How Does Asset Structure Correlate with Capital Structure? – Cross-Industry and Cross-Size Analysis of the EU Countries

Koralun-Bereźnicka, Julia

doi:10.13189/ujaf.2013.010103

Cited by 12 publications

(10 citation statements)

References 30 publications

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“…Tangibility has a negative effect on short-term debt ratio for firms in the grey and distressed subsamples, corroborating the results of Scherr and Hulburt (2001) for US firms, Heyman et al. (2003) for Belgian firms, and Koralun-Bereźnicka (2013) for nine European countries, including Portugal. These authors conclude that firms match the maturity of assets with the maturity of financing sources that fund these assets.…”

Section: Discussion Of the Resultssupporting

confidence: 79%

Is financial distress risk important for manufacturing SMEs to rebalance the short-term debt ratio?

Sardo

Serrasqueiro

Vieira

et al. 2022

JRF

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PurposeThis study seeks to analyse if the adjustment towards the target short-term debt ratio of small and medium-sized firms (SMEs) is related to financial distress risk.Design/methodology/approachData obtained for a sample of Portuguese manufacturing SMEs from 2010 to 2017 were analysed using the system-generalised method of moments (GMM-sys). Using the modified Z-Altman score, the authors classify SMEs according to their exposure to financial distress risk.FindingsManufacturing SMEs exposed to a high risk of financial distress rebalance their short-term debt ratio quicker. However, regardless of the financial distress risk level, SMEs distant from the target short-term debt ratio adjust more slowly, suggesting that transaction costs are greater than financial distress costs.Practical implicationsPolicymakers should promote the access to external sources of finance with low transaction costs for SMEs, exposed to low levels of financial distress risk, to rebalance their short-term debt ratios quicker. Distressed SMEs far from their target short-term debt ratios, but with capacity to rebalance, need government programmes to access finance with low transaction costs to rebalance their short-term debt ratios.Originality/valueThis paper contributes to deepening our understanding of how SMEs, facing financial risk, rebalance their short-term debt ratios. SMEs, facing high financial distress risk, adjust towards their target short-term debt ratios more rapidly. However, SMEs, distant from the target short-term debt ratio face higher transaction costs than financial distress costs. These firms adjust towards their target short-term debt ratios more slowly, which may aggravate the refinancing risk and, ultimately, announce bankruptcy.

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Section: Discussion Of the Resultssupporting

confidence: 79%

Is financial distress risk important for manufacturing SMEs to rebalance the short-term debt ratio?

Sardo

Serrasqueiro

Vieira

et al. 2022

JRF

View full text Add to dashboard Cite

show abstract

“…In concrete, tangible assets are positively related to long-term debt and total leverage, but negatively related to short-term debt. Here the positive relationships tend to support the trade-off theory and the pecking order theory, both of which (based on the collateral value of tangible assets) predict positive effects of tangible assets on increasing debt (Koralun-Bereźnicka, 2013). Furthermore, as stated by Harc (2015), SMEs tend to use collateral to attract long-term debt, thus leaving less collateral for short-term debt.…”

Section: Discussionsupporting

confidence: 64%

“…Tangible assets also do not show stable relationship with the debt variables; nonetheless, similar to the findings of Koralun-Bereźnicka (2013), its positive effect on long-term debt and negative effect on short-term debt tend to be clear. Theoretically, as pointed out by Fattouh et al (2008), more tangible assets mean more collateralisable assets, which can lead to higher leverage; however, a negative relationship between asset tangibility and leverage may also exist, as the firms with large amount of tangible assets (especially fixed assets) do not need to invest much and then require less borrowing (Arsov & Naumoski, 2016).…”

Section: Discussionmentioning

confidence: 58%

The Influential Factors on Capital Structure: A Study on Portuguese High Technology and Medium-High Technology Small and Medium-Sized Enterprises

Tong¹,

Serrasqueiro²

2020

IJFR

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Using the panel data model, this paper studies the influential factors on the capital structure of small and medium-sized enterprises (SMEs) in high and medium-high technology manufacturing sectors in Portugal. In particular, the total sample is further classified into young SME group and mature SME group for observing the similarities and differences. The research results show that firm size, profitability, firm age, and industry sector impact much on the capital structure and debt ratios; on the other hand, the impacts of tangible assets, intangible assets, and growth are not as strong as the previous factors. The differences of the impacts on young and mature SMEs are mainly shown by growth, intangible assets and industry sector. In particular, intangible assets show more statistical significance in young SMEs compared to mature SMEs, and intangible assets tend to be positively related to long-term debt especially in young SME group; this may reflect the positive attitude of financial institutions on the value of intangibles in generating future benefits for high and medium-high technology young firms. Besides, the findings tend to support the pecking order theory more than the trade-off theory regarding the high and medium-high technology manufacturing SMEs here.

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“…Since inflation was a time series attribute compared to others which were panel, it was not appropriate to fit the regression model jointly. Bereźnicka (2013) investigated how asset structure correlates with capital structure in European countries. A correlation research design was adopted and panel data were collected from 2000 to 2010.…”

Section: Empirical Reviewmentioning

confidence: 99%

Firm Financial Characteristics and Leverage of Listed Commercial and Allied Companies in Nairobi Securities Exchanges

Helen Wairimu Kinyua

2023

theijbm

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The ability to borrow is anchored on an organization to raise required collateral security, cash flow, profitability, firm size, among others. There has not been any consensus on the influence of firm financial characteristics on leverage since some have positive, negative, significant and non-significant influences on leverage. Moreover, most studies have been considering all listed companies in the absence of time-invariant characteristics and specific risk considerations that vary from listing sectors. Hence, the current study examined the influence of firm financial characteristics on the leverage of listed commercial and allied companies in Nairobi securities exchanges. Specifically, the study examined the effect of tangibility of assets, profitability, firm size, and growth opportunities on leverage. Moreover, the moderating effect of operating cash flows was examined. The study was based on the pecking order theory. Secondary data were collected for the period 2008-2016. Data was analyzed using univariate, bivariate and multivariate techniques. Study findings indicated tangibility of assets and growth opportunities has an inverse and significant influence on leverage. Profitability has a positive and not significant influence on leverage. Firm size has an inverse and not significant influence on leverage. Moreover, operating cash flow has a moderating effect on the influence of firm financial characteristics on the short leverage of listed commercial and services firms in Nairobi securities exchange. Listed companies should consider exploration of opportunities that would maintain significant co-movement between firm financial characteristics and leverage of listed commercial and allied companies in Nairobi securities exchange. The management of Nairobi securities exchanges and capital market authority ought to develop measures to recruit more companies to be listed to enhance the odds of access to finance.

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How Does Asset Structure Correlate with Capital Structure? – Cross-Industry and Cross-Size Analysis of the EU Countries

Cited by 12 publications

References 30 publications

Is financial distress risk important for manufacturing SMEs to rebalance the short-term debt ratio?

Is financial distress risk important for manufacturing SMEs to rebalance the short-term debt ratio?

The Influential Factors on Capital Structure: A Study on Portuguese High Technology and Medium-High Technology Small and Medium-Sized Enterprises

Firm Financial Characteristics and Leverage of Listed Commercial and Allied Companies in Nairobi Securities Exchanges

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