimation begins with firm fixed-effects models, then proceeds to stricter specifications that add year fixed effects and, in the preferred model, industry-by-year fixed effects; dynamic robustness is evaluated using System GMM. In baseline firm fixed-effects specifications, recognized intangible intensity is positively associated with leverage, and the post-COVID-19 interaction is also significant under lighter controls. Statistical significance, however, fades after accounting for broader macro-financial and sector-specific financing conditions, and System GMM results similarly yield weak coefficients for recognized intangibles once leverage persistence is accounted for. The findings imply that apparent financing relevance for recognized intangibles depends strongly on the surrounding financing regime rather than on a robust independent debt-capacity effect. Full article

This study investigates the impact of public debt service costs on social expenditure in South Africa, focusing on three categories of social expenditure, namely, government education expenditure, government health expenditure and government social protection expenditure. It addresses the challenge of financing debt service costs while maintaining social expenditure. The study employed annual time series data from 1994 to 2024 and the autoregressive distributed lag (ARDL) technique to examine the effect of public debt service costs on social expenditure. The results reveal that debt service exhibits a negative and statistically significant impact across all three categories of social expenditure under consideration in the long run and short run in South Africa. Moreover, the results reveal that public debt has a negative relationship with all three categories of social expenditure. The exchange rate and revenue were found to have a positive relationship with all three categories of social expenditure under consideration. Urban population was found to have a positive relationship with government education expenditure and social protection expenditure. These findings underscore the need to focus on reducing the fiscal pressure stemming from increasing debt service costs, while upholding social expenditure. It is recommended that policymakers focus on debt stabilisation and reduction, thereby easing the crowding-out of social expenditure. Full article

Does the digital transformation of major customers foster collaborative financing for upstream suppliers, or does it amplify their bargaining power for rent extraction? This study investigates these competing hypotheses by examining the digital spillovers from major customers to supplier trade credit. Using a unique hand-collected dataset linking Chinese listed suppliers with their top five customers by accounts receivable from 2010 to 2021, we document a “dual enhancement effect”: major customer digitalization significantly increases trade credit scale and improves trade credit quality, effectively rejecting the rent extraction hypothesis. Specifically, trade credit quality is reflected in lower bad debt provision ratios, shorter receivable aging, and lower material default risk. Mechanism tests suggest that improved information transparency and stronger customer market competitiveness are important channels through which digitalization affects supplier trade credit. Cross-sectional analyses show that these effects are more pronounced for non-state-owned or low-asset-specificity suppliers, and for customers with higher asset specificity or lower importance. After ruling out alternative explanations, we further find that this digital spillover strengthens supply chain resilience. Overall, the evidence is more consistent with the collaborative financing view than with the rent extraction view, suggesting that major customer digitalization may help foster more sustainable and cooperative financing relationships within supply chains. Full article

This study investigates the determinants of capital structure in Moroccan agricultural SMEs, with particular emphasis on the distinction between interest-bearing debt and non-interest-bearing liabilities in a context characterized by persistent credit constraints. While traditional capital structure theories typically treat debt as a homogeneous aggregate, such an approach may obscure important financing dynamics in financially constrained environments. Using a panel dataset of 52 agricultural SMEs observed over the period 2017–2022, the analysis employs a correlated random effects model to control for unobserved heterogeneity. The results indicate a negative relationship between profitability and both total and short-term debt, consistent with the predictions of the Pecking Order Theory. Liquidity, asset tangibility, and firm size are negatively associated with non-interest-bearing current liabilities, suggesting that trade-based financing may serve as an adjustment mechanism when access to formal credit is limited. In contrast, long-term debt is only weakly explained by firm-level characteristics, pointing to potential supply-side constraints in agricultural credit markets. Overall, the findings suggest that financing patterns in agricultural SMEs appear to be more closely associated with credit market imperfections than with optimal trade-off considerations. By distinguishing between different debt components, this study contributes to the literature by highlighting the importance of debt composition when analyzing capital structure in emerging and financially constrained economies. Full article

This study investigates the ESG rating effect on firm financing by evaluating rating divergence data from five rating agencies, focusing on China’s A-share listed firms spanning 2018–2023. Empirical findings reveal: (1) ESG rating divergence has negatively exacerbated the financing constraints of enterprises. (2) Economic policy uncertainty in China moderates this relationship, significantly amplifying the financing constraint effect of ESG rating divergence. (3) Parallel intermediation tests the negative impact of information asymmetry and debt capital costs jointly transmitting discrepancies. (4) Deeper analysis shows non-state-owned enterprises, small-scale businesses, firms in less financially marketized regions, and entities with high rating divergence face more notable effects. This study explores the internal operation logic of ESG rating discrepancies on corporate financing constraints through two parallel channels of information asymmetry and debt capital cost. The research conclusions provide empirical support for regulators to promote the standardization of ESG information disclosure, assist investors in improving the risk pricing system, and improve the efficiency of market resource allocation. Full article

Financial literacy represents a fundamental competence in contemporary knowledge-based economies, particularly in the context of increasingly complex corporate financing instruments. Insufficient financial literacy may lead to suboptimal debt decisions, inefficient capital structures, and heightened financial vulnerability of firms. The aim of this paper is to assess the level of financial literacy of university students in the field of corporate debt financing and to identify key determinants influencing the correctness of their responses. The empirical analysis is based on a quantitative questionnaire survey conducted among university students in the Slovak Republic (n = 403) using a convenience sampling approach. The questionnaire included 16 knowledge-based items focused on debt financing instruments, interest mechanisms, leasing, bonds, and alternative sources of financing. Data were analysed using descriptive statistics and inferential methods, primarily Pearson’s χ² test of independence and Cramer’s V. The results reveal considerable variability in students’ performance across thematic areas. Higher success rates were observed for basic concepts of debt financing and traditional bank products, while lower performance was recorded for analytically demanding tasks, particularly those related to interest rate comparisons, capital market instruments, and alternative financing forms. Field of study emerged as the most significant determinant of financial literacy, followed by the level of study, whereas gender and region showed only marginal effects. The findings highlight the need to strengthen application-oriented financial education in higher education, with a stronger focus on practical aspects of corporate debt financing. Full article

This study examined the ‘too central to fail’ concept in the South African equity sector. We employed the Granger causality framework and PageRank algorithm to generate the centrality scores of the sectors on the Johannesburg Stock Exchange under extreme market conditions. Using the realized volatilities of sectoral returns for the full sample period (3 January 2006–31 December 2021), as well as during the global financial crisis (GFC), European debt crisis (EDC), COVID-19 pandemic, and US–China trade war sub-periods, we analyzed the sectors’ interconnections and calculated each sector’s centrality score across the entire sample and under different extreme market conditions. This allowed us to rank sectors relative to their centrality scores. The results indicate that, in the full sample, the insurance sector has the highest PageRank centrality score, suggesting it is too central to fail. This implies that the insurance sector acts as a systemic receiver of risks and provides stability within the network of sectors. However, the sub-period analyses reveal that General Industrial and Automobiles emerged as the key sectors with the highest PageRank centrality scores, and shocks from other sectors can disproportionately affect these industries during crisis periods. Underperformance in these sectors could have destabilizing effects on the South African economy. The findings have significant implications for regulators and policymakers, portfolio and fund managers, local and international investors, and researchers in the field of finance. Full article

The heterogeneous empirical evidence in the vast literature on capital structure determinants is puzzling to scholars and practitioners. Various leverage measurements, in conjunction with the inconclusiveness of the significant firm-related capital structure determinants, complicate comparability. Practitioners also find it challenging to determine optimal financing strategies with real precision. This paper provides an integrative position that consolidates firm-related capital structure determinants with their respective measurements and suggests a preferred proxy for capital structure. A qualitative design has been applied, which is rarely done in the context of capital structure. This paper also offers a methodological contribution by utilising a combination of documentary analysis with PRISMA and forward-looking citation analysis, named the adapted documentary analysis. Capital structure determinant studies were targeted from inception until 2023. The synthesis of the results from 335 articles identified the six most prominent capital structure determinants: profitability, tangibility, growth proxied by the market-to-book value of equity (MTB), firm size, non-debt tax shield (NDTS), and business risk. Capital structure book value measurements seem more reliable than market-based measures. Profitability, MTB, and tangibility are the key firm-related determinants informing practitioners’ financing decisions. A consolidated list of the most prominent capital structure determinants, with their associated measurements, and a reliable proxy for capital structure are novel contributions that enable comparability in capital structure research across companies, industries, and countries. It creates a consolidated, integrative platform that adds to the academic debate and assists practitioners in their capital structure decision-making. Full article

This study seeks to establish how financial leverage mediates the relationship between corporate governance and the financial performance of 58 carbon-intensive firms listed on the Johannesburg Stock Exchange over the period 2015–2023. This study employed the two-step system generalised method of moments to address endogeneity issues. The results indicate that leverage negatively impacts a firm’s financial performance, but leverage does not mediate the relationship between corporate governance and a firm’s financial performance in carbon-intensive firms. The results of the study also reveal that board remuneration negatively influences a firm’s financial performance, yet board independence has an insignificant impact on firm performance. These results underscore the need for carbon-intensive companies to reassess their remuneration policies to ensure alignment with short-term financial benefits and long-term sustainability initiatives. The findings also suggest that sustainability projects financed predominantly by debt may negatively impact short-term financial performance, indicating the importance of a balanced capital structure during the decarbonisation process. Full article