Capital structure, executive compensation, and investment efficiency

Eisdorfer, Assaf; Giaccotto, Carmelo; White, Reilly

doi:10.1016/j.jbankfin.2012.09.011

Cited by 98 publications

(62 citation statements)

References 43 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Empirical studies carried out in Pakistan have given mixed results (Qureshi et al, 2012;Sheikh and Qureshi, 2014). Studies (Gomariz and Ballesta, 2014;Eisdorfer et al, 2013) use Altman's Z-score 3 (Altman, 1968) to represent bankruptcy probability, and we have also used that in this study. The Z-score measures the health of a firm.…”

Section: Firm Level Variablesmentioning

confidence: 99%

How do they adjust their capital structure along their life cycle? An empirical study about capital structure over life cycle of Pakistani firms

Ahsan

Wang

Qureshi

2016

JABS

View full text Add to dashboard Cite

Purpose The purpose of this study is to explain the adjustment rate made to target capital structures by listed non-financial firms in Pakistan during the courses of their life cycles and to determine what factors influence their adjustment rates. Design/methodology/approach The study used multivariate analysis to classify 39 years (1972-2010) of unbalanced panel data from listed non-financial Pakistani firms in terms of their growth, maturity and decline stages. Further, it used a fixed-effects panel data model to determine the factors that influence capital structure and adjustment rates during the life-cycle stages of firms. Findings The study observed a low–high–low leverage pattern during the growth, maturity and decline stages of businesses in line with tradeoff theory. Furthermore, the study observed an adjustment rate for growing firms of between 49.3-37.9 per cent, for mature firms of between 35.5-17.5 per cent and for declining firms of between 22.2-15.1 per cent toward their respective leverage targets. Furthermore, it was found that growing firms have higher leverage adjustment rates because, by having more investment opportunities, these firms can alter their capital structures easily by changing the composition of their new issues. Practical implications Erratic economic conditions in Pakistan have created an uncertain business environment. Therefore, even mature Pakistani firms remain skeptical about the sustainability of positive trends among current economic indicators. Furthermore, to avoid uncertainty, Pakistani firms grab short-term opportunities by using quickly available short-term debt as a main financing source. Government should introduce long-term policies that will stabilize the business environment and strengthen the financial, as well as the judicial, institutions of the country so that these firms may benefit from long-term investment opportunities and access more options for raising external financing. The results of this study will also help policymakers for other Asian economies where the capital markets are underdeveloped and where firms have higher leverage ratios, such as Thailand, Indonesia and Malaysia. Originality/value This is the first study in Pakistan that has used a multivariate approach to classify firms into their different life-cycle stages and to discover the leverage adjustment rates of firms during those life-cycle stages.

show abstract

Section: Firm Level Variablesmentioning

confidence: 99%

How do they adjust their capital structure along their life cycle? An empirical study about capital structure over life cycle of Pakistani firms

Ahsan

Wang

Qureshi

2016

JABS

View full text Add to dashboard Cite

show abstract

“…In these recent studies reviewed above, Margaritis and Psillaki (2010), Kayo and Kimura (2011), Eisdorfer et al (2013), Feld et al (2013), and Schmid (2013) partially consider the issue of industry effects on capital structure. However, in these studies, the industrial differentials of capital structure are not the main focus of their investigations.…”

Section: Introductionmentioning

confidence: 99%

An Overview of the Corporate Capital Structure in the Industries at the Tokyo Stock Exchange

Tsuji¹

2014

IBR

View full text Add to dashboard Cite

This paper presents an overview of the differentials in the capital structures in various industries in Japan. More specifically, we first examine how capital structures of the industries at the Tokyo Stock Exchange (TSE) First Section are different. After that, we investigate whether financial risks associated with corporate debt ratios are rewarded with higher returns within industries. Main findings from our investigations are as follows. First, we find that the capital structure of each industry at the TSE First Section is statistically significantly much different. Second, we also find that financial risks associated with corporate debt ratios are not rewarded with future positive stock returns when we exclude the effects of industrial differentials of corporate leverage.

show abstract

“…Based on these theories, in the US, many corporate capital structure determinants were empirically tested by such studies as Frank and Goyal (2009), Lemmon et al (2008), Hartford et al (2009), Margaritis and Psillaki (2010), Gungoraydinoglu andÖztekin (2011), andFier et al (2013). Moreover, there are further several recent studies on the corporate capital structure in the US such as Cook and Tang (2010), Bliss and Gul (2012), Colla et al (2012), Devos et al (2012), Dudley (2012), Duru et al (2012), Lin et al (2012), Paligorova and Xu (2012), and Eisdorfer et al (2013); however, as far as we know, there would be little empirical research on the capital structure with a focus on the corporate solvency as our present study.…”

Section: Introductionmentioning

confidence: 99%

Corporate Solvency and Capital Structure: The Case of the Electric Appliances Industry Firms of the Tokyo Stock Exchange

Tsuji¹

2013

IJEF

View full text Add to dashboard Cite

This study examines the linkages between corporate solvency and capital structure of the electric appliances industry firms which are listed on the Tokyo Stock Exchange. When we consider and use some theories, different relationships between corporate solvency and leverage ratio are derived. In this study, we clarify that in the Japanese electric appliances industry, the linkages between corporate solvency and debt ratio are generally negative. Further, we also reveal that about 50% to 60% of the ratio of total debt to total asset can be explained by our corporate solvency variables.

show abstract

Capital structure, executive compensation, and investment efficiency

Cited by 98 publications

References 43 publications

How do they adjust their capital structure along their life cycle? An empirical study about capital structure over life cycle of Pakistani firms

How do they adjust their capital structure along their life cycle? An empirical study about capital structure over life cycle of Pakistani firms

An Overview of the Corporate Capital Structure in the Industries at the Tokyo Stock Exchange

Corporate Solvency and Capital Structure: The Case of the Electric Appliances Industry Firms of the Tokyo Stock Exchange

Contact Info

Product

Resources

About