Search Results (328)

The study examines economic and non-economic endeavors to explore the association between family involvement and financial decisions within family firms. The non-economic factors of a family drive the need to analyze the impact of socioemotional factors on the financial policies of the family firms. The study explores the impact of family ownership, family management, and family control drawn from agency theory and socioemotional wealth perspectives on the financial decisions of family firms. Our findings in support of the socioemotional wealth perspective show a positive relationship between family ownership and debt financing with a desire to finance growth and avoid control dilution, with an increase in the level of debt. However, the involvement of family members in management and the top management team leads to an adverse relationship between family ownership and debt level, exhibiting the risk-averse behavior of a firm, which drives firms to reduce debt levels. Overall, our findings suggest that the perceptions of the socioemotional wealth theoretical paradigm are important in determining capital structure decisions in family enterprises. The results are resilient to potential endogeneity and heterogeneity difficulties, which may assist scholars and practitioners in assessing capital structure decisions in emerging economies. Full article

This study examines the impact of board characteristics on capital structure decisions in the context of a transition economy, focusing on Algeria, where governance institutions are underdeveloped and the financial market remains immature. Using the Generalized Method of Moments (GMM) on a panel dataset of 120 firms over the period 2015 to 2019, we identify a U-shaped relationship between board size and leverage, and an inverted U-shaped relationship between board size and debt maturity. Furthermore, increased nationality diversity on boards is found to significantly reduce debt maturity. These findings highlight the critical role of board composition in shaping corporate financing strategies in transition economies and provide novel insights into corporate governance dynamics in a relatively underexplored institutional context. The results are particularly relevant for national entities such as COSOB and Hawkama El Djazaïr and may guide banking sector practices by promoting the integration of board governance criteria into credit evaluation processes. Full article

This study investigates economic decision-making behaviors among welfare recipients in Miami, Florida, by leveraging well-established experimental protocols: the Guessing Game, the Prudence Measurement Task, the Risk Aversion Task, and the Stag Hunt Game. For this purpose, our study defines financial decisions as the underlying individual preferences that serve as validated proxies for savings behavior, debt management, job-search intensity, and participation in cooperative finance. A central objective is to compare the behavior of welfare recipients to that of undergraduate students, a cohort typically used in experimental economics research. The analysis reveals significant differences between the two groups in strategic thinking and coordination, particularly across ethnic and gender lines. Non-Hispanic/Latino participants in Miami displayed significantly higher average guesses in the Guessing Game compared to their counterparts in Tucson, indicating potential discrepancies in the depth of strategic reasoning. Additionally, female participants in Tucson exhibited higher levels of coordination in the Stag Hunt Game compared to females in Miami, suggesting variance in cooperative behavior between these groups. Despite these findings, regression models demonstrate that location, gender, and ethnicity collectively account for only a small fraction of the observed variance, as evidenced by low R² values and substantial mean squared errors across all games. These results suggest that individual heterogeneity, rather than broad demographic variables, may be more influential in shaping economic decisions. This study underscores the complexity of generalizing findings from traditional student samples to more diverse populations, highlighting the need for further investigation into the socioeconomic factors that drive financial decision-making. Full article

Prior research often portrays Corporate Social Responsibility (CSR) as a coercive institutional force compelling firms to passively conform for legitimacy. More recent studies, however, suggest firms actively pursue CSR to gain sustainable competitive advantages. Yet, how and when CSR buffers firms against adverse shocks of crises remains insufficiently understood. This study addresses this gap by using multiple regression analysis to examine the buffering effects of CSR investments during the COVID-19 crisis, which severely disrupted capital markets and firm valuation. Drawing on signaling theory and CSR literature, we analyze the stock market performance of China’s A-share listed firms using a sample of 2577 observations as of the end of 2019. Results indicate that firms with higher CSR investments experienced significantly greater cumulative abnormal returns during the pandemic. Moreover, the buffering effect is amplified among firms with higher debt burdens, greater financing constraints, and those operating in regions with stronger social trust and more severe COVID-19 impact. These findings are robust across multiple robustness checks. This study highlights the strategic value of CSR as a resilience mechanism during crises and supports a more proactive view of CSR engagement for sustainable development, complementing the traditional legitimacy-focused perspective in existing literature. Full article

The study of capital structure is one of the most relevant topics in finance because, despite the various theories that seek to explain it, there is still no consensus on the determining factors or the behaviors of financing decisions in companies. This study empirically analyzes the capital structure decisions of Latin American companies during the period of 2013–2023, in light of trade-off and pecking order theories. A panel data methodology was applied to 62 companies, using fixed and random effects models. The results show that, on average, companies correct around 5.80% of the gap between their current and optimal level of indebtedness per period, partially supporting the trade-off theory. However, the effects of the financial deficit on indebtedness are heterogeneous and, in most cases, inconsistent with the pecking order theory, especially in countries such as Colombia. It is concluded that country risk has a marginal influence on debt decisions, and the need to consider each country’s institutional and market particularities when analyzing the dynamics of capital structure in emerging economies is emphasized. Full article

This paper highlights the importance of accounting for both the maturity structure of government debt and the composition of fiscal instruments when studying the macroeconomic effects of fiscal policy. Using a dynamic stochastic general equilibrium (DSGE) model featuring a debt maturity structure and six exogenous fiscal shocks spanning both the expenditure and revenue sides, we show that long-maturity debt systematically weakens the expansionary effects of fiscal policy under dovish monetary policy, particularly in response to increases in government purchases, government investment, and capital income tax cuts, where long-term financing leads to the significant crowding-out of private activity. In contrast, short-term debt financing yields output multipliers that often exceed unity. The maturity structure also alters the relative efficacy of fiscal instruments: while labor income tax cuts produce the largest multipliers under short-term debt, government purchases become more potent under long-term debt financing. We also show that the stark difference between short- and long-term debt becomes muted under a hawkish monetary regime. Our results have important policy implications, suggesting that the maturity composition of public debt should be carefully considered in the design of fiscal policy, particularly in high-debt economies. Full article

To promote the deepening of reform and the effective implementation of policies, the State Council launched the special supervision of the liquidation of local governments’ arrears in project funds in 2016, which supports the optimization of the government debt structure. Based on the quasi-natural experiment of the special supervision action, in this study, we use the difference-in-difference (DID) method to investigate the effect and mechanism of the optimization of the government debt structure on the financing constraints of private enterprises. This research is particularly relevant for private enterprises, which face acute financing challenges and are critical for promoting inclusive economic growth, employment, and innovation—key pillars of sustainable development. The results are as follows. Firstly, the special supervision significantly reduces the financing constraints of private enterprises. Secondly, it has heterogeneous effects on the financing constraints of different types of enterprises, and the alleviating effect is particularly significant for enterprises that rely on the funding support of local governments. This highlights the importance of institutional reforms in fostering equitable access to financial resources for vulnerable enterprise groups such as private enterprises. Thirdly, the optimization of the government debt structure eases enterprises’ financing constraints by improving their capital turnover and trade credit. By enhancing liquidity and creditworthiness, these changes create a more resilient financial environment for private enterprises, supporting their long-term development and contribution to sustainable economic systems. Full article

Achieving sustainable economic growth requires a careful balance between public debt accumulation and the macroeconomic stability necessary for long-term development. While public debt can support growth through productive public investment, excessive debt may crowd out private investment, raise borrowing costs, and undermine financial stability, ultimately threatening economic sustainability. In this context, the quality of institutions plays a pivotal moderating role by fostering responsible debt management and ensuring that debt-financed investments contribute to sustainable development. In this context, this study investigates the relationship between public debt and economic growth, with a focus on the moderating role of institutional quality (IQ). Utilizing an unbalanced panel of 115 countries over the period from 1996 to 2021, this study tests the hypothesis that robust institutional frameworks mitigate the negative impact of public debt on economic growth. To address potential endogeneity, this study employs the dynamic system Generalized Method of Moments (GMM) estimation technique. The results reveal that, although the direct effect of public debt on economic growth is negative, the interaction between public debt and IQ yields a positive influence. Furthermore, the results indicate the presence of a threshold beyond which public debt begins to exert a beneficial effect on economic growth, whereas its impact remains adverse below this threshold. These findings underscore the critical importance of sound debt management strategies and institutional development for policymakers, suggesting that effective government governance is essential to harnessing the potential positive effects of public debt on economic growth. Full article

This study explores the impact of growth opportunities on the capital structure of South African banks, utilising panel data from registered banking institutions covering the period from 2014 to 2023. While a substantial body of literature examines the relationship between growth prospects and corporate leverage, limited attention has been paid to this interaction within the banking sector, particularly in emerging economies. By employing the dynamic panel Generalised Method of Moments (GMM) estimator to address endogeneity concerns, the analysis reveals a statistically significant positive relationship between growth opportunities and both the total debt ratio (TDR) and the long-term debt ratio (LTDR). In contrast, a significant negative association is found between growth opportunities and the short-term debt ratio (STDR). The findings suggest that banks with stronger growth prospects are more inclined to utilise long-term financing, possibly reflecting shareholder preferences for institutions with favourable future outlooks and lower refinancing risks. These results highlight the importance of aligning capital structure decisions with an institution’s growth trajectory, while indicating that this relationship shifts depending on the maturity of the debt considered. This study contributes to the existing literature by contextualising capital structure decisions within the framework of growth opportunities. Structure theory within the context of the banking sector in a developing market offers practical insights for strategic financial planning and regulatory policy. Full article

Climate change risk has significant impacts on corporate financial activities. Using firm-level data from A-share listed companies in China from 2010 to 2022, we examine how climate risk affects corporate debt financing capacity. We find that climate change risk significantly weakens firms’ ability to raise debt, leading to lower leverage and higher financing costs. These results remain robust across various checks for endogeneity and alternative specifications. We also show that reducing corporate carbon emission intensity can mitigate the negative impact of climate risk on debt financing, suggesting that supply-side credit policies are more effective than demand-side capital structure choices. Furthermore, we identify three channels through which climate risk impairs debt capacity: reduced competitiveness, increased default risk, and diminished resilience. Our heterogeneity analysis reveals that these adverse effects are more pronounced for non-state-owned firms, firms with weaker internal controls, and companies in highly financialized regions, and during periods of heightened environmental uncertainty. We also apply textual analysis and machine learning to the measurement of climate change risks, partially mitigating the geographic biases and single-dimensional shortcomings inherent in macro-level indicators, thus enriching the quantitative research on climate change risks. These findings provide valuable insights for policymakers and financial institutions in promoting corporate green transition, guiding capital allocation, and supporting sustainable development. Full article

Debt financing is important for financing major investments in the biopharmaceutical industry. Debt financing allows companies to raise funds without giving up ownership or control through indenture and covenants of the company. In this study, I analyze the effects of debt financing decisions on profitability in the biopharmaceutical industry. I find that short-term debt, long-term debt, and total debt negatively impact the return on assets (ROA) as a firm’s profitability measure. A comparison is made between American and European biopharmaceutical firms, and the result shows the negative effects of short-term and long-term debt on profitability persist more for US biopharmaceutical firms than European firms. Short-term and long-term debt both impact profitability negatively with 10-year lagged R&D intensity and financial distress. Short-term debt’s negative impact is stronger post-COVID-19, indicating increased financial strain. Long-term debt consistently affects profitability negatively, with relatively stable effects during the pre- and post-COVID-19 pandemic. Full article

Sustainability performance is an important criterion for investors and lenders when making financing decisions. This study aims to analyze whether sustainability governance influences sustainability performance and the extent to which sustainability performance affects a company’s cost of debt. This study analyzed 209 publicly listed companies in Indonesia, Malaysia, Singapore, and Thailand. Sustainability governance was measured using two proxies from the Refinitiv Eikon database: (1) the existence of a sustainability committee and (2) the existence of sustainability assurance. Sustainability performance and the cost of debt were assessed using scores obtained from the same database. Quantitative analysis was performed using descriptive statistics, ANOVA, and structural equation modeling (SEM) with path analysis. The results showed that sustainability governance has a strong positive impact on sustainability performance. However, the results also show that higher sustainability performance leads to a higher cost of debt. This finding suggests that companies that integrate sustainability into their core business strategies face challenges in obtaining funding to support sustainability initiatives. This research implies that a well-developed sustainable ecosystem needs to be established before companies can realize a lower cost of debt. Full article

The increasingly observable financial vulnerability of households in emerging market countries makes it imperative to investigate the factors influencing it. Considering that China stands as a representative of emerging market economies, analyzing the factors influencing household financial vulnerability in China presents great reference significance for the sustainable development of households in emerging market countries. Using data from the China Household Finance Survey (CHFS) household samples, this paper presents the regional distribution of households with financial vulnerability in China. Utilizing machine learning (ML), this research examines the factors that influence household financial vulnerability in China and determines the most significant ones. The results reveal that households with financial vulnerability in China takes up a proportion of more than 63%, and household financial vulnerability is lower in economically developed coastal regions than in medium and small-sized cities in the central and western parts of China. The analysis results of the SHAP method show that the debt leverage ratio of a household is the most significant feature variable in predicting financial vulnerability. The ALE plots demonstrate that, in a household, the debt leverage ratio, the age of household head, health condition, economic development and literacy level are significantly nonlinearly related to financial vulnerability. Heterogeneity analysis reveals that, except for household debt leverage and insurance participation, the key characteristic variables exerting the most pronounced effect on financial fragility differ between urban and rural households: household head age for urban families and physical health status for rural families. Furthermore, digital financial inclusion and social security exert distinct impacts on financial vulnerability, showing significantly stronger effects in high per capita GDP regions and low per capita GDP regions, respectively. These findings offer valuable insights for policymakers in emerging economies to formulate targeted financial risk mitigation strategies—such as developing household debt relief and prevention mechanisms and strengthening rural health security systems—and optimize policies for household financial health. Full article

As ESG practices become increasingly embedded in global capital markets, their impact on firm financing costs remains an open question in emerging economies, where regulatory divergence and rating inconsistency complicate investor perceptions, particularly in China’s rapidly evolving financial environment. This study examines the impact of Environmental, Social, and Governance (ESG) performance on financing costs among Chinese non-financial listed firms, with a focus on the moderating roles of financial regulation and ESG rating divergence. Using a panel dataset of 4493 firms across 33,773 firm–year observations from 2011 to 2022, we employ a two-way fixed effects model, along with Propensity Score Matching and Difference-in-Differences (PSM-DID) techniques, to address endogeneity concerns and enhance causal inference. The findings reveal that improvements in ESG performance significantly reduce financing costs, substantially affecting debt relative to equity. Moreover, the cost-saving benefits of ESG are amplified in industries with stronger regulatory oversight, while high ESG rating divergence undermines these benefits by increasing uncertainty. These results highlight the importance of standardizing ESG rating systems and enhancing regulatory consistency. Such efforts can lower capital costs and improve financial access for firms, particularly in capital-intensive and environmentally sensitive sectors, offering actionable guidance for policymakers shaping disclosure frameworks and corporate managers optimizing ESG investment strategies. Full article

This paper examines the impacts of observed versus uncertain (stochastic) institutional quality of corporate debt financing. This paper compares the impacts of two distinct levels of institutional quality in developed and developing economies. World governance indicators (WGIs) are used as proxies for institutional quality. Stochastic Geometric Brownian Motion (GBM) is used to quantify the institutional uncertainty of WGIs. The results of GLS estimates using a sample of 309 nonfinancial listed firms in G8 countries and 373 nonfinancial listed firms in MENA countries covering the years 2016–2022 show (a) positive (negative) stochastic impacts of voice and accountability (government effectiveness and political stability) on debt financing in the G8 and MENA regions; (b) although potential improvements in institutional quality are shared concerns among G8 and MENA countries, the former outperforms the latter in terms of creditors’ contract protection and enforcement, paving the way for public policy makers in the MENA region to enhance regulations that protect debt contractual obligations; (c) macroeconomic variables have sporadic impacts; GDP growth is significant in G8 but not in MENA countries; (d) the negative impacts of inflation rates are consistent in both regions; and (e) unemployment plays a negative signaling role in the G8 region only. This paper contributes to the related literature by examining the uncertain impact of institutional quality on corporate debt financing. This paper offers implications for policy makers, directing them to focus on institutional endeavors in a way that helps companies secure the debt financing required to support investment growth. Full article