Pub Date : 2023-02-28DOI: 10.1108/ijmf-09-2022-0390
Nemiraja Jadiyappa, Ram Kumar Kakani
PurposeThe purpose of this paper is to examine how changes in creditors' rights affect the dividend policy behavior of corporate firms.Design/methodology/approachThe authors use the implementation of the bankruptcy and insolvency code (IBC) in India in 2016 as a quasi-natural experiment setup. Differential application of this law allows them to use the Difference in Differences approach to extract the marginal impact of change in creditors' rights on the dividend policy.FindingsThe authors show that firms responded to strengthening creditors' rights by decreasing their dividend payout. Further, the authors observe that this negative response is conditioned on firm leverage and the nature of the creditor, i.e. public or private. The firms with a greater leverage ratio and a greater proportion of private debt in the total debt in the pre-event period have shown greater response to the change in the law. Lastly, the authors show that stock markets positively respond to the observed decrease in dividends only when a corresponding decrease in the leverage accompanies such a decrease.Originality/valueThe authors contribute to the finance and law literature from several aspects. First, the authors extend this stream by bringing to light the dividend policy response of firms when they are subjected to a change in creditors' rights. Second, the authors also show how firm-level factors like financial policy and the nature of the creditor condition their response to IBC. Lastly, the authors also examine the market reaction to the dividend policy response of firms to the change in bankruptcy law.
{"title":"Bankruptcy law, creditors' rights and dividend policy: evidence from a quasi-natural experiment","authors":"Nemiraja Jadiyappa, Ram Kumar Kakani","doi":"10.1108/ijmf-09-2022-0390","DOIUrl":"https://doi.org/10.1108/ijmf-09-2022-0390","url":null,"abstract":"PurposeThe purpose of this paper is to examine how changes in creditors' rights affect the dividend policy behavior of corporate firms.Design/methodology/approachThe authors use the implementation of the bankruptcy and insolvency code (IBC) in India in 2016 as a quasi-natural experiment setup. Differential application of this law allows them to use the Difference in Differences approach to extract the marginal impact of change in creditors' rights on the dividend policy.FindingsThe authors show that firms responded to strengthening creditors' rights by decreasing their dividend payout. Further, the authors observe that this negative response is conditioned on firm leverage and the nature of the creditor, i.e. public or private. The firms with a greater leverage ratio and a greater proportion of private debt in the total debt in the pre-event period have shown greater response to the change in the law. Lastly, the authors show that stock markets positively respond to the observed decrease in dividends only when a corresponding decrease in the leverage accompanies such a decrease.Originality/valueThe authors contribute to the finance and law literature from several aspects. First, the authors extend this stream by bringing to light the dividend policy response of firms when they are subjected to a change in creditors' rights. Second, the authors also show how firm-level factors like financial policy and the nature of the creditor condition their response to IBC. Lastly, the authors also examine the market reaction to the dividend policy response of firms to the change in bankruptcy law.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2023-02-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48906555","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-02-28DOI: 10.1108/ijmf-03-2022-0111
Kevin M. Zhao
PurposeThis study tests the signaling and tunneling models of dividend policies by examining the relationship between the ownership structure and the dividend payout in a setting where strong institutional governance and weak firm-level governance coexist.Design/methodology/approachChinese American Depository Receipts (ADRs) listed in the US offer an excellent opportunity to study dividend policy where strong institutional governance and weak firm-level governance coexist. Using a sample of 161 Chinese ADRs from 2004 to 2018, this study examines the relationship between the firm's ownership structure and cash dividend policy.FindingsThis study shows that high levels of controlling shareholder ownership and high levels of state ownership are associated with high dividend payouts. A high level of controlling shareholder ownership has a negative effect on its firm value. Dividend payments in those firms mitigate the negative effect, consistent with the signaling (substitution) model. A high level of state ownership is beneficial to its firm value. However, high dividend payment in those firms decreases the benefit, supporting the tunneling model.Practical implicationsThis study covers 161 Chinese ADRs listed in the US with a total market capitalization of over $2 trillion and reveals that dividend tunneling could occur in Chinese government controlled ADRs. Findings in this study would offer valuable insights for US investors and regulators.Originality/valueThis paper extends the tunneling hypothesis to the topic of dividend policy in a setting where strong institutional governance and weak firm-level governance coexist. This study shows that tunneling through dividends can happen among Chinese government controlled ADRs in the US. It also complements the literature by extending the examination of the dividend tunneling model from a relatively small universe of master limited partnership (Atanssov and Mandell, 2018) to a larger universe of Chinese ADRs listed in the US with a total market capitalization over $2 trillion US dollars.
{"title":"Signaling or tunneling: the dividend policies of Chinese ADRs listed in the US","authors":"Kevin M. Zhao","doi":"10.1108/ijmf-03-2022-0111","DOIUrl":"https://doi.org/10.1108/ijmf-03-2022-0111","url":null,"abstract":"PurposeThis study tests the signaling and tunneling models of dividend policies by examining the relationship between the ownership structure and the dividend payout in a setting where strong institutional governance and weak firm-level governance coexist.Design/methodology/approachChinese American Depository Receipts (ADRs) listed in the US offer an excellent opportunity to study dividend policy where strong institutional governance and weak firm-level governance coexist. Using a sample of 161 Chinese ADRs from 2004 to 2018, this study examines the relationship between the firm's ownership structure and cash dividend policy.FindingsThis study shows that high levels of controlling shareholder ownership and high levels of state ownership are associated with high dividend payouts. A high level of controlling shareholder ownership has a negative effect on its firm value. Dividend payments in those firms mitigate the negative effect, consistent with the signaling (substitution) model. A high level of state ownership is beneficial to its firm value. However, high dividend payment in those firms decreases the benefit, supporting the tunneling model.Practical implicationsThis study covers 161 Chinese ADRs listed in the US with a total market capitalization of over $2 trillion and reveals that dividend tunneling could occur in Chinese government controlled ADRs. Findings in this study would offer valuable insights for US investors and regulators.Originality/valueThis paper extends the tunneling hypothesis to the topic of dividend policy in a setting where strong institutional governance and weak firm-level governance coexist. This study shows that tunneling through dividends can happen among Chinese government controlled ADRs in the US. It also complements the literature by extending the examination of the dividend tunneling model from a relatively small universe of master limited partnership (Atanssov and Mandell, 2018) to a larger universe of Chinese ADRs listed in the US with a total market capitalization over $2 trillion US dollars.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2023-02-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47138498","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
PurposeThe paper aims to investigate the imprinting effect on working capital (WC) management as higher-level managers' transition to chief executive officer (CEO) positions. This paper proposes that WC management defined as a shorter cash conversion cycle (CCC) can be carried forward to the new firm when the managers are appointed as a CEO.Design/methodology/approachThe authors employ a multivariate regression approach. The data in this study come from two sources: Execucomp which provides data for corporate managers of the largest 2,000 USA firms including S&P 1,500 US and Compustat which provides financial information of firms.FindingsThe authors find a positive imprinting effect of “new” CEOs on WC outcomes – proxied by the CCC. CCC shortens by approximately 16 days when CEOs are efficient managers at previous institutions, predominantly derived from improvements in inventory and payables. The effect is sensitive to individuals' age, familiarity with the industry and high-pressure circumstances.Practical implicationsThe paper includes important implications of WC management for firms to consider, especially during economic crises when liquidity management is a priority.Originality/valueThis paper extends the literature on the imprinting effect on managerial decision-making. The paper offers evidence of cooperative yet dynamic efforts in managing WC during CEO turnover events, which are unique findings.
{"title":"Investigation of the multi-layers of imprinting on corporate working capital management","authors":"Zagdbazar Davaadorj, Bolortuya Enkhtaivan, Jamie Weathers","doi":"10.1108/ijmf-09-2022-0426","DOIUrl":"https://doi.org/10.1108/ijmf-09-2022-0426","url":null,"abstract":"PurposeThe paper aims to investigate the imprinting effect on working capital (WC) management as higher-level managers' transition to chief executive officer (CEO) positions. This paper proposes that WC management defined as a shorter cash conversion cycle (CCC) can be carried forward to the new firm when the managers are appointed as a CEO.Design/methodology/approachThe authors employ a multivariate regression approach. The data in this study come from two sources: Execucomp which provides data for corporate managers of the largest 2,000 USA firms including S&P 1,500 US and Compustat which provides financial information of firms.FindingsThe authors find a positive imprinting effect of “new” CEOs on WC outcomes – proxied by the CCC. CCC shortens by approximately 16 days when CEOs are efficient managers at previous institutions, predominantly derived from improvements in inventory and payables. The effect is sensitive to individuals' age, familiarity with the industry and high-pressure circumstances.Practical implicationsThe paper includes important implications of WC management for firms to consider, especially during economic crises when liquidity management is a priority.Originality/valueThis paper extends the literature on the imprinting effect on managerial decision-making. The paper offers evidence of cooperative yet dynamic efforts in managing WC during CEO turnover events, which are unique findings.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2023-02-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46371916","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-02-02DOI: 10.1108/ijmf-10-2021-0531
Md Noman Hossain, Md Nazmul Hasan Bhuyan
PurposeThe extant literature provides evidence that single CEOs are less risk-averse. Building on the theory of risk aversion, the authors argue that the risk aversion trait arising from CEO’s marital status partially explains capital allocation efficiency. The paper aims to examine the association between CEO marital status and capital allocation efficiency.Design/methodology/approachThe primary sample includes 9,671 observations from 1,264 US firms. The authors apply multivariate regression and a series of endogeneity tests to examine the association between CEO marital status and capital allocation efficiency.FindingsSingle-CEO firms have higher capital allocation inefficiency than those with married CEOs. The findings continue to hold after a series of endogeneity tests such as propensity score matching, change analysis and instrumental variable regression analysis and are robust to alternative proxies for capital allocation inefficiency. The capital allocation inefficiency in single-CEO firms arises from overinvestment but not underinvestment, and corporate risk-taking channels the effect.Research limitations/implicationsThe study is limited to the effect of CEO marital status, not CEO marital quality.Practical implicationsThe findings imply that besides information asymmetry and agency conflicts, CEO marital status should receive special attention for capital allocation efficiency. Also, marital status influences the CEOs’ commitment to the general good of society, affecting the potential conflict of interest with different stakeholders from inefficient capital allocation.Originality/valueThis study extends corporate finance literature on CEO marital status by providing novel evidence on the effect of single CEOs on capital allocation efficiency. The authors conclude that CEOs’ personality traits, such as marital status, matter in corporate policy choices.
{"title":"CEO marital status and capital allocation efficiency","authors":"Md Noman Hossain, Md Nazmul Hasan Bhuyan","doi":"10.1108/ijmf-10-2021-0531","DOIUrl":"https://doi.org/10.1108/ijmf-10-2021-0531","url":null,"abstract":"PurposeThe extant literature provides evidence that single CEOs are less risk-averse. Building on the theory of risk aversion, the authors argue that the risk aversion trait arising from CEO’s marital status partially explains capital allocation efficiency. The paper aims to examine the association between CEO marital status and capital allocation efficiency.Design/methodology/approachThe primary sample includes 9,671 observations from 1,264 US firms. The authors apply multivariate regression and a series of endogeneity tests to examine the association between CEO marital status and capital allocation efficiency.FindingsSingle-CEO firms have higher capital allocation inefficiency than those with married CEOs. The findings continue to hold after a series of endogeneity tests such as propensity score matching, change analysis and instrumental variable regression analysis and are robust to alternative proxies for capital allocation inefficiency. The capital allocation inefficiency in single-CEO firms arises from overinvestment but not underinvestment, and corporate risk-taking channels the effect.Research limitations/implicationsThe study is limited to the effect of CEO marital status, not CEO marital quality.Practical implicationsThe findings imply that besides information asymmetry and agency conflicts, CEO marital status should receive special attention for capital allocation efficiency. Also, marital status influences the CEOs’ commitment to the general good of society, affecting the potential conflict of interest with different stakeholders from inefficient capital allocation.Originality/valueThis study extends corporate finance literature on CEO marital status by providing novel evidence on the effect of single CEOs on capital allocation efficiency. The authors conclude that CEOs’ personality traits, such as marital status, matter in corporate policy choices.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2023-02-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49634699","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-12-21DOI: 10.1108/ijmf-07-2022-0298
A. K. Panda, S. Nanda, A. Hegde
PurposeThis paper aims to empirically investigate the evidence of the transmission of monetary policy impulses to firm profitability via manufacturing firms’ short-term and long-term corporate financing decisions.Design/methodology/approachThis study decomposes the receptiveness of firm profitability to monetary policy shock under circumstances of financial flexibility. Additionally, the study extends its scope to undertake a sector-wise analysis of manufacturing firms from 2008 to 2020. Generalized methods of moments (GMM) and quantile regression models are employed.FindingsThe profitability of firms in the chemical, food and machinery sector are positively impacted by short-term financing, whereas the metal sector is positively impacted. But during the tight monetary policy, short-term financing does not appear to be a significant parameter while explaining the firms’ profitability. Secondly, the profitability of firms in the consumer goods and metal sector is positively impacted by long-term financing. Therefore, debt financing of assets could be more appropriate to maximize profitability in these sectors.Originality/valueAnalyzing the transmission of monetary policy impulses to firm profitability by clustering firms with financial flexibility across six key manufacturing sectors makes the study unique.
{"title":"Testing of coherence between monetary policy stimulus, financial flexibility and profitability of manufacturing firms","authors":"A. K. Panda, S. Nanda, A. Hegde","doi":"10.1108/ijmf-07-2022-0298","DOIUrl":"https://doi.org/10.1108/ijmf-07-2022-0298","url":null,"abstract":"PurposeThis paper aims to empirically investigate the evidence of the transmission of monetary policy impulses to firm profitability via manufacturing firms’ short-term and long-term corporate financing decisions.Design/methodology/approachThis study decomposes the receptiveness of firm profitability to monetary policy shock under circumstances of financial flexibility. Additionally, the study extends its scope to undertake a sector-wise analysis of manufacturing firms from 2008 to 2020. Generalized methods of moments (GMM) and quantile regression models are employed.FindingsThe profitability of firms in the chemical, food and machinery sector are positively impacted by short-term financing, whereas the metal sector is positively impacted. But during the tight monetary policy, short-term financing does not appear to be a significant parameter while explaining the firms’ profitability. Secondly, the profitability of firms in the consumer goods and metal sector is positively impacted by long-term financing. Therefore, debt financing of assets could be more appropriate to maximize profitability in these sectors.Originality/valueAnalyzing the transmission of monetary policy impulses to firm profitability by clustering firms with financial flexibility across six key manufacturing sectors makes the study unique.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2022-12-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44389111","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-12-14DOI: 10.1108/ijmf-02-2022-0075
Solomon Opare, M. Houqe, Tony van Zijl
PurposeThis purpose of this study is to examine the association between earnings management (accruals earnings management (AEM) and/or real activities manipulation (RAM)) and firm underperformance following seasoned equity offerings (SEOs) using cross-country data.Design/methodology/approachThe study applies ordinary least squares regression analyses to a sample of 11,764 observations on firms from 22 countries over the period from 2005 to 2017. The methods include weighted least squares regression, sub-sampling approach and alternative measures of firm performance, earnings management and legal regime for robustness tests as well as a two-stage least squares instrumental variable (IV) approach to address endogeneity concerns.FindingsThe results suggest that RAM has a greater negative impact on post-SEO performance than AEM. The result is economically significant for RAM only. The results also reveal that the negative impact of earnings management, in particular RAM, on post-SEO performance is greater in countries with a strong legal regime than in other countries.Practical implicationsEarnings management around SEOs has important implications for investors, regulators and policymakers. The study suggests that policymakers should improve the current legal conditions to promote fairness in the equity market.Originality/valueThe results from the cross-country data support earlier results from single-country studies on the impact of earnings management on post-SEO performance. The study also provides new evidence on the variation in the impact of earnings management according to the strength of the legal regime operating in a country.
{"title":"Earnings management and underperformance after seasoned equity offerings: a cross-country study","authors":"Solomon Opare, M. Houqe, Tony van Zijl","doi":"10.1108/ijmf-02-2022-0075","DOIUrl":"https://doi.org/10.1108/ijmf-02-2022-0075","url":null,"abstract":"PurposeThis purpose of this study is to examine the association between earnings management (accruals earnings management (AEM) and/or real activities manipulation (RAM)) and firm underperformance following seasoned equity offerings (SEOs) using cross-country data.Design/methodology/approachThe study applies ordinary least squares regression analyses to a sample of 11,764 observations on firms from 22 countries over the period from 2005 to 2017. The methods include weighted least squares regression, sub-sampling approach and alternative measures of firm performance, earnings management and legal regime for robustness tests as well as a two-stage least squares instrumental variable (IV) approach to address endogeneity concerns.FindingsThe results suggest that RAM has a greater negative impact on post-SEO performance than AEM. The result is economically significant for RAM only. The results also reveal that the negative impact of earnings management, in particular RAM, on post-SEO performance is greater in countries with a strong legal regime than in other countries.Practical implicationsEarnings management around SEOs has important implications for investors, regulators and policymakers. The study suggests that policymakers should improve the current legal conditions to promote fairness in the equity market.Originality/valueThe results from the cross-country data support earlier results from single-country studies on the impact of earnings management on post-SEO performance. The study also provides new evidence on the variation in the impact of earnings management according to the strength of the legal regime operating in a country.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2022-12-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44565462","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-12-08DOI: 10.1108/ijmf-10-2021-0513
Geeta Rani Duppati, Stifanos Hailemariam, Roselyn Murray, Jana Kivell
<h3>Purpose</h3> <p>This study aims to provide empirical evidence on two research questions: firstly, whether green finance is positively related to electricity access, and, secondly, if the domestic economic environment moderates the relationship between green finance and electricity access? This paper pays particular attention to the regional disparities in Africa.</p><!--/ Abstract__block --> <h3>Design/methodology/approach</h3> <p>While pursuing the study objectives, the authors apply a variety of statistical approaches and tools to assess the robustness of the findings. The authors use panel dataset for analysing data. In order to empirically examine the relationship between green finance and electricity access in the African region, the paper employs static and dynamic panel estimation methods, Poisson method and adopts two-step system generalized method of moments (GMM) approach for dealing with issues relating to endogeneity. The authors also use alternate proxy for the electricity access, which is drawn from the regulatory indicators for sustainable energy (RISE) scores.</p><!--/ Abstract__block --> <h3>Findings</h3> <p>The authors find that despite the fact that green funding appears to support job creation, household incomes aren't high enough to drive rising demand for electricity. The study underscores the role and responsibilities of external funding agencies to ensure that funds at the receiving end are effectively routed to encourage access to clean and sustainable energy, which is good to the economic and domestic environment. Further, due to the relatively modest size of some funds, the cost to administer those funds is larger than the funds themselves. This causes inefficiencies, which may temporarily provide jobs but not lasting growth. This means there is no regular need for energy, therefore larger investors have no reason to enter the market. This discourages investors from public-private partnerships or private investments and prevents future investment.</p><!--/ Abstract__block --> <h3>Research limitations/implications</h3> <p>The provide insights into the private-public partnerships and whether the challenges to electricity access are being turned into investment opportunities. The effects of the power Africa project initiatives are revealing, with, sanitation being an impediment to the development of electricity infrastructure, specifically in low-income group countries.</p><!--/ Abstract__block --> <h3>Practical implications</h3> <p>The study confirms the view that trivial amounts of green financing (US-Aid or grants) impose a burden on the absorptive capacity of the recipient government and increases the transaction costs and is likely to be an impediment (Kimura <em>et al.</em>, 2012) to initiating projects that enhance electricity access.</p><!--/ Abstract__block --> <h3>Social implications</h3> <p>The results indicate that although green financing seems to be supporting employment opportunities, income levels are i
{"title":"Electricity access and green financing in the African region","authors":"Geeta Rani Duppati, Stifanos Hailemariam, Roselyn Murray, Jana Kivell","doi":"10.1108/ijmf-10-2021-0513","DOIUrl":"https://doi.org/10.1108/ijmf-10-2021-0513","url":null,"abstract":"<h3>Purpose</h3>\u0000<p>This study aims to provide empirical evidence on two research questions: firstly, whether green finance is positively related to electricity access, and, secondly, if the domestic economic environment moderates the relationship between green finance and electricity access? This paper pays particular attention to the regional disparities in Africa.</p><!--/ Abstract__block -->\u0000<h3>Design/methodology/approach</h3>\u0000<p>While pursuing the study objectives, the authors apply a variety of statistical approaches and tools to assess the robustness of the findings. The authors use panel dataset for analysing data. In order to empirically examine the relationship between green finance and electricity access in the African region, the paper employs static and dynamic panel estimation methods, Poisson method and adopts two-step system generalized method of moments (GMM) approach for dealing with issues relating to endogeneity. The authors also use alternate proxy for the electricity access, which is drawn from the regulatory indicators for sustainable energy (RISE) scores.</p><!--/ Abstract__block -->\u0000<h3>Findings</h3>\u0000<p>The authors find that despite the fact that green funding appears to support job creation, household incomes aren't high enough to drive rising demand for electricity. The study underscores the role and responsibilities of external funding agencies to ensure that funds at the receiving end are effectively routed to encourage access to clean and sustainable energy, which is good to the economic and domestic environment. Further, due to the relatively modest size of some funds, the cost to administer those funds is larger than the funds themselves. This causes inefficiencies, which may temporarily provide jobs but not lasting growth. This means there is no regular need for energy, therefore larger investors have no reason to enter the market. This discourages investors from public-private partnerships or private investments and prevents future investment.</p><!--/ Abstract__block -->\u0000<h3>Research limitations/implications</h3>\u0000<p>The provide insights into the private-public partnerships and whether the challenges to electricity access are being turned into investment opportunities. The effects of the power Africa project initiatives are revealing, with, sanitation being an impediment to the development of electricity infrastructure, specifically in low-income group countries.</p><!--/ Abstract__block -->\u0000<h3>Practical implications</h3>\u0000<p>The study confirms the view that trivial amounts of green financing (US-Aid or grants) impose a burden on the absorptive capacity of the recipient government and increases the transaction costs and is likely to be an impediment (Kimura <em>et al.</em>, 2012) to initiating projects that enhance electricity access.</p><!--/ Abstract__block -->\u0000<h3>Social implications</h3>\u0000<p>The results indicate that although green financing seems to be supporting employment opportunities, income levels are i","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":"34 1","pages":""},"PeriodicalIF":1.7,"publicationDate":"2022-12-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138515811","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-12-05DOI: 10.1108/ijmf-04-2022-0192
Hsin-I Chou, Xiaofei Pan, Jing Zhao
PurposeThis paper aims to examine the relationship between executive pay disparity and the cost of debt.Design/methodology/approachThe authors use a sample of syndicated bank loans granted to United States (US) listed firms from 1992 to 2014 and adopt the loan yield spread (Chief Executive Officer (CEO) pay slice) as the main proxy for the cost of debt (executive pay disparity). The authors also use the Heckman two-stage model to address the sample selection bias and the two-stage least squares and propensity score matching methods to control the potential endogeneity issues. To test different views about executive pay disparity, the authors adopt the cash-to-stock ratio to proxy for managerial risk-shifting incentives.FindingsThe authors find that the cost of debt is significantly higher for firms with larger executive pay disparity, which is robust to sample selection bias, endogeneity concerns, alternative measures and various controls. This positive relationship increases with the risk-shifting incentives of CEOs instead of other top executives, which supports the managerial power view, and is stronger for firms with higher levels of financial distress. The findings suggest that creditors view executive pay disparity are associated with higher credit risk and CEO entrenchment.Originality/valueThis paper reveals one “dark” side of executive pay disparity: it increases the cost of debt and identifies a significant role played by CEOs' risk-shifting incentives. The authors provide direct evidence of the relevance of pay differential to corporate credit analysis.
{"title":"Executive pay disparity and cost of debt financing","authors":"Hsin-I Chou, Xiaofei Pan, Jing Zhao","doi":"10.1108/ijmf-04-2022-0192","DOIUrl":"https://doi.org/10.1108/ijmf-04-2022-0192","url":null,"abstract":"PurposeThis paper aims to examine the relationship between executive pay disparity and the cost of debt.Design/methodology/approachThe authors use a sample of syndicated bank loans granted to United States (US) listed firms from 1992 to 2014 and adopt the loan yield spread (Chief Executive Officer (CEO) pay slice) as the main proxy for the cost of debt (executive pay disparity). The authors also use the Heckman two-stage model to address the sample selection bias and the two-stage least squares and propensity score matching methods to control the potential endogeneity issues. To test different views about executive pay disparity, the authors adopt the cash-to-stock ratio to proxy for managerial risk-shifting incentives.FindingsThe authors find that the cost of debt is significantly higher for firms with larger executive pay disparity, which is robust to sample selection bias, endogeneity concerns, alternative measures and various controls. This positive relationship increases with the risk-shifting incentives of CEOs instead of other top executives, which supports the managerial power view, and is stronger for firms with higher levels of financial distress. The findings suggest that creditors view executive pay disparity are associated with higher credit risk and CEO entrenchment.Originality/valueThis paper reveals one “dark” side of executive pay disparity: it increases the cost of debt and identifies a significant role played by CEOs' risk-shifting incentives. The authors provide direct evidence of the relevance of pay differential to corporate credit analysis.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2022-12-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45603831","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-11-03DOI: 10.1108/ijmf-02-2022-0058
Chin-Chong Lee, Shaw Warn Too, Kuan San Ooi
PurposeBoth issuing firms and underwriters shall benefit from the associations in underwriting contracts for seasoned equity offerings (SEOs). Issuing firms that are offered underwriting contracts with clustered gross spreads do not have strong incentives to switch away from the firms' prior SEO underwriters, and thus these existing underwriters are able to maintain or gain greater market share. This study investigates how the clustering of percentage gross spreads affects the likelihood of underwriter switching.Design/methodology/approachUsing the investment bank-underwritten SEOs in Hong Kong, the authors find that the percentage gross spreads of 40% of these SEOs are clustered at 2.5%. The seemingly unrelated bivariate probit model, Weibull survival mixed model and trivariate probit model are applied to analyse this phenomenon.FindingsThe authors' study provides first direct evidence that the clustering of percentage gross spreads lowers the likelihood of underwriter switching. Investment banks as underwriters can explicitly price underwriting contracts at a clustered level, more likely in periods of greater market volatility, and intentionally retain the banks' client firms using pricing arrangements. The authors' finding and approach offer more direct and distinct support that the issuer–underwriter association can be relationship-based.Originality/valueWhilst the clustering of fees is interpreted as a type of anticompetitive price sitting, the authors contribute to literature by providing new empirical evidence on why percentage gross spreads as a price dimension are clustered. On top of contract efficiency and collusion, this study's new evidence provides a third view for the clustering of gross spreads.
{"title":"Clustering of percentage gross spreads and the avoidance of underwriter switching","authors":"Chin-Chong Lee, Shaw Warn Too, Kuan San Ooi","doi":"10.1108/ijmf-02-2022-0058","DOIUrl":"https://doi.org/10.1108/ijmf-02-2022-0058","url":null,"abstract":"PurposeBoth issuing firms and underwriters shall benefit from the associations in underwriting contracts for seasoned equity offerings (SEOs). Issuing firms that are offered underwriting contracts with clustered gross spreads do not have strong incentives to switch away from the firms' prior SEO underwriters, and thus these existing underwriters are able to maintain or gain greater market share. This study investigates how the clustering of percentage gross spreads affects the likelihood of underwriter switching.Design/methodology/approachUsing the investment bank-underwritten SEOs in Hong Kong, the authors find that the percentage gross spreads of 40% of these SEOs are clustered at 2.5%. The seemingly unrelated bivariate probit model, Weibull survival mixed model and trivariate probit model are applied to analyse this phenomenon.FindingsThe authors' study provides first direct evidence that the clustering of percentage gross spreads lowers the likelihood of underwriter switching. Investment banks as underwriters can explicitly price underwriting contracts at a clustered level, more likely in periods of greater market volatility, and intentionally retain the banks' client firms using pricing arrangements. The authors' finding and approach offer more direct and distinct support that the issuer–underwriter association can be relationship-based.Originality/valueWhilst the clustering of fees is interpreted as a type of anticompetitive price sitting, the authors contribute to literature by providing new empirical evidence on why percentage gross spreads as a price dimension are clustered. On top of contract efficiency and collusion, this study's new evidence provides a third view for the clustering of gross spreads.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":"1 1","pages":""},"PeriodicalIF":1.7,"publicationDate":"2022-11-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41529916","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-10-13DOI: 10.1108/ijmf-06-2022-0274
Yane Chandera
PurposeThe author examines the presence of foreign currency effects and the risk-mitigation channel through which a foreign-currency denomination reduces the loan spread.Design/methodology/approachThe author runs regression analyses using loan data of firms incorporated in member countries of the Association of Southeast Asian Nations (ASEAN) from 2000 to 2020. The author also runs several robustness tests to address forward exchange rate bias, endogeneity concern and sample-selection bias.FindingsConsistent with the currency matching motive of foreign debt use, the results show that a foreign currency denomination is associated with a lower spread and the relationship is amplified when there is a positive correlation between the changes in the return on assets and in the exchange rate.Research limitations/implicationsThis paper enriches existing studies on the use of foreign debt as an exchange rate risk management tool.Practical implicationsThe results suggest that as firms utilize foreign debt and policymakers need to design banking regulations that not only oversee but also encourage the use of foreign debt as a hedging instrument to lower firms' borrowing costs.Originality/valueThis paper contributes to extant studies by examining the presence of foreign currency effects in emerging countries' loan markets and by exploiting the micro-level demand-side factors as the channel through which the currency denomination affects the loan spread.
{"title":"Risk mitigation effect of foreign debt: evidence from loan pricing","authors":"Yane Chandera","doi":"10.1108/ijmf-06-2022-0274","DOIUrl":"https://doi.org/10.1108/ijmf-06-2022-0274","url":null,"abstract":"PurposeThe author examines the presence of foreign currency effects and the risk-mitigation channel through which a foreign-currency denomination reduces the loan spread.Design/methodology/approachThe author runs regression analyses using loan data of firms incorporated in member countries of the Association of Southeast Asian Nations (ASEAN) from 2000 to 2020. The author also runs several robustness tests to address forward exchange rate bias, endogeneity concern and sample-selection bias.FindingsConsistent with the currency matching motive of foreign debt use, the results show that a foreign currency denomination is associated with a lower spread and the relationship is amplified when there is a positive correlation between the changes in the return on assets and in the exchange rate.Research limitations/implicationsThis paper enriches existing studies on the use of foreign debt as an exchange rate risk management tool.Practical implicationsThe results suggest that as firms utilize foreign debt and policymakers need to design banking regulations that not only oversee but also encourage the use of foreign debt as a hedging instrument to lower firms' borrowing costs.Originality/valueThis paper contributes to extant studies by examining the presence of foreign currency effects in emerging countries' loan markets and by exploiting the micro-level demand-side factors as the channel through which the currency denomination affects the loan spread.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2022-10-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45563090","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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