Rising corporate debt and value relevance of supply-side factors in South Africa

Machokoto, Michael; Areneke, Geofry; Ibrahim, Boulis Maher

doi:10.1016/j.jbusres.2019.11.039

Cited by 27 publications

(25 citation statements)

References 48 publications

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“…Such practices are sometimes called "naked" or "unsecured" or "uncollateralized" lending. The results are consistent with the findings of Machokoto, Areneke & Ibrahim [63] but counter the findings of Maes, Dewaelheyns, Fuss & van Hulle [64] who report a strong positive relationship between pledgeable assets and access to short-term debt especially for firms exposed to the risk of distant export markets.…”

Section: Theoretical and Practical Implications Of Findingssupporting

confidence: 86%

Firm Size, Asset Tangibility, Growth, Volatility, Dividends and the Capital Structure of Nigerian Quoted Firms

Paseda¹

2021

JFA

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Empirical work on capital structure in emerging markets like Nigeria has been sparse and met with low explanatory power. This study investigates the determinants of capital structure in Nigeria. The population of study comprises all non-financial corporations quoted on the Nigerian Stock Exchange (NSE) for the period 1999-2014 out of which 50 companies that met the minimum data criteria were utilized. Using panel data least squares regression, modified to weighted (cross section-and period-) models, the research documents the following findings. First, the factors that exert positive influence on corporate borrowing include firm age, intangible assets and expected inflation while those factors that exert negative influence on capital structure include tangible assets, growth, size, volatility of earnings, profitability, liquidity, dividend-paying status and uniqueness of industry. The results were, at best, mixed with respect to the portability of pecking order, target adjustment, trade-off, agency and market conditions models. The pecking order beats the trade-off model based on the signs of coefficients of firm-level attributes. In order words, asymmetric information explains why smaller, less profitable, less liquid firms with more risky intangible assets and which are low dividend-payers end up relying primarily on debt financing and vice versa. The study recommends the use of leases for financially-and collateral-constrained firms as well as instruments that facilitate information symmetry in financial markets.

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Section: Theoretical and Practical Implications Of Findingssupporting

confidence: 86%

Firm Size, Asset Tangibility, Growth, Volatility, Dividends and the Capital Structure of Nigerian Quoted Firms

Paseda¹

2021

JFA

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“…Conversely, if there is more demand for the US dollar, the rupiah exchange rate will weaken. The triggers for these supply requests vary from the need to pay dividends and foreign debt interest, export and import of goods and services, foreign exchange transfers, investment activities from foreign investors to The Stability of the Indonesian Sharia Stock the real sector and capital market instruments, such as stocks and bonds, interest rate policies, confidence in economic conditions, to intervention from the central bank (Machokoto, Areneke, & Ibrahim, 2020;Muûls, 2015). Generally, exchange rate fluctuations are a combination of these factors, but sometimes there is also a particular issue whose role is more dominant.…”

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confidence: 99%

The Stability of the Indonesian Sharia Stock Index to Economic Shocks

Mubarok¹,

Arif²,

Mufraini³

2020

IQTISHADIA

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<p>The stock market has a strategic role in the development of a country's economy in the era of globalization, including the Islamic stock market. The rapid growth of the Islamic stock market, especially in developing countries, is a historical record in Indonesia's financial sector. This study aims to analyze the factors that influence the return of the Indonesian Sharia Stock Index (ISSI) in the short and long term, how long shocks occur, and how much the contribution of these factors. This study uses monthly time series data from January 2012 to December 2019 using the Vector Error Correction Model (VECM) method. VECM estimation results show the price of gold has a significant effect on the short and long term, while inflation has an impact on a long time. ISSI's return quickly reaches stability when it receives a shock from the exchange rate. The price of gold dominates the diversity of ISSI's performances. Stakeholders should consider several things that affect the ISSI return, pay attention to the economic climate, and anticipate quickly the shock that occurs.</p>

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“…By showing that the effects of the GFC vary with financing policies, we also provide further and more direct evidence on the contentious nexus between financing and real corporate activities. This also serves as a forewarning of the potential adverse effects of over‐leveraging and the need to develop robust risk management strategies, especially given the recent surge in corporate debt (Lund, Woetzel, Windhagen, Dobbs, & Goldshtein, 2018; Machokoto et al, 2020) and predictions of another eminent crisis as firms appear to be taking investment risks similar to those that led to the 2008–2009 GFC (see Duffie, 2019; Syriopoulos, Makram, & Boubaker, 2015).…”

Section: Summary Discussion and Conclusionmentioning

confidence: 99%

“…7 7 See Ojah and Pillay (2009), Agyei‐Boapeah and Machokoto (2018) and Machokoto, Areneke, and Ibrahim (2020). …”

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confidence: 99%

Financial conservatism, firm value and international business risk: Evidence from emerging economies around the global financial crisis

2020

Self Cite

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The increase in debt‐free or under‐levered firms (financial conservatism) is one of the most recent stylized puzzles that cannot be explained within the context of extant capital structure theories. In this paper, we exploit the 2008–09 contractions in credit supply in a quasi‐natural experiment to examine whether financial conservatism affects firm value. Using a large sample of firms from seven African countries over the period 2003–2012, we find strong evidence that financial conservatism mitigates the adverse effect of contractions in credit supply on firm value for both local and international firms. Our results suggest that financial conservatism is an effective strategy for managing risks arising from contractions in credit supply and international business exposure. These findings provide novel empirical evidence on the value relevance of financial conservatism which shields firms from the adverse and far‐reaching effects of contractions in credit supply.

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Rising corporate debt and value relevance of supply-side factors in South Africa

Cited by 27 publications

References 48 publications

Firm Size, Asset Tangibility, Growth, Volatility, Dividends and the Capital Structure of Nigerian Quoted Firms

Firm Size, Asset Tangibility, Growth, Volatility, Dividends and the Capital Structure of Nigerian Quoted Firms

The Stability of the Indonesian Sharia Stock Index to Economic Shocks

Financial conservatism, firm value and international business risk: Evidence from emerging economies around the global financial crisis

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