Is saving vital? Evidence from the financial crisis

Tekin, Hasan; Polat, Ali Yavuz

doi:10.17811/ebl.9.2.2020.124-134

Cited by 11 publications

(11 citation statements)

References 23 publications

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“…Specifically, Berger and Udell (1998) mention in Marshall et al (2019) that small and younger companies have higher private equity and lower public debt. Besides, Tekin and Polat (2020) show that the choice of the market may be used as a financial constraint measure for the cash management of UK firms. More recently, Nguyen et al (2020) show that the concentrated ownership is inversely related to the optimal debt financing.…”

Section: Market Differences In London Stock Exchangementioning

confidence: 99%

“…At the aggregate level, MAIN and AIM firms have been likened to financially unconstrained and financially constrained, respectively. More recently, Tekin and Polat (2020) show that AIM firms have higher adjustment speed of cash than their MAIN counterparts. Thus, AIM firms have higher SOA due to low adjustment costs of debt.…”

Section: Adjustment Speed Of Debt Equity and Debt Maturity And The Financial Crisismentioning

confidence: 99%

“…Regarding the empirical model, I test hypotheses analyzing the target debt, equity, and debt maturity of UK firms. Although the partial adjustment model is one of the common models in dynamic panel data studies (Elsas and Florysiak, 2015;Flannery and Rangan, 2006;Ho et al, 2020;Tekin and Polat, 2020;Wojewodzki et al, 2018), DeAngelo and Roll (2015) compare three target-leveraging models: time-varying target ratios that have inflexible boundaries, the partial adjustment that has stationary targets, and no targeting that is a random evaluation, to determine which model is the most appropriate in the target-leverage estimations. DeAngelo and Roll (2015) conclude that there is no substantial difference to take into consideration when determining the best model in target leveraging.…”

Section: Empirical Modelmentioning

confidence: 99%

“…Elsas and Florysiak (2015) also take an average of cross-sections using Fama-MacBeth (FMB) approach, 2 and Dang et al (2015) employ bias-corrected estimators in addition to dynamic panel estimators above. Overall, more recently, Dang et al (2019) summarize that BB and LSDVC may estimate adjustment speeds correctly than other estimators above, whereas I test the adjustment speed of debt, equity, and debt maturity using BB-the system GMM (Tekin and Polat, 2020;Wojewodzki et al, 2018).…”

Section: Empirical Strategymentioning

confidence: 99%

“…However, the picture shifts in the post-GFC. Since AIM firms are small and high growth, and face higher information asymmetry during turbulence (Tekin and Polat, 2020), they may have obstacles in accessing external finance (debt) more than internal finance (equity) in the post-crisis. Consequently, while AIM firms reduce the SOA of debt and do not change the SOA of equity, MAIN firms raise both the SOA of debt and equity.…”

Section: Introductionmentioning

confidence: 99%

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Market differences and adjustment speed of debt, equity, and debt maturity

Tekin

2020

Australian Journal of Management

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This article investigates the role of market differences and the global financial crisis 2007–2009 (GFC) on the adjustment speed of debt issuance, equity issuance, and debt maturity. The sample of 9731 firm-years from highly regulated Main Market (MAIN) and slightly unregulated Alternative Investment Market (AIM) in the United Kingdom was used. Employing system generalized methods of moments, the findings show that AIM firms have a faster adjustment speed of debt and equity before the GFC than MAIN firms. However, it is vice versa after the GFC because AIM firms face greater problems in accessing finance due to the shrinkage of bank credits during the recession. Besides, MAIN firms have faster adjustments on long-term debt over the time, whereas AIM firms have faster adjustment speed of trade credits. Overall, investors should consider market differences and recessions to take accurate decisions on debt-equity and debt maturity to invest where and when. JEL Classification: C26, G01, G32

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Section: Market Differences In London Stock Exchangementioning

confidence: 99%

Section: Adjustment Speed Of Debt Equity and Debt Maturity And The Financial Crisismentioning

confidence: 99%

Section: Empirical Modelmentioning

confidence: 99%

Section: Empirical Strategymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Market differences and adjustment speed of debt, equity, and debt maturity

Tekin

2020

Australian Journal of Management

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Do market differences matter on dividend policy?

Tekin

Polat

2021

Borsa Istanbul Review

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Is leverage a substitute or outcome for governance? Evidence from financial crises

Tekin

Polat

2021

IJOEM

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PurposeThe authors investigate the impact of governance on the leverage of East Asian firms in the financial crisis context, in order to understand the puzzle whether debt acts as a substitute for governance or an outcome of the governance mechanism.Design/methodology/approachThe authors use 86,030 firm-years and the country-level governance data from eight East Asian countries over the period 1996–2017. The authors employ the fixed effects (FE) model, in the main analysis and the weighted least squares model, as a robustness check in order to compare the two competing hypotheses of agency theory, substitute and outcome models.FindingsThe authors’ results show that debt acts as a substitute for governance before the GFC, but during and after the GFC the picture changes. Namely, debt acts as an outcome of the governance mechanism during the GFC and its aftermath. Since during financial downturns both agency costs increase, and information asymmetry widens, firms in poor-governed countries may be reluctant to increase their leverage in order not to face financial distress and additional restrictions. Thus, the results imply that the use of debt as a tool to mitigate agency conflicts and a substitute for governance strongly depends on the environment that the firms operate and the general macroeconomic conditions, such as facing a financial crisis or not.Research limitations/implicationsThis study provides an interesting case of the firms' capacity to raise money during a crisis and that governance plays an important role in borrowing activities of firms. This will undoubtedly help motivating owners and policymakers for improving governance. The authors’ findings may be useful for policymakers to develop policies considering the adverse effects caused by exogenous shocks. This is crucial because the severity of GFC as a shock seems to change the macro and institutional environment that firms operate. While the authors properly address the research hypotheses using country governance data, future research may employ corporate governance data to attain firm-level results by testing two competing hypotheses.Originality/valueThere are several important areas where this study makes original contributions. First, while Tsoy and Heshmati (2019) focus on the dynamics of capital structure for only Korean firms, the authors extend the sample including eight East Asian countries considering the impact of country governance on capital structure policy. Specifically, this study is the first in using the robust country governance data, which differs by country and year, in the crisis context. Next, the authors investigate both the AFC and GFC to compare whether these two crises have different effects on capital structure policy of East Asian firms. Finally, the authors aim to understand whether leverage is used as a substitute for governance or an outcome of governance mechanism considering recessions.

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Is saving vital? Evidence from the financial crisis

Cited by 11 publications

References 23 publications

Market differences and adjustment speed of debt, equity, and debt maturity

Market differences and adjustment speed of debt, equity, and debt maturity

Do market differences matter on dividend policy?

Is leverage a substitute or outcome for governance? Evidence from financial crises

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