How Much is Too Much? Debt Capacity and Financial Flexibility

Hess, Dieter; Immenkötter, Philipp

doi:10.2139/ssrn.2023097

Cited by 3 publications

(2 citation statements)

References 5 publications

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“…Shukla and Shukla (2015) report finance as a significant factor constraining the growth of Indian SMEs. Even when finance is available, its high cost increases the risk of insolvency (Hess & Immenkötter, 2014). These challenges with finance may prevent SMEs in India from being able to harness new technologies for improved productivity through retooling, thus rendering them less competitive compared to their larger counterparts (AGI, 2011).…”

Section: Financial Inclusion and Sme Performancementioning

confidence: 99%

Improving small and medium‐size enterprise performance: Does working capital management enhance the effectiveness of financial inclusion?

Bhattacharyya

Rahman

Wright

2023

Accounting & Finance

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Growth of the small and medium‐size enterprise (SME) sector is traditionally an important driver of overall economic growth, particularly in emerging economies. SME growth is enhanced by access to finance (financial inclusion). In this study, we show that efficient working capital management has a positive influence on performance that is independent of the effect of financial inclusion. Our results remain robust to alternative measurements and estimations, and may be useful to national policy‐makers in developing strategies for SMEs' greater access to finance and introducing ways of improving financial management education and training for SME managers.

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Section: Financial Inclusion and Sme Performancementioning

confidence: 99%

Improving small and medium‐size enterprise performance: Does working capital management enhance the effectiveness of financial inclusion?

Bhattacharyya

Rahman

Wright

2023

Accounting & Finance

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“…According to the financial flexibility hypothesis, a conservative capital structure can help companies become financially flexible (Marchica and Mura, 2010) by maintaining unused borrowing power (Modigliani & Miller, 1963). Therefore, unused debt capacity is closely related to and seen as the main source of financial flexibility (Hess & Immenkötter, 2014;DeAngelo et al 2011;Denis & McKeon, 2012), and companies with a conservative capital structure tend to have high financial flexibility (Xie and Zhao, 2020). Second, since IL companies rely on liquid assets, such as cash reserves, for funding to meet financial and operational needs (Alnori and Alqahtani, 2019), they tend to accumulate cash (Alnori and Alqahtani, 2019;Bugshan et al 2021).…”

Section: Introductionmentioning

confidence: 99%

Competitive Advantage in Mediating The Effect of Financial Flexibility on Financial Performance: Indonesian Sharia Stock Index

Hasyim,

Budiarta

2023

jabm

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Resources are considered a key driver of organizational performance. However, the means to improve performance through resources remains an issue that is yet to be conclusively addressed in both theoretical and practical terms. This study aims to examine the roles of competitive advantage and Islamic Label (IL) in the relationship between financial flexibility and the performance of companies listed on the Indonesian Sharia Stock Index (ISSI). Using a longitudinal approach covering the period 2012-2021 and observing 88 companies, a total of 880 observations were obtained for this study. The statistical technique used for the analysis was variance-based structural equation modeling utilizing partial least squares with the statistical tool of WarpPLS. The study revealed that competitive advantage is able to partially mediate the impact of financial flexibility on firm performance. Proxies of competitive advantage, such as receivable turnover and financial leverage, were found to be significant to all performance proxies, namely ROA, ROE, and Tobin's Q. However, IL did not significantly enhance the link between financial flexibility and performance. It was found that the mediating impact of competitive advantage on the relationship between financial flexibility and performance indicated that improving performance through financial flexibility is indirect. Thus, contingency factors should be given due consideration in enhancing resource-based performance. For Islamic label companies, competitive advantage can be built to enhance performance by optimizing resource utilization.

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Conceptual Framework for Determining the Transfer Price of the Loans

KALOVA

2023

AD ALTA: Journal of Interdisciplinary Research

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Associated enterprises integrated into business groups may use the capital resources of the group. When setting the remuneration for their use, they must ensure that prices between them are set according to the rules of the Organisation for Economic Co-operation and Development (OECD). The core document is the Transfer Pricing Guidance on Financial Transactions. Based on the results of a qualitative analysis (content and contextual analysis of the document), the aim of the article is to systematize the procedures used to determine the transfer price in financial transactions such as loans and borrowings where the parties are related parties (hereinafter referred to as "intra-group loans"). The decision-making process is illustrated by means of a flow chart that establishes the basic decision framework, or the individual steps leading to the selection of an appropriate transfer pricing method for intra-group loans.

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How Much is Too Much? Debt Capacity and Financial Flexibility

Cited by 3 publications

References 5 publications

Improving small and medium‐size enterprise performance: Does working capital management enhance the effectiveness of financial inclusion?

Improving small and medium‐size enterprise performance: Does working capital management enhance the effectiveness of financial inclusion?

Competitive Advantage in Mediating The Effect of Financial Flexibility on Financial Performance: Indonesian Sharia Stock Index

Conceptual Framework for Determining the Transfer Price of the Loans

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