The financial conservatism of firms in emerging economies

Machokoto, Michael; Chipeta, Chimwemwe; Aftab, Nadeem; Areneke, Geofry

doi:10.1016/j.ribaf.2021.101483

Cited by 10 publications

(4 citation statements)

References 83 publications

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“…In comparison to non-IL structures (Kutan et al 2018;Cheong, 2021), the capital structure of IL is more conservative or relatively lower (Alnori and Alqahtani, 2019). Financially conservative companies have been shown to be more profitable and perform better than non-conservative companies in previous research (Machokoto et al 2021). Therefore, this study predicts that the conservatism in the IL capital structure would result in higher performance compared to non-IL structures.…”

Section: Introductionmentioning

confidence: 78%

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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Section: Introductionmentioning

confidence: 78%

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

Hasyim,

Budiarta

2023

jabm

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“…OCFit-1 ‫األةول.‬ ‫إجمالي‬ ‫إلى‬ ‫التشغيلية‬ ‫النقدية‬ ‫التدفقات‬ ‫نسبة‬ : (AL-Amri et al, 2015;Lin et al, 2018;Hamad et al, 2019;Daryaei et al, 2020;Machokoto et al,…”

Section: ‫إة‬ ‫حيث‬unclassified

أثر التحفظ المحاسبی وأنماط الملكیة على الاحتفاظ بالنقدیة ودورها فی الحد من مخاطر انخفاض التدفقات النقدیة التشغیلیة: دراسة تطبیقیة

الجوهری¹,

سلیمان²

2023

المجلة العلمیة للدراسات والبحوث المالیة والتجاریة

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“…The share of companies with conservative leverage or zero debt policies is also increasing on emerging capital markets (Machokoto et al, 2021;Ghoul et al, 2018). An analysis of firms from 21 emerging markets (Asia, South and Central America, East Europe, Africa) showed the predominance of financial flex-would be for emerging capital markets and develop strategies for optimal capital structure choices by technology companies.…”

Section: Introductionmentioning

confidence: 99%

The New Strategy of High-Tech Companies – Hidden Sources of Growth

Kokoreva¹,

Stepanova²,

Povkh³

2023

Foresight and STI Governance

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The recent increase in the share of zero-leverage firms is most pronounced in the Software and Services, Hardware Equipment, and Pharmaceutical and Biotechnical industries. The reasons for these industries’ conservative debt policies are not fully disclosed. How companies in technological sectors manage to perform well attracting no debt and loosing debt tax shield benefits is a mystery. This study aims to determine why high-tech firms are less likely to have debt in the capital structure. On the basis of a sample of US-based firms from the RUSSELL 3000 index for 12 years, we show the factors leading to a zero-debt structure. After dividing the sample into high-tech and non-high-tech subsamples, we demonstrate the gap between zero-debt motives for technological and traditional sectors. We show that the common determinants of corporate structure cannot fully explain why high-tech firms choose a zero-debt policy. Testing the possible motives of debt financing avoidance, we find that high-tech firms are more financially constrained than non-high-tech firms. We further show that unconstrained high-tech firms may avoid debt to maintain their financial flexibility. On top of that, managerial entrenchment also adds to the zero-leverage choice of high-tech companies. The study results are helpful for executive management teams and investors since they shed light on the specific style of financing choice for technological firms.

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The financial conservatism of firms in emerging economies

Cited by 10 publications

References 83 publications

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

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

أثر التحفظ المحاسبی وأنماط الملكیة على الاحتفاظ بالنقدیة ودورها فی الحد من مخاطر انخفاض التدفقات النقدیة التشغیلیة: دراسة تطبیقیة

The New Strategy of High-Tech Companies – Hidden Sources of Growth

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