Capital market financing and firm growth Didier, Tatiana; Levine, Ross; Llovet Montanes, Ruth ...
Journal of international money and finance,
November 2021, 2021-11-00, Volume:
118
Journal Article
Peer reviewed
Open access
This paper studies whether there is a connection between finance and growth at the firm level. It employs a new dataset of 150,165 equity and bond issuances around the world, matched with income and ...balance sheet data for 62,653 listed firms in 65 countries over 1990–2016. Three main patterns emerge from the analyses. First, firms that choose to issue in capital markets use the funds raised to grow by enhancing their productive capabilities, increasing their tangible and intangible capital and the number of employees. Growth accelerates as firms raise funds. Second, the faster growth is more pronounced among firms that are more likely to face tighter financing constraints, namely, small, young, and high-R&D firms. Third, capital market issuances are associated with faster growth among firms located in countries with more developed capital markets relative to banks. Capital markets are also comparatively effective at allowing financially constrained firms to raise capital.
The debate over 'why capital and bond markets remain under-developed in Pakistan' is more than two decades old. Several conceptual papers have highlighted causes responsible for the underdevelopment ...of these markets; however, not enough empirical evidence exists to support the theoretical claims. This paper tries to fill in this gap. Specifically, this paper draws on the recent developments in the area of law and finance to develop several hypotheses related to maturity of corporate debt and judicial efficiency. These hypotheses are tested using data of 370 firms listed at the Karachi Stock Exchange (KSE) and 27 districts high courts of Pakistan over the period 2000 to 2006. Results indicate that corporate debt-maturity decreases with the inefficiency of judiciary. Furthermore, results show that worsening judicial efficiency has greater negative effect on debt-maturity of small firms than on debt-maturity of large firms. Similarly, worsening judicial efficiency negatively affects debt-maturity ratios of firms with fewer tangible assets than debt-maturity ratio of firms with more tangible assets.
This article investigated the sensitivity of capital market development to public debt in Nigeria using descriptive statistic, regression analysis, and the Engle-Granger co integration techniques for ...the period ranging from 1981 to 2014. The estimates from the descriptive analysis showed that both the market capitalization and public debt series were not normally distributed at 5% significance level. The ADF unit root test showed that the market capitalization and public debt series were integrated of order one (i.e., I (1)). The results from the regression model provide evidence to show that capital market development is not sensitive to domestic debt at any conventional level, but it is sensitive to external debt at 10% significance level. The estimates of the Engle-Granger co integration tests show that capital market development is not co integrated with public debt. It is recommended that capital market and debt management authorities should formulate policies will enhance linkage between the markets.
The purpose of this study is to construct a two-stage effective and innovative going concern prediction model to predict going concern doubt for the sustainability of enterprises and capital market ...development. Samples of this study are the companies listed on the Taiwan Stock Exchange or the Taipei Exchange, totalling 196 companies and including 49 companies with going concern doubt and 147 normal companies (with no going concern doubt). The data are taken from the Taiwan Economic Journal (TEJ) and the Market Observation Post System during the period from 2001 to 2016 (totalling 16 years). This study adopts a two-stage way to construct the going concern prediction models. In Stage I, the traditional statistical method of stepwise regression (SR) and the data mining technique artificial neural network (ANN) are applied to select the important variables. In Stage II, two decision tree algorithms (data mining techniques): classification and regression tree (CART) and C5.0 are used to establish the prediction models. The results show that the SR + CART model has the highest going concern prediction accuracy, with an overall accuracy of 87.42%.
•Examines valuation effects of interactions of sales growth and diversification strategies.•A diversification premium when both diversification and sales growth decline.•A lessened diversification ...discount when both diversification and sales growth increase.•A diversification discount when diversification increases in the face of decreasing sales growth.•Joint valuation effects are more pronounced for firms in developed than emerging markets.
This paper highlights the interactions of sales growth with diversification strategies and their joint effects on firm value. Employing firm-level data for 39 countries, we confirm a diversification discount on average for our sample firms, consistent with the evidence in the literature. After considering joint changes in industry-adjusted sales growth and diversification, however, we uncover a significant diversification premium when a decrease in diversification is accompanied with declining sales growth. We also find a lessened diversification discount when an increase in diversification is intertwined with increasing sales growth. In contrast, an increase in diversification in the face of decreasing sales growth leads to a significant diversification discount. We further show that the joint effects on firm value are more pronounced for developed market firms than for emerging market firms. Overall, our results suggest that despite the negative diversification effect on average, a lessened diversification discount and a diversification premium are viable if a firm’s diversification strategy is properly developed in consideration of its business situations such as sales growth.
This paper examines the bank lending channel of monetary policy transmission and the effect of banking sector and capital market development on the lending channel using the bank-level panel data of ...89 commercial banks in five ASEAN countries (Thailand, Malaysia, the Philippines, Singapore and Indonesia) over the period 1999–2011. The results show that monetary policy has a significant effect via the bank lending channel. The higher the capitalization and liquidity of banks, the weaker the effect of monetary policy via the bank lending channel; however, the greater the size of banks, the stronger the bank lending channel. Banking sector development in terms of banking activities and capital market development leads to a weaker effect of monetary policy through the lending channel, while the development of banks in terms of size strengthens the bank lending channel.
Cash holdings: International evidence Alves, Duarte; Alves, Paulo; Carvalho, Luis ...
Journal of economic asymmetries,
November 2022, 2022-11-00, Volume:
26
Journal Article
Peer reviewed
The goal of this paper is to study how firms’ cash holdings have recently performed. We have not only used GMM approach, but also a pioneer econometric approach to evaluate the determinants of firms’ ...cash holdings, ML-SEM. The results are more robust in comparison with those obtained using GMM. Our results showed that cash holdings have increased during the 2008 financial crisis and rose significantly after that time. The exception were firms placed in the United States and emerging markets. We have found that cash holdings, in general, were positively influenced by the banking system and capital market, although the results have been more robust for the first variable. Our results also showed that the development of the rule of law and shareholder rights lead to a decrease on firms’ cash holdings, which confirms the agency theory as an explanation of firms’ cash holdings.
This article revisits the notion of governed interdependence to examine the knowledge practices that have underpinned the expansion of debt capital markets in Southeast Asia, with a focus on ...Indonesia and Malaysia. It identifies two types of communities of practice - one of planners/policymakers, one of market practitioners - as central to the production of capital market knowledge and traces the emphasis placed on them by state actors through consecutive capital market development plans. The article then moves on to examining how both countries have sought to implement regimes for the training and licensing of capital market professionals in the wake of the financial crisis of the late 1990s. It argues that these knowledge practices bestow capital markets with legitimacy which makes the practices of investing in and borrowing from debt capital markets socially acceptable, if not even a key developmental objective. This is in the context of both the Asian crisis and more recent crises repeatedly showing the dangers of speculative portfolio investment as well as Islamic stipulations against speculative finance in these two Muslim-majority countries.
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