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Corporate Finance
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Corporate Finance

A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Economics and Finance".

Deadline for manuscript submissions: closed (31 August 2020) | Viewed by 104723

Printed Edition Available!
A printed edition of this Special Issue is available here.

Special Issue Editor

Prof. Dr. Ştefan Cristian Gherghina

E-Mail Website
Guest Editor
Department of Finance, Faculty of Finance and Banking, Bucharest University of Economic Studies, 010552 Bucharest, Romania
Interests: corporate finance; corporate governance; quantitative finance; sustainable development
Special Issues, Collections and Topics in MDPI journals

Special Issue Information

Dear Colleagues,

Corporate finance is one of the most noteworthy topics in the financial sphere, being profoundly embedded in our everyday lives. Corporations require corporate finance to function and, more precisely, to create value. It is widely recognized that shareholder wealth maximization is the supreme objective of a company, and shareholders are the residual claimants. Nevertheless, when the suppliers of finance are different from those who control and exploit their assets, the need for corporate governance is crucial. Additionally, corporate social responsibility supports sustainable development by ensuring economic, social, and environmental benefits for all stakeholders. Further, going public leads to the creation of supplementary financing sources, greater visibility, and trustworthiness for the company, but with these opportunities come several downsides, such as openness to government and public scrutiny, strict disclosure requirements, or markets pressures. Therewith, mergers and acquisitions reveal a quick method for companies to advance the scale of their processes, widen their product portfolio, and pass in to novel markets. General topics of interest comprise but are not limited to:

  • Investigating the specific determinants of capital structure;
  • Analyzing the drivers of firm performance;
  • Assessing bankruptcy risk;
  • Inspecting the association between working capital and company performance;
  • Exploring the relationship between corporate governance and firm value;
  • Examining the causality between corporate social responsibility and dividend policy;
  • Estimating the impact of mergers and acquisitions on stock prices.

Dr. Ştefan Cristian Gherghina
Guest Editor

Manuscript Submission Information

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Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Journal of Risk and Financial Management is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1400 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • Company performance
  • Business valuation
  • Capital structure decisions
  • Business failure risk
  • Working capital management
  • Corporate liquidity management
  • Dividend policy
  • Corporate governance
  • Corporate social responsibility
  • Mergers and acquisitions

Published Papers (22 papers)

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Editorial

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5 pages, 223 KiB  
Editorial
Corporate Finance
by Ștefan Cristian Gherghina
J. Risk Financial Manag. 2021, 14(2), 44; https://doi.org/10.3390/jrfm14020044 - 21 Jan 2021
Cited by 1 | Viewed by 5280
Abstract
Corporate finance deals with the financing and investment decisions set by the corporations’ management in order to maximize the value of the shareholders’ wealth [...] Full article
(This article belongs to the Special Issue Corporate Finance)

Research

Jump to: Editorial

29 pages, 6780 KiB  
Article
Corporate Failure Risk Assessment for Knowledge-Intensive Services Using the Evidential Reasoning Approach
by Meng-Meng Tan, Dong-Ling Xu and Jian-Bo Yang
J. Risk Financial Manag. 2022, 15(3), 131; https://doi.org/10.3390/jrfm15030131 - 10 Mar 2022
Cited by 4 | Viewed by 2637
Abstract
In this study, a new risk assessment model is developed and the evidence reasoning (ER) approach is applied to assess failure risk of knowledge-intensive services (KIS) corporates in the UK. General quantitative financial indicators alone (e.g., operational capability or profitability) cannot comprehensively evaluate [...] Read more.
In this study, a new risk assessment model is developed and the evidence reasoning (ER) approach is applied to assess failure risk of knowledge-intensive services (KIS) corporates in the UK. General quantitative financial indicators alone (e.g., operational capability or profitability) cannot comprehensively evaluate the probability of company bankruptcy in the KIS sector. This new model combines quantitative financial indicators with macroeconomic variables, industrial factors and company non-financial criteria for robust and balanced risk analysis. It is based on the theory of enterprise risk management (ERM) and can be used to analyze company failure possibility as an important aspect of risk management. This study provides new insight into the selection of macro and industry factors based on statistical analysis. Another innovation is related to how marginal utility functions of variables are constructed and imperfect data can be handled in a distributed assessment framework. It is the first study to convert observed data into probability distributions using the likelihood analysis method instead of subjective judgement for data-driven risk analysis of company bankruptcy in the KIS sector within the ER framework, which makes the model more interpretable and informative. The model can be used to provide an early warning mechanism to assist stakeholders to make investment and other decisions. Full article
(This article belongs to the Special Issue Corporate Finance)
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12 pages, 306 KiB  
Article
Financial Institution Type and Firm-Related Attributes as Determinants of Loan Amounts
by Edmund Mallinguh and Zeman Zoltan
J. Risk Financial Manag. 2022, 15(3), 119; https://doi.org/10.3390/jrfm15030119 - 4 Mar 2022
Cited by 1 | Viewed by 2905
Abstract
Access to formal credit remains critical for business operations, particularly for firms unable to generate sufficient funds internally. Using the World Bank’s Enterprise Survey dataset, 2018, we analyzed 230 Kenyan firms that applied for loans. These loans are sourced from banks (private, commercial, [...] Read more.
Access to formal credit remains critical for business operations, particularly for firms unable to generate sufficient funds internally. Using the World Bank’s Enterprise Survey dataset, 2018, we analyzed 230 Kenyan firms that applied for loans. These loans are sourced from banks (private, commercial, or state-owned) or non-banking financial institutions. Specifically, the paper explores the effect of financial institution type and firm-related characteristics on loan amounts advanced. The results show that the preferred credit provider matters, with the sensitivity level varying among the three institutional types. Additionally, the collateralization value, the owner’s equity proportion of fixed assets, and any existing credit facility correlate positively with the outcome variable. There is an inverse relationship between the largest shareholder’s ownership and the loan amount. The study uses the new product (service) launches to measure innovation. The findings suggest that firms in the innovation process access higher loan amounts than their non-innovative peers. Be that as it may, the difference in amount effect size between the two groups is small based on Cohen’s d rule. The paper highlights the theoretical and practical implications of these findings. Full article
(This article belongs to the Special Issue Corporate Finance)
13 pages, 1111 KiB  
Article
Determinants of Financial Performance of Insurance Companies: Empirical Evidence Using Kenyan Data
by Kamanda Morara and Athenia Bongani Sibindi
J. Risk Financial Manag. 2021, 14(12), 566; https://doi.org/10.3390/jrfm14120566 - 24 Nov 2021
Cited by 13 | Viewed by 8226
Abstract
The drivers of financial success of the insurance industry are of interest to several players in any economy including the government; policymakers; policyholders; and investors. In Kenya; there have been relatively few studies on this topic; most of which look at narrow elements [...] Read more.
The drivers of financial success of the insurance industry are of interest to several players in any economy including the government; policymakers; policyholders; and investors. In Kenya; there have been relatively few studies on this topic; most of which look at narrow elements that determine insurance companies’ performance. This article sought to explore the components contributing to the financial performance of insurance firms. We employed a sample consisting of 37 general insurers and 16 life insurers for the period running from 2009 to 2018 and utilised panel data methods in order to establish the determinants of financial performance of Kenyan insurers. The pooled OLS; fixed effects and random effects models were estimated with the financial performance measures (proxied by either ROA or ROE) as the dependent variables. The results of the study documented that insurer financial performance and size were positively related. The study also found that insurer financial performance was negatively related to the age variable. The study also unraveled that higher leveraged insurance companies performed better than their lowly geared peers. This article provides broad analyses of the various drivers of financial performance of the insurance industry in Kenya. The findings of this study contribute to the academic literature on the financial performance of the insurance sector in Kenya and Africa as a whole. Furthermore; it gives pointers to the management of insurance companies on the aspects of their business that would need greater attention to drive and sustain superior financial performance. Full article
(This article belongs to the Special Issue Corporate Finance)
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18 pages, 496 KiB  
Article
Level of Financial Performance of Selected Construction Companies in South Africa
by Emmanuel Dele Omopariola, Abimbola Windapo, David John Edwards and Hatem El-Gohary
J. Risk Financial Manag. 2021, 14(11), 518; https://doi.org/10.3390/jrfm14110518 - 27 Oct 2021
Cited by 3 | Viewed by 2971
Abstract
Purpose—There is no consensus on the indicators that assess a construction company’s financial performance projects undertaken. There is also a dearth of concepts on the financial performance indicators for construction companies in South Africa and indeed, the wider continent of Africa. This [...] Read more.
Purpose—There is no consensus on the indicators that assess a construction company’s financial performance projects undertaken. There is also a dearth of concepts on the financial performance indicators for construction companies in South Africa and indeed, the wider continent of Africa. This paper proposes novel financial performance indicators for assessing construction organizations and tests these on selected construction companies in the South African construction industry. Design/methodology/approach—This research employed a pragmatic approach. Contractors with financial credibility and capacity of ≥R 40 million, annual turnover of ≥R 20 million, and available capital of ≥R 40 million were purposively selected for this study. Parameters such as total revenue, direct cost of work, total indirect cost and total income were elicited from the sample contractors to assess their financial performance. The assessment was undertaken using formulas that were formulated based on the descriptions provided under the research methodology. Further analysis was conducted using post hoc Tukey’s honest significant difference (HSD). Findings—The study finds that construction companies with a strong structure, multiple areas of specialization, creative and efficient staff members, and access to funding, have a greater chance of experiencing higher: income; positive leverage; positive liquidity; and positive cash flow. Moreover, companies with specialization in civil engineering construction and project management skills experienced higher positive liquidity and profitability. Originality/value—This research is unique through its investigation and formulation of indicators for assessing the financial performance of construction companies. This research is consequently representing the first attempt to analyze financial data using the approaches prescribed and adopted. Full article
(This article belongs to the Special Issue Corporate Finance)
22 pages, 856 KiB  
Article
Corporate Cash Holdings and National Culture: Evidence from the Middle East and North Africa Region
by Sherif El-Halaby, Hosam Abdelrasheed and Khaled Hussainey
J. Risk Financial Manag. 2021, 14(10), 475; https://doi.org/10.3390/jrfm14100475 - 8 Oct 2021
Cited by 8 | Viewed by 2673
Abstract
This paper investigates to what extent cultural dimensions, based on Hofstede’s model, can clarify differences in cash holding levels. The sample includes 395 banks across 19 countries in the Middle East and North Africa region over a period of 16 years (1999–2014). The [...] Read more.
This paper investigates to what extent cultural dimensions, based on Hofstede’s model, can clarify differences in cash holding levels. The sample includes 395 banks across 19 countries in the Middle East and North Africa region over a period of 16 years (1999–2014). The findings indicate that when uncertainty avoidance and masculinity decrease, cash holdings increase, whereas when power distance, long-term orientation, and individualism increase, the cash holdings increase correspondingly. Based on robustness analysis, the results remain unaffected even after controlling corporate and macroeconomic characteristics related to inflation, corruption, and the exchange rate system. Further analysis shows insignificant differences between Islamic and non-Islamic banks regarding the influence of culture over cash holdings. This study contributes to the literature regarding the impact of culture on corporate cash holdings based on a unique and different context, through examining this relationship in financial institutions located in the Middle East and North Africa region. Full article
(This article belongs to the Special Issue Corporate Finance)
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15 pages, 932 KiB  
Article
Why the Operating Performance of Post-IPO Firms Decreases: Evidence from China
by Hai Long, Xiaochen Lin and Yu Chen
J. Risk Financial Manag. 2021, 14(9), 424; https://doi.org/10.3390/jrfm14090424 - 5 Sep 2021
Cited by 3 | Viewed by 3562
Abstract
Based on a database of 200 listed firms from the Growth Enterprise Market of China, this paper employs regression models to investigate the significance of IPO capital expenditure to firms’ operating performance. It suggests that a vast majority of pre-IPO money is spent [...] Read more.
Based on a database of 200 listed firms from the Growth Enterprise Market of China, this paper employs regression models to investigate the significance of IPO capital expenditure to firms’ operating performance. It suggests that a vast majority of pre-IPO money is spent on business development to promote operating performance in order to meet IPO requirements. After the IPO, most of the money is transferred to equity investments in order to increase the firms’ market value quickly, which leads to operating performance decline and deterioration. Full article
(This article belongs to the Special Issue Corporate Finance)
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13 pages, 324 KiB  
Article
Women on Boards and Firm Performance: A Microeconometric Search for a Connection
by Marek Gruszczyński
J. Risk Financial Manag. 2020, 13(9), 218; https://doi.org/10.3390/jrfm13090218 - 19 Sep 2020
Cited by 5 | Viewed by 3780
Abstract
This paper discusses questions of the gender diversity of corporate boards vis-à-vis firm performance. Typically, researchers have asked if a female presence is associated with improved performance and more transparent governance. The paper’s first part reports on several econometric attempts in the quest [...] Read more.
This paper discusses questions of the gender diversity of corporate boards vis-à-vis firm performance. Typically, researchers have asked if a female presence is associated with improved performance and more transparent governance. The paper’s first part reports on several econometric attempts in the quest to prove the existence of such an association. The primary outcome is that the results vary over geographical, cultural, and time settings. The study presented in the second part examines European firms’ annual reports from 2015. Binomial models, multiple regression, and quantile regression are applied resulting in the finding that female presence on a board is not significantly related to firm performance for this sample. Together with the picture that emerged from the paper’s first part, this result leads to the possibility that the search for an association between women on boards and company performance is not fundamental. Nevertheless, modern business societies worldwide may need to boost the female presence on managerial bodies. Current econometric evidence indicates that this is not harmful to corporate results. Full article
(This article belongs to the Special Issue Corporate Finance)
20 pages, 589 KiB  
Article
Corporate Governance and Firm Performance: A Comparative Analysis between Listed Family and Non-Family Firms in Japan
by Kojima Koji, Bishnu Kumar Adhikary and Le Tram
J. Risk Financial Manag. 2020, 13(9), 215; https://doi.org/10.3390/jrfm13090215 - 18 Sep 2020
Cited by 40 | Viewed by 8496
Abstract
This study aims to explore the relationship between corporate governance and financial performance of publicly listed family and non-family firms in the Japanese manufacturing industry. The study obtains data from Bloomberg over the period 2014–2018 and covers 1412 firms comprising of 861 non-family [...] Read more.
This study aims to explore the relationship between corporate governance and financial performance of publicly listed family and non-family firms in the Japanese manufacturing industry. The study obtains data from Bloomberg over the period 2014–2018 and covers 1412 firms comprising of 861 non-family and 551 family firms. Our results show that family firms outperform non-family counterparts in terms of return on assets (ROA) and Tobin’s Q when a univariate analysis is invoked. On multivariate analysis, family firms show superior performance to non-family firms with Tobin’s Q. However, family ownership negates firm performance when ROA is taken into account. Regarding the impact of governance elements on Tobin’s Q, institutional shareholding appears to be a significant and positive factor for promoting the performance of both family and non-family firms. Furthermore, board size encourages the performance of non-family firms, while such influence is not observed for family firms. In terms of ROA, foreign ownership inspires the performance of both family and non-family firms. Moreover, government ownership stimulates the performance of family firms, while board independence significantly negates the same. Besides, we find that the performance of family firms run by the founder’s descendants is superior to that of family firms run by the founder. These findings have critical policy implications for family firms in Japan. Full article
(This article belongs to the Special Issue Corporate Finance)
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15 pages, 1072 KiB  
Article
Bankruptcy Prediction with the Use of Data Envelopment Analysis: An Empirical Study of Slovak Businesses
by Róbert Štefko, Jarmila Horváthová and Martina Mokrišová
J. Risk Financial Manag. 2020, 13(9), 212; https://doi.org/10.3390/jrfm13090212 - 16 Sep 2020
Cited by 15 | Viewed by 4015
Abstract
The paper deals with methods of predicting bankruptcy of a business with the aim of choosing a prediction method which will have exact results. Existing bankruptcy prediction models are a suitable tool for predicting the financial difficulties of businesses. However, such tools are [...] Read more.
The paper deals with methods of predicting bankruptcy of a business with the aim of choosing a prediction method which will have exact results. Existing bankruptcy prediction models are a suitable tool for predicting the financial difficulties of businesses. However, such tools are based on strictly defined financial indicators. Therefore, the Data Envelopment Analysis (DEA) method has been applied, as it allows for the free choice of financial indicators. The research sample consisted of 343 businesses active in the heating industry in Slovakia. Analysed businesses have a significant relatively stable position in the given industry. The research was based on several studies which also used the DEA method to predict future financial difficulties and bankruptcies of studied businesses. The estimation accuracy of the Additive DEA model (ADD model) was compared with the Logit model to determine the reliability of the DEA method. Also, an optimal cut-off point for the ADD model and Logit model was determined. The main conclusion is that the DEA method is a suitable alternative for predicting the failure of the analysed sample of businesses. In contrast to the Logit model, its results are independent of any assumptions. The paper identified the key indicators of the future success of businesses in the analysed sample. These results can help businesses to improve their financial health and competitiveness. Full article
(This article belongs to the Special Issue Corporate Finance)
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19 pages, 1256 KiB  
Article
Innovation in SMEs and Financing Mix
by Joanna Błach, Monika Wieczorek-Kosmala and Joanna Trzęsiok
J. Risk Financial Manag. 2020, 13(9), 206; https://doi.org/10.3390/jrfm13090206 - 10 Sep 2020
Cited by 10 | Viewed by 3822
Abstract
This study addresses the types of innovation activity of SMEs (Small and medium-sized enterprises) in the European Union and its association with financing decisions. The main objective is to capture the cross-country differences in the types of innovation in SMEs and then investigate [...] Read more.
This study addresses the types of innovation activity of SMEs (Small and medium-sized enterprises) in the European Union and its association with financing decisions. The main objective is to capture the cross-country differences in the types of innovation in SMEs and then investigate the relationship between the types of innovations and relevance of a given type of funding. In the empirical examinations, we use the non-parametric methods, due to the nature of the data. We have found out that there are differences in the types of innovation activity of SMEs in the cross-country dimension. We have also confirmed the contingencies between the types of innovations undertaken by SMEs in each cluster of the European countries, which suggests that various types of innovations co-exist. However, we have not found any unified pattern of correlations between the relevance of a given source of financing and a given type of innovation. Our study contributes to the ongoing debate on the different intensity of innovation activity of SMEs, as linked to the problem of the SMEs financing gap as one of the fundamental drivers of innovation. Full article
(This article belongs to the Special Issue Corporate Finance)
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14 pages, 243 KiB  
Article
What Drives the Declining Wealth Effect of Subsequent Share Repurchase Announcements?
by David K. Ding, Hardjo Koerniadi and Chandrasekhar Krishnamurti
J. Risk Financial Manag. 2020, 13(8), 176; https://doi.org/10.3390/jrfm13080176 - 7 Aug 2020
Cited by 1 | Viewed by 2445
Abstract
Recent academic studies document that open market share repurchase announcements in the United States generate significantly lower returns than those reported in earlier studies. We find that the lower announcement return is associated with an increasing number of subsequent announcements in the more [...] Read more.
Recent academic studies document that open market share repurchase announcements in the United States generate significantly lower returns than those reported in earlier studies. We find that the lower announcement return is associated with an increasing number of subsequent announcements in the more recent periods. Although the announcement period return from the initial announcement is positive, subsequent announcement returns are significantly decreasing. Further, we find that the decreasing returns of subsequent announcements are attributed to firms with negative past repurchase announcement returns. Our multivariate regression test results are consistent with the notion that the decreasing subsequent repurchase announcement returns are driven by hubris-endowed managers. Full article
(This article belongs to the Special Issue Corporate Finance)
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19 pages, 462 KiB  
Article
Transition to the Revised OHADA Law on Accounting and Financial Reporting: Corporate Perceptions of Costs and Benefits
by Micheal Forzeh Fossung, Lious Agbor Tabot Ntoung, Helena Maria Santos de Oliveira, Cláudia Maria Ferreira Pereira, Susana Adelina Moreira Carvalho Bastos and Liliana Marques Pimentel
J. Risk Financial Manag. 2020, 13(8), 172; https://doi.org/10.3390/jrfm13080172 - 3 Aug 2020
Cited by 5 | Viewed by 4375
Abstract
This paper examines the ongoing transition to the revised Organisation for the Harmonisation of Business Law in Africa Act on Accounting and Financial Reporting for companies in general and to the International Financial Reporting Standards for listed and group companies with a particular [...] Read more.
This paper examines the ongoing transition to the revised Organisation for the Harmonisation of Business Law in Africa Act on Accounting and Financial Reporting for companies in general and to the International Financial Reporting Standards for listed and group companies with a particular focus on recent institutional developments and corporate concerns. The study used 80 professional accountants, most of whom were members of the Institute of Chartered Accountants of Cameroon and academics. Using the descriptive statistics, the study shows that the transition to the revised OHADA brings about a high level of comparability and transparency of the financial statements, that the International Financial Reporting Standards can be implemented in Cameroon (but not fully), and that the benefit of the transition exceeds the cost. Full article
(This article belongs to the Special Issue Corporate Finance)
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35 pages, 430 KiB  
Article
Corporate Governance Quality, Ownership Structure, Agency Costs and Firm Performance. Evidence from an Emerging Economy
by Haroon ur Rashid Khan, Waqas Bin Khidmat, Osama Al Hares, Naeem Muhammad and Kashif Saleem
J. Risk Financial Manag. 2020, 13(7), 154; https://doi.org/10.3390/jrfm13070154 - 15 Jul 2020
Cited by 23 | Viewed by 7963
Abstract
The purpose of this paper is to investigate the effect of corporate governance quality and ownership structure on the relationship between the agency cost and firm performance. Both the fixed-effects model and a more robust dynamic panel generalized method of moment estimation are [...] Read more.
The purpose of this paper is to investigate the effect of corporate governance quality and ownership structure on the relationship between the agency cost and firm performance. Both the fixed-effects model and a more robust dynamic panel generalized method of moment estimation are applied to Chinese A-listed firms for the years 2008 to 2016. The results show that the agency–performance relationship is positively moderated by (1) corporate governance quality, (2) ownership concentration, and (3) non-state ownership. State ownership has a negative effect on the agency–performance relationship. Various robust tests of an alternative measure of agency cost confirm our main conclusions. The analysis adds to the empirical literature on agency theory by providing useful insights into how corporate governance and ownership concentration can help mitigate agency–performance relationship. It also highlights the impact of ownership type on the relationship between agency cost and firm performance. Our study supports the literature that agency cost and firm performance are negatively related to the Chinese listed firms. The investors should keep in mind the proxies of agency cost while choosing a specific stock. Secondly; the abuse of managerial appropriation is higher in state-held firms as compared to non-state firms. Policymakers can use these results to devise the investor protection rules so that managerial appropriation can be minimized. Full article
(This article belongs to the Special Issue Corporate Finance)
21 pages, 569 KiB  
Article
The Impact of Brand Relationships on Corporate Brand Identity and Reputation—An Integrative Model
by Teresa Barros, Paula Rodrigues, Nelson Duarte, Xue-Feng Shao, F. V. Martins, H. Barandas-Karl and Xiao-Guang Yue
J. Risk Financial Manag. 2020, 13(6), 133; https://doi.org/10.3390/jrfm13060133 - 22 Jun 2020
Cited by 7 | Viewed by 5627
Abstract
The current literature focuses on the cocreation of brands in dynamic contexts, but the impact of the relationships among brands on branding is poorly documented. To address this gap a concept is proposed concerning the relationships between brands and a model is developed, [...] Read more.
The current literature focuses on the cocreation of brands in dynamic contexts, but the impact of the relationships among brands on branding is poorly documented. To address this gap a concept is proposed concerning the relationships between brands and a model is developed, showing the influence of the latter on the identity and reputation of brands. Therefore, the goal of this study is to develop a brand relationships concept and to build a framework relating it with corporate brand identity and reputation, in a higher consumer involvement context like higher education. Structural equation modelling (SEM) was used for this purpose. In line with this, interviews, cooperatively developed by higher education lecturers and brand managers, were carried out with focus groups of higher education students, and questionnaires conducted, with 216 complete surveys obtained. Data are analyzed using confirmatory factor analysis and structural equation modelling. Results demonstrate that the concept of brand relationships comprises three dimensions: trust, commitment, and motivation. The structural model reveals robustness regarding the selected fit indicators, demonstrating that the relationships between brands influence brand identity and reputation. This suggests that managers must choose and promote brand relationships that gel with the identity and reputation of the primary brand they manage, to develop an integrated balanced product range. Full article
(This article belongs to the Special Issue Corporate Finance)
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22 pages, 385 KiB  
Article
CEO Diversity, Political Influences, and CEO Turnover in Unstable Environments: The Romanian Case
by Ingrid-Mihaela Dragotă, Andreea Curmei-Semenescu and Raluca Moscu
J. Risk Financial Manag. 2020, 13(3), 59; https://doi.org/10.3390/jrfm13030059 - 18 Mar 2020
Cited by 4 | Viewed by 3321
Abstract
This work expands the literature on a less studied topic, the Chief Executive Officer (CEO) turnover in post-communist economies, analyzed during an unstable and ambiguous economic and financial environment. For the period 2005–2010, the results indicate the political inference in CEO turnover decision [...] Read more.
This work expands the literature on a less studied topic, the Chief Executive Officer (CEO) turnover in post-communist economies, analyzed during an unstable and ambiguous economic and financial environment. For the period 2005–2010, the results indicate the political inference in CEO turnover decision for the Romanian listed companies. In this period, with great turmoil in the economy determined by the financial crisis of 2008, we also find that CEO gender helps to explain the probability of changing the CEO. Moreover, this paper empirically tests if the financial and corporate governance determinants that are validated in the existing literature work for the Romanian listed companies. We reinforce that CEO turnover decision is negatively related to accounting-based performance. We find evidence of the “voting with their feet” behavior of institutional investors, and of the lack of Board of Directors monitoring. The CEO–Chairman duality and the controlling power of the largest shareholder act as entrenchment mechanisms. Full article
(This article belongs to the Special Issue Corporate Finance)
29 pages, 395 KiB  
Article
Optimal Contracting of Pension Incentive: Evidence of Currency Risk Management in Multinational Companies
by Jeffrey (Jun) Chen, Yun Guan and Ivy Tang
J. Risk Financial Manag. 2020, 13(2), 24; https://doi.org/10.3390/jrfm13020024 - 3 Feb 2020
Cited by 1 | Viewed by 2524
Abstract
Using a large sample of multinational companies (MNCs), this paper intends to explore whether executives’ pension incentives will function as a mechanism of optimal contracting in motivating firm risk management. We find that granting more pension to executives is significantly related to the [...] Read more.
Using a large sample of multinational companies (MNCs), this paper intends to explore whether executives’ pension incentives will function as a mechanism of optimal contracting in motivating firm risk management. We find that granting more pension to executives is significantly related to the higher likelihood and intensity of currency hedging strategies in MNCs. This suggests that pension incentive should promote executives to more actively manage firms’ risk. Such a positive relationship is robust to endogeneity and is more prominent in firms with strong shareholder power. We further explore the contribution of currency hedging induced by pension incentives to shareholder value. Supporting the hypothesis of optimal contracting, our results indicate that pension incentives play an important role in reconciling managerial risk preference and shareholder value creation. Full article
(This article belongs to the Special Issue Corporate Finance)
18 pages, 487 KiB  
Article
Are Family Firms Financially Healthier Than Non-Family Firm?
by Lious Agbor Tabot Ntoung, Helena Maria Santos de Oliveira, Benjamim Manuel Ferreira de Sousa, Liliana Marques Pimentel and Susana Adelina Moreira Carvalho Bastos
J. Risk Financial Manag. 2020, 13(1), 5; https://doi.org/10.3390/jrfm13010005 - 29 Dec 2019
Cited by 13 | Viewed by 3470
Abstract
This study examines the whether or not family firms are financially healthier than non-family in terms of capital structure and leverage. It therefore takes into consideration the existence of any significant differences between the leverage and risk choices of family and non-family firms. [...] Read more.
This study examines the whether or not family firms are financially healthier than non-family in terms of capital structure and leverage. It therefore takes into consideration the existence of any significant differences between the leverage and risk choices of family and non-family firms. Using a panel data set of 888 firms and 7104 firm-year observations of unlisted small and medium size firms over the period 2007–2014, we present that family owned businesses have lower financial structure than those of non-family owned businesses. This indicates that most family firms use less debt financing than non-family firms, and as such maintain a lower level of debt. Secondly, family firms demonstrate lower risk as illustrated by the Altman Z-score. The Altman Z-score scale illustrates a contrary relationship of significance with respect to family firms and their counterparts in terms of the operation aspect of the business’s risk factors. Family firms managed their business operations with lower risk and are generally healthier financially than their counterpart firms. Lastly, findings from the robust tests for the hypotheses using a sample of bankrupt firms in Iberian Balance sheet Analysis System (SABI) reveal that the proportion of failure of family firms as opposed to their counterpart firms is relatively low. Analyzing the bankruptcy files of firms from 2002 to 2014 shows a considerably low ratio of family firms at the 5% significant level. This affirms that the low risk illustrated in the Altman Z-score regression is consistent to the lower ratio of family firms that were declared bankrupted over the study period, which makes Spain an important case in this study. Full article
(This article belongs to the Special Issue Corporate Finance)
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34 pages, 2518 KiB  
Article
How Long Does It Last to Systematically Make Bad Decisions? An Agent-Based Application for Dividend Policy
by Victor Dragotă and Camelia Delcea
J. Risk Financial Manag. 2019, 12(4), 167; https://doi.org/10.3390/jrfm12040167 - 5 Nov 2019
Cited by 4 | Viewed by 3385
Abstract
Bad decisions have harmful effects on the quality of human life and an increase of their duration expands these undesirable effects. Systematic bad decisions related to dividend policy can affect the investors’ quality of life in the long-term. We propose an agent-based model [...] Read more.
Bad decisions have harmful effects on the quality of human life and an increase of their duration expands these undesirable effects. Systematic bad decisions related to dividend policy can affect the investors’ quality of life in the long-term. We propose an agent-based model for the estimation of the duration of systematically making bad decisions, with an application on dividend policy. We propose an algorithm that can be used in modelling the interaction between different classes of shareholders and for predicting this duration. We perform numerical simulations based on this model using NetLogo 6.0.4. We prove that, as a result of agents’ interaction, in some conditions, the duration of systematically making bad decisions can be very long: some numerical simulations suggest that, in some circumstances, this duration can significantly exceed the human lifetime. Additionally, in some conditions, the company can fail before the power is switched. This duration can increase dramatically if the shareholders have a great level of trust in the management’s decisions. As an implication, a greater concern for the quality of financial education, and more performant instruments for controlling the power’s decisions are required. Full article
(This article belongs to the Special Issue Corporate Finance)
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16 pages, 346 KiB  
Article
Exploring the Determinants of Financial Structure in the Technology Industry: Panel Data Evidence from the New York Stock Exchange Listed Companies
by Georgeta Vintilă, Ştefan Cristian Gherghina and Diana Alexandra Toader
J. Risk Financial Manag. 2019, 12(4), 163; https://doi.org/10.3390/jrfm12040163 - 22 Oct 2019
Cited by 6 | Viewed by 4337
Abstract
This paper aims to analyze the influencing factors on the financial structure of 51 companies listed on the New York Stock Exchange, in the technology industry, from 2005–2018. The objective is to see the impact of independent company-specific variables such as company size, [...] Read more.
This paper aims to analyze the influencing factors on the financial structure of 51 companies listed on the New York Stock Exchange, in the technology industry, from 2005–2018. The objective is to see the impact of independent company-specific variables such as company size, tangibility of assets, growth opportunity, effective tax rate, current liquidity, depreciation, stock rotation, financial return, working capital, price to book value, price to earnings ratio, as well as the impact of governance variables and macroeconomic variables such as inflation rate, interest rate, market size, gross domestic product per capita. Using panel data and multiple linear regressions, we analyze the relationship between the independent variables listed above and the dependent variables, namely the total debt ratio, the long-term debt ratio and the short-term debt ratio. The results of the analysis showed that variables such as size, tangibility, liquidity, profitability have a significant influence on the dependent variables in accordance with the theories regarding the capital structure. Full article
(This article belongs to the Special Issue Corporate Finance)
18 pages, 273 KiB  
Article
Sectoral Analysis of Factors Influencing Dividend Policy: Case of an Emerging Financial Market
by Geetanjali Pinto and Shailesh Rastogi
J. Risk Financial Manag. 2019, 12(3), 110; https://doi.org/10.3390/jrfm12030110 - 26 Jun 2019
Cited by 23 | Viewed by 10860
Abstract
This study aims to determine whether a firm’s dividends are influenced by the sector to which it belongs. This paper also examines the explanatory factors for dividends across individual sectors in India. This longitudinal study uses balanced data consisting of companies listed on [...] Read more.
This study aims to determine whether a firm’s dividends are influenced by the sector to which it belongs. This paper also examines the explanatory factors for dividends across individual sectors in India. This longitudinal study uses balanced data consisting of companies listed on the National Stock Exchange (NSE) of India for 12 years—from 2006 to 2017. Pooled ordinary least squares (POLSs) and fixed effects panel models are used in our estimation. We find that size, profitability, and interest coverage ratios have a significant positive relation to dividend policy. Furthermore, business risk and debt reveal a significantly negative relation with dividends. The findings on profitability support the free cash flow hypothesis for India. However, we also found that Indian companies prefer to follow a stable dividend policy. As a result of this, even firms with higher growth opportunities and lower cash flows continue to pay dividends. We also find evidence that dividend policies vary significantly across industrial sectors in India. The results of this study can be used by financial managers and policymakers in order to make appropriate dividend decisions. They can also help investors make portfolio selection decisions based on sectoral dividend paying behavior. Full article
(This article belongs to the Special Issue Corporate Finance)
13 pages, 624 KiB  
Article
Optimal Cash Holding Ratio for Non-Financial Firms in Vietnam Stock Exchange Market
by Cuong Nguyen Thanh
J. Risk Financial Manag. 2019, 12(2), 104; https://doi.org/10.3390/jrfm12020104 - 20 Jun 2019
Cited by 8 | Viewed by 5847
Abstract
The purpose of this research is to investigate whether there is an optimal cash holding ratio, in which firm’s performance can be maximized. The threshold regression model is applied to test the threshold effect of the cash holding ratio on firm’s performance of [...] Read more.
The purpose of this research is to investigate whether there is an optimal cash holding ratio, in which firm’s performance can be maximized. The threshold regression model is applied to test the threshold effect of the cash holding ratio on firm’s performance of 306 non-financial companies listed on the Vietnam stock exchange market during the period of 2008–2017. Experimental results showed that a single-threshold effect exists between the ratio of cash holding and company’s performance. A proportion of cash holding within a threshold of 9.93% can contribute to improvement of the company’s efficiency. The coefficient is positive but tends to decrease when the cash holding ratio passes the 9.93% check point, implying that an increase in cash holdings ratio will continue to diminishment of efficiency eventually. Therefore, the relationship between cash holding ratio and firm’s performance is nonlinear. From this result, this paper provides policy implications for non-financial companies listed on the Vietnam stock exchange market in determining the proportion of cash holding flexibly. In detail, non-financial companies listed on the Vietnam stock exchange market should not keep the cash holding ratio over 9.93%. To ensure and enhance the company’s performance, the optimal range of cash holding ratios should be below 9.93%. Full article
(This article belongs to the Special Issue Corporate Finance)
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