Target leverage and speed of adjustment along the life cycle of European listed firms

Castro, Paula; Fernández, María Teresa Tascón; Tapia, Borja Amor; Miguel, Alberto

doi:10.1016/j.brq.2016.01.003

Cited by 39 publications

(42 citation statements)

References 69 publications

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“…The first set of variables comprises leverage (Myers, 1977;Fosu et al, 2016, Castro et al, 2016, company size (Barnea et al, 1980;Awartani et al, 2015;Gonzales, 2015), growth opportunities (Myers, 1977;Yung et al, 2015;Gonzales, 2015), profitability (Demirguc-Kunt and Maksimovic, 1999; An et al, 2016;Zhang, 2016), business risk (Kane et al, 1985;Laeven et al, 2015;Košak et al, 2015), tangibility (Demirguc- Kunt and Maksimovic, 1999;Stephan et al, 2011;Gungoraydinoglu and Oztekin, 2011) and regulated industry (Barclay and Smith, 1996), defining the following (Table I). It can be seen that the relationship.…”

Section: Determinants Of Maturity Of Debtmentioning

confidence: 99%

Effects of institutional quality and the development of the banking system on corporate debt

Tresierra

Reyes

2018

JEFAS

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Purpose This study aims to determine if the quality of national institutions and banking development condition the maturity of debt depending on the horizon of short or long term. Design/methodology/approach Analysis is performed on a sample of 116 nonfinancial companies from Peru and Brazil. The measures of quality of national institutions and banking development were obtained from World Bank data and included factorial analysis for dynamic considerations. Findings The findings, through the treatment of pointed indicators, the factor analysis and the subsequent estimation of a dynamic econometric model, called GMM-SYS, show that institutional quality fosters the maturity of long-term debt and banking development boots short-term financial relations. Research limitations/implications Evaluating different measures of the quality of national institutions and banking development is necessary to demonstrate the robustness of the results beyond the sample evaluated in Latin America. Practical implications The research allows to understand the interaction between national institutions and system banking through debt maturity, and this is useful for establishing common target between both groups. Social implications It is important for corporate finance to understand the mechanisms of the interaction between national institutions and system banking, because this affects internal decisions of firms regarding financial implications. Originality/value The treatment of measures of national institutions and banking development include dynamic considerations, and the application of this study in Latin America provides new findings regarding these kind of indexes and their interaction with firms´ features such as debt maturity.

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Section: Determinants Of Maturity Of Debtmentioning

confidence: 99%

Effects of institutional quality and the development of the banking system on corporate debt

Tresierra

Reyes

2018

JEFAS

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“…When the liquidity level of firm is high, then the lower debt is needed by the firm. Castro et al (2014) does not find the significant relationship between the liquidity and leverage on the stage of growth, but there is a negative relationship on the stage of shake-out. Meanwhile, Rehman et al (2016) find the significant negative relationship on all stage of growth, mature, and decline.…”

Section: Introductionmentioning

confidence: 68%

“…Pecking order theory says that the higher the profitability of firm, the lower the level of leverage. Castro et al (2016) find negative relationship between the profitability and leverage on the stage of introduction, growth, and mature. As well as Rehman et al (2016) find the negative relationship on the stage of growth, mature, and decline.…”

Section: Introductionmentioning

confidence: 85%

“…Therefore, the higher the firm's assets, the more the leverage level of firm predicted. The positive relation of the fixed assets with leverage is found in Castro et al (2016) on the stage of introduction, growth, and matures.…”

Section: Introductionmentioning

confidence: 93%

“…The dynamic of optimal capital structure with the specific characteristic that affect the various life cycle of a firm has been studied by some researchers previously. Castro et al (2016) has conducted a study by dividing the companies in Europe into three stages of cycle, namely introduction, growth, and mature. Meanwhile, the study of Rehman et al (2016) uses sample of non financial firm of China divided into three stages of cycle, namely growth, mature and decline.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Dynamics of Firm’s Capital Structure Along The Life Cycle of Indonesian Manufacturing Firms

Cempakasari

Firdaus

Hardiyanto

2019

ijbe

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Life cycle of the firm has an important role in the dynamics of firm's capital structure. A firm will take different funding decision along the life cycle because the firm's characteristics that affect the capital structure will adjust itself as the tranformation of the life cycle occuring. The research objectives were to analize the dynamic of firm's capital structure across three-life cycle stages of Indonesian manufacturing companies listed with a total sample of 121 companies observed during the period from 2011 to 2016. By using dynamic panel data analysis with Generalized Method of Moments (GMM) model, we find that profitability and liquidity affect the firm's life cycle for a growing stage, meanwhile the fixed asset, growth opportunities, profitability, and liquidity affect the capital structure for a mature stage, whereas only liquidity that affects capital structure for a decline stage. The coefficient of lag dependent variable of GMM model representing the previous year capital structure showed an adjustment rate of capital structure. The lowest speed of adjustment occurred on the decline stage which was orderly followed by the growth and mature stage.Abstrak: Siklus hidup perusahaan memiliki peranan penting dalam dinamika struktur modal suatu perusahaan. Perusahaan akan memiliki keputusan pendanaan yang berbeda pada setiap siklus hidupnya, karena karakteristik perusahaan yang mempengaruhi struktur modal akan berubah mengikuti perkembangan siklus hidup yang terjadi. Tujuan dari penelitian ini menganalisa dinamika struktur modal perusahaan selama tiga tahap siklus hidup yang terjadi pada perusahaan manufaktur go public di Indonesia, dengan total jumlah 121 perusahaan yang diamati selama periode 2011-2016. Dengan pengolahan data yang dilakukan dengan analisis data panel dinamis dengan model Generalized Method of Moments (GMM), kami menemukan bahwa variabel yang berpengaruh pada siklus hidup growth adalah profitabilitas dan likuiditas perusahaan. Berbeda halnya pada siklus hidup mature, variabel yang memiliki pengaruh signifikan terhadap struktur modal adalah aset tetap, pertumbuhan, profitabilitas, dan likuiditas perusahaan. Sementara pada siklus hidup decline, variabel yang memiliki pengaruh signifikan terhadap struktur modal adalah likuiditas perusahaan. Nilai koefisien lag variabel terikat pada model GMM yang mewakili struktur modal tahun sebelumnya menggambarkan kecepatan perusahaan dalam menyesuaikan struktur modalnya. Tingkat kecepatan penyesuaian struktur modal terendah ada pada siklus hidup decline yang diikuti berturut-turut oleh perusahaan yang berada pada siklus hidup growth dan siklus hidup mature.

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How does a firm's life cycle influence the relationship between carbon performance and financial debt?

2021

Self Cite

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In a progressively more stringent regulatory context concerning greenhouse gas emissions derived from a growing awareness of how economic activity affects our environment, this study analyzes how the firm's life cycle affects the relationship between carbon performance and financial debt. Using panel data on a sample of European listed firms during the 2005-2018 period, we find evidence suggesting that firms with better carbon performance have greater access to external financing during their growth stages and lesser access during maturity, although it has no effect during the shake-out stage. Furthermore, carbon performance has a strong positive effect during growth, maturity, and shake-out when firms need to finance additional tangible investments. We also find that the negative relationship between liquidity and debt is reversed during innovative stages for firms with better carbon performance. Our results are robust to the use of alternative measures of life cycle stages and to the consideration of industrial, legal, and cultural contexts.

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Target leverage and speed of adjustment along the life cycle of European listed firms

Cited by 39 publications

References 69 publications

Effects of institutional quality and the development of the banking system on corporate debt

Effects of institutional quality and the development of the banking system on corporate debt

Dynamics of Firm’s Capital Structure Along The Life Cycle of Indonesian Manufacturing Firms

How does a firm's life cycle influence the relationship between carbon performance and financial debt?

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