The impact of product warranties on the capital structure of Australian firms

Arqawi, Bayan M; Bertin, William J.; Prather, Laurie

doi:10.1177/0312896213496258

“…Furthermore, they do not provide any survey evidence to bridge the gap between theories and practice. 5 For example, empirical capital structure papers published in the leading Asia Pacific journals between 2011 and 2015 include Tan, Lee and Faff (2015); Gao and Zhu (2015); Alcock and Steiner (2015); Mohamed, Masih and Bacha (2015); Huang (2014); Arqawi, Bertin, and Prather (2014) ;Chang, Chen, and Liao (2014) ;Smith, Chen and Anderson, (2015); Alcock, Steiner and Tan (2014) ;Lam, Zhang, and Lee (2013);Zhu (2013); O'Connor and Flavin (2013);Zhang (2012);Zhu (2012) ;Goyal, Nova, and Zanetti (2011);and Pindado and De La Torre (2011). Second, the surveys that have been conducted in the field to date focus mainly on the financial behaviour of U.S. firms, with only limited investigation of other countries, and very little consideration of the Australian practice, especially after the most recent Global Financial Crisis (GFC). 6 So far, international surveys do not always find consistency across responses by Chief Financial Officers (CFOs) to capital structure decisions across countries.…”

Section: Introductionmentioning

confidence: 99%

A Contemporary View of Corporate Finance Theory, Empirical Evidence and Practice

Faff

¹

,

Gray

²

,

Tan

³

2015

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This paper uses a survey of Australian Corporate Treasurers to shed light on the gap between the theory and practice of corporate finance in Australia. Seven areas are examined: capital structure, payout policy, cash holdings, initial public offerings, seasoned equity offering, mergers and acquisitions, and corporate governance. We also exploit the Global Financial Crisis to examine the effect of liquidity shocks on a firm's capital structure choices. We then compare our Australian survey results with results from a comprehensive U.S. survey conducted by Graham and Harvey (2001). Our survey shows that the board of directors play the most important role in determining capital structure decisions and that corporate treasurers play the most important role in cash holding decisions. This contrasts with the academic literature that has typically focused on the role of CEO in both capital structure and cash holdings decisions. In addition, our respondents do not view the tax advantage of interest deductibility to be of first order of importance for debt issuance choices, which contrasts with most of the U.S. empirical studies. Finally, we juxtapose the theory-practice perspective, with a review of the most recent five years (2011)(2012)(2013)(2014)(2015) of corporate finance research published in the leading Asia Pacific Basin finance journals. Abstract This paper uses a survey of Australian Corporate Treasurers to shed light on the gap between the theory and practice of corporate finance in Australia. Seven areas are examined: capital structure, payout policy, cash holdings, initial public offerings, seasoned equity offering, mergers and acquisitions, and corporate governance. We also exploit the Global Financial Crisis to examine the effect of liquidity shocks on a firm's capital structure choices. We then compare our Australian survey results with results from a comprehensive U.S. survey conducted by Graham and Harvey (2001). Our survey shows that the board of directors play the most important role in determining capital structure decisions and that corporate treasurers play the most important role in cash holding decisions. This contrasts with the academic literature that has typically focused on the role of CEO in both capital structure and cash holdings decisions. In addition, our respondents do not view the tax advantage of interest deductibility to be of first order of importance for debt issuance choices, which contrasts with most of the U.S. empirical studies. Finally, we juxtapose the theory-practice perspective, with a review of the most recent five years (2011)(2012)(2013)(2014)(2015) of corporate finance research published in the leading Asia Pacific Basin finance journals.

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“…5 For example, empirical capital structure papers published in the leading Asia Pacific journals between 2011 and 2015 include Tan, Lee and Faff (2015); Gao and Zhu (2015); Alcock and Steiner (2015); Mohamed, Masih and Bacha (2015); Huang (2014); Arqawi, Bertin, and Prather (2014);Chang, Chen, and Liao (2014); Smith, Chen and Anderson, (2015); Alcock, Steiner and Tan (2014); Lam, Zhang, and Lee (2013);Zhu (2013); O'Connor and Flavin (2013);Zhang (2012);Zhu (2012);Goyal, Nova, and Zanetti (2011);and Pindado and De La Torre (2011 For example, on the one hand, in a European survey study, Brounen, Jong and Koedijk (2004) find support for the landmark U.S. survey finding of Graham and Harvey (2001) that most of their CFO respondents identify "financial flexibility" to be the most important factor in determining their debt level. But these results are in direct contrast to those results reported by a UK survey by Beattie et al (2006), who find that "ensuring the long term survivability of the company" is the most important determinant of debt level.…”

Section: Introductionmentioning

confidence: 99%

A contemporary view of corporate finance theory, empirical evidence and practice

Faff

¹

,

Gray

²

,

Tan

³

2016

Australian Journal of Management

12

0

View full text Add to dashboard Cite

This paper uses a survey of Australian Corporate Treasurers to shed light on the gap between the theory and practice of corporate finance in Australia. Seven areas are examined: capital structure, payout policy, cash holdings, initial public offerings, seasoned equity offering, mergers and acquisitions, and corporate governance. We also exploit the Global Financial Crisis to examine the effect of liquidity shocks on a firm's capital structure choices. We then compare our Australian survey results with results from a comprehensive U.S. survey conducted by Graham and Harvey (2001). Our survey shows that the board of directors play the most important role in determining capital structure decisions and that corporate treasurers play the most important role in cash holding decisions. This contrasts with the academic literature that has typically focused on the role of CEO in both capital structure and cash holdings decisions. In addition, our respondents do not view the tax advantage of interest deductibility to be of first order of importance for debt issuance choices, which contrasts with most of the U.S. empirical studies. Finally, we juxtapose the theory-practice perspective, with a review of the most recent five years (2011)(2012)(2013)(2014)(2015) of corporate finance research published in the leading Asia Pacific Basin finance journals. Abstract This paper uses a survey of Australian Corporate Treasurers to shed light on the gap between the theory and practice of corporate finance in Australia. Seven areas are examined: capital structure, payout policy, cash holdings, initial public offerings, seasoned equity offering, mergers and acquisitions, and corporate governance. We also exploit the Global Financial Crisis to examine the effect of liquidity shocks on a firm's capital structure choices. We then compare our Australian survey results with results from a comprehensive U.S. survey conducted by Graham and Harvey (2001). Our survey shows that the board of directors play the most important role in determining capital structure decisions and that corporate treasurers play the most important role in cash holding decisions. This contrasts with the academic literature that has typically focused on the role of CEO in both capital structure and cash holdings decisions. In addition, our respondents do not view the tax advantage of interest deductibility to be of first order of importance for debt issuance choices, which contrasts with most of the U.S. empirical studies. Finally, we juxtapose the theory-practice perspective, with a review of the most recent five years (2011)(2012)(2013)(2014)(2015) of corporate finance research published in the leading Asia Pacific Basin finance journals.

show abstract