Financial distress, refinancing, and debt structure

Dudley, Evan; Yin, Qie Ellie

doi:10.1016/j.jbankfin.2018.07.004

Cited by 17 publications

(6 citation statements)

References 32 publications

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“…Companies with a relatively high operating cash flow indicate that the company can pay the expenses that are part of operational activities (Finishtya, 2019). Based on agency theory, shareholders can provide full confidence in management performance through cash flow statements, so as to minimize agency conflicts (Dudley & Yin, 2018). In addition, it will provide good information for potential investors, so they are interested in giving their capital to the company.…”

Section: Introductionmentioning

confidence: 99%

Financial Distress Prediction: The Role of Financial Ratio and Firm Size

Ramadani,

Ratmono

2023

JRAK

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Financial distress reflects a continuous decline in the company's financial performance that needs to be predicted and minimized. Therefore, this study aims to test financial ratios in predicting financial distress moderated by firm size with a sample of 128 manufacturing companies listed on the Indonesia Stock Exchange in 2018-2020. The data analysis method is Structural Equation Model based on Partial Least Square (SEM-PLS) with SmartPLS 3.0. The results showed that leverage and liquidity negatively affected financial distress, but operating cash flow had the opposite effect. Meanwhile, firm size can moderate the effect of leverage and operating cash flow on financial distress, but on the other hand, firm size weakens the relationship of liquidity to financial distress. Therefore, the implications of this research for manufacturing companies serve as a benchmark for analyzing financial distress.

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Section: Introductionmentioning

confidence: 99%

Financial Distress Prediction: The Role of Financial Ratio and Firm Size

Ramadani,

Ratmono

2023

JRAK

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“…Companies respond to these shocks by diversifying their priority structure and by jointly issuing secured and subordinated debt claims. They issue junior debt to finance the liquidity shock for avoiding underinvestment and to preserve incentives for high effort on the entrepreneur's part upon arrival of a new investment opportunity (Dudley 2018).…”

Section: Debts and Leveragementioning

confidence: 99%

“…The changes in debt structure or overall financing structure should be examined when companies experience financial distress (Dudley, 2018) or intend to develop the business as it was specific during and after the last two crisis from 2008-2009 and 2020. In countries as Romania, characterized by emerging economy, the behavior of the companies was to improve the leverage, especially during the post-recession timing (Alfaro et al, 2019). The credit flow of the private sector has fluctuations as a response of the supply and demand during the financial crisis (an Bhaird 2013).…”

Section: Introductionmentioning

confidence: 99%

The Influence of the Company Size, Financing Structure and Assets Efficiency on the Positive Net Result in the Agri-Business Sector

Moise

2023

Proceedings of the International Conference on Business Excellence

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The net profit is the primary goal of every business focused on commercial activity. It is the source of further company’s development, and it is followed by all the stakeholders. Its relative size is the basis of the shareholders return through dividends. This paper studies the influence of several factors as the company size, financing structure or assets efficiency on the net profit for the companies with positive results. The data was analyzed for a period of 12 years, from 2009 until 2020. The sample consists in 3109 companies specialized in vegetal nutrition in the Romanian Agri-sector. The company size is defined by the turnover, the financing structure is represented by the level of equity, long-term debts and short-term debts and the return on assets reflects the assets efficiency. Each factor is influencing in a different manner the net profit of the companies. The hypothesis of the study refers to the relationship between net profit and the above factors. A correlation analyses was performed using SPSS software for determining the strength and directions between variables, combined with a descriptive analyses and reliability tests as Cronbach’s and F. The results show that there is a high positive correlation with equity, a moderate positive with turnover and short-term debts, low positive with long-term debts and negligible correlation with return on assets. The conclusion is that the shareholders behavior reflected in the dividend policy can have a significant influence on the relative size of the net profit.

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“…Recently, several studies have contributed towards the literature pertaining to debt structure, where they have focused on the reasons for changes in the debt structure. Likewise, when firms come face to face with financial distress, they undergo considerable differences in their previous debt structure, mainly by refinancing their operations (Dudley & Yin, 2018). Moreover, even the external economic distress effects are not only limited to the financial decision.…”

Section: Capital Structure and Debt Policymentioning

confidence: 99%

Consistency of Debt Policy: An Intrinsic Role of Business Group Affiliation

Rasheed¹,

Khan²,

Naqvi³

et al. 2021

LJB

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The debt structure remains an area of indispensable concern for businesses across the globe. The organizations are facing difficulty to achieve an optimal capital structure due to inconsistent debt policy. This study investigates the firm's debt policy consistency over a period of twenty-two years after its establishment by observing leverage, debt maturity, debt granularity, and debt specialization as important measures. It has employed a unique dataset covering all the non-financial Pakistani firms listing from 1997 to 2018. The results depict that a firm's debt policy remains remarkably consistent over time, confirming that the initially adopted debt policy is a significant determinant of its future debt policies. However, it is noteworthy that the consistency of the debt policy has shown a declining trend due to the firm's age and size. Additionally, we have examined the effect of business group affiliation on the consistency of debt policy, with further segregation in terms of the financial firm's presence in a group or not. The findings show that a group affiliated firm has more access to the debt market than an unaffiliated firm. Further, the existence of a financial firm in a group serves as an extended financial market that help them to survive in a distress situation. This study will assist the managers in understanding the significance of initial debt policy on the continuity of future policies that help them in financial decision-making.

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Financial distress, refinancing, and debt structure

Cited by 17 publications

References 32 publications

Financial Distress Prediction: The Role of Financial Ratio and Firm Size

Financial Distress Prediction: The Role of Financial Ratio and Firm Size

The Influence of the Company Size, Financing Structure and Assets Efficiency on the Positive Net Result in the Agri-Business Sector

Consistency of Debt Policy: An Intrinsic Role of Business Group Affiliation

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