...Corporate Financial Policies In Emerging Markets: The Role Of Financial Market Development Paper by; Charles Amo-Yartey Joshua Abor Article Reviewed & Presented by Gabriel Nomotsu Teye- Ali George. E. A Anang Prince Baah Takyi Outline of Presentation Definition of Key Terms Introduction Research Problems Methodology Key Findings Study Gaps For Future Research Research Questions Literature Review Conclusion and Remarks Definition of Key Terms Financial markets: This is a market where financial instruments are traded. Emerging markets: An emerging market economy (EME) is defined as an economy with low to middle per capita income Financial policy: Criteria describing a corporation's choices regarding its debt/equity mix, currencies of denomination, maturity structure, method of financing investment projects, and hedging decisions with a goal of maximizing the value of the firm to some set of stockholders. Definition of Key Terms Capitalization: The total dollar market value of all of a company's outstanding shares. Capital structure: Refers to the way a corporation finances its assets through equity and long-term debt. Financial structure: The structure of a company's sources of financing, including shareholders' equity, long- and short-term debt, and accounts payable. Research Problem The financial markets in emerging markets have undergone considerable growth in recent times, mainly as a result of the trade and...
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...business environment and financial system in Ethiopia 7 2.4. Points we Agree or Disagree with 7 2.5. One part of the article that helped to understand finance 8 III. Hypothesis Comparison. 8 IV. How the information in the article affect the business manager in us 9 4.1. Becoming a better financial manager 9 4.2. Becoming a better professional 9 4.3. Practicing suggestions in the article 9 4.4. Issues listed by the authors 10 References 13 I. Article Summary 1.1. Article Title: The theory and practice of corporate finance: Evidence from the field 1.2. Authors: John R. Graham and Campbell R. Harvey 1.3. Publication: the article is published in the Journal of Financial Economics, Volume 60, Issue 2, Pages 187-243, dated 31/05/2001. The publisher is North-Holland. 1.4. Reviewer: Group 8 members 1. 1.5. Purpose of the Article The article reports the result of a comprehensive survey on the practice of corporate finance conducted in 1999 G.C by the above mentioned two authors in the USA. Unlike previous similar studies in theory and practice of corporate finance, the article address a broader scope in the field of corporate finance including capital budgeting, cost of capital and capital structure, which according to the authors allows “linking responses of survey participants across areas”. Selecting a large sample of cross-section firms with approximate population size of 4,440, the authors claim to have solicited the response of 392 chief financial officers and to have...
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...No. 19 [Special Issue - October 2011] Perceived Relationship between Corporate Capital Structure and Firm Value in Nigeria Semiu Babatunde ADEYEMI Department of Accounting University of Lagos Lagos, Nigeria Collins Sankay OBOH Department of Accounting University of Lagos Lagos, Nigeria Abstract This study examined the empirical effects of corporate capital structure (financial leverage) on the market value of a selection of firms listed on the Nigerian Stock Exchange. Both primary and secondary data were obtained for analysis employing both descriptive and inferential statistics for analysis. A sample size of 150 respondents and 90 firms were selected for both primary data and secondary data respectively. Descriptive statistics was used to analyse the primary data, while Chi-Square was used to draw inference of perceived relationship between capital structure and firm value. The results of the study suggested that a positively significant relationship exists between a firm’s choice of capital structure and its market value in Nigeria. The study suggested that listed firms in Nigeria should strategically plan and manage their capital structure in order to maximize their market values. Keywords: Capital structure, market value, Nigeria, debt, equity. 1. Introduction 1.1 Background to the Study After the Modigliani-Miller (1958 and 1963) paradigms on firms’ capital structure and their market values, there have been considerable debates, both in theoretical and empirical researches...
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...Three Theories of Regulation 1: Public interest theory The central economic rationale for origins of government intervention with public interest theory is that of market failure. Public interest theory assumes that economic markets are subject to a series of market imperfections or transaction failures, which if left uncorrected will result in both inefficient and inequitable outcomes. 2: Regulatory Capture Theory Capture theory assumes that all members of society are economically rational -and each will pursue his/her self interest to the point where marginal benefit from lobbying regulators just equals private marginal cost. Therefore people lobby for regulations that increase their wealth, or they lobby to ensure that regulations are ineffective in decreasing their wealth. 3: Private Interest Theory Stigler’s private interest theory – he argues that regulatory activity reflects the relative political power between interest groups. Interaction is with politicians who are not neutral arbiters but are like business executives or consumers - and are thus rationally self interested. Private interest theories favour producer groups as the most likely to become organised interest groups. Theorists believe that regulation does not arise as a result of a government‘s response to public demands – it is sought by the producer private interest group - and is designed and operated primarily for its benefit. QUESTION TWO –ACCOUNTING THEORY 12 * Normative theories Normative...
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...Australasian Accounting Business & Finance Journal, February 2007 Gaffikin: Accounting Research and Theory: the age of neo-empiricism. Vol. 1, No.1.pp. 1-19. Accounting Research and Theory: The age of neo-empiricism Michael Gaffikin, School of Accounting & Finance, University of Wollongong ABSTRACT The theorising in accounting prior to 1970 was rejected as not providing sufficiently general theories. Informed by theories in economics and finance (and other disciplines such as psychology) and with the aid of computers, attempts to theorise accounting took a new direction. Large data collection and analysis emphasized a purportedly more systematic empirical approach to developing theory. Key words: accounting; neo-empiricism; capital markets research; behavioural finance; efficient markets hypothesis; positive accounting theory INTRODUCTION Around 1970 there was a dramatic change in the approach to accounting research. Several reasons have been suggested for this change in methodological direction by those reviewing the development of accounting thought. To many, a major distinction is a change in direction away from attempts to prescribe a theory of accounting to developing theory from a description of extant practices. To advocates of the latter, previous attempts to develop a theory of accounting were futile as there could never be agreement over many of the inputs into a theory such as the postulates, principles but most specifically the assumptions. Although a very...
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...valuation effects of long-term changes in capital structure ABSTRACT The objective of this study is to analyze and examine the changes in capital structure that do not affect the value of the firm and we have to know the relationship between the capital structure and the firm’s value. We are try to learn the changes in capital structure that do not affected the firm’s value and want to know relationship between the capital structure and the value of firm. For this study we used five independent variable that are profitability , growth , leverages , size and intangible ratio on the other hand we have one dependent variable that are firm value. We collected data from the Karachi stock exchange (KSE) and State Bank of Pakistan. Contents CHAPTER 1: INTRODUCTION 4 1.1 Background of the study 4 1.2 Problem Statement 6 1.3 Purpose of the study 7 1.4 Significance of the study 7 1.5 Operational definitions of the variables 8 1.5.1 Leverage: 8 1.5.2 Market to Book Value: 8 1.5.3 Profitability: 8 1.5.4 Growth: 8 1.5.5 Size: 8 1.5.6 Intangible: 9 CHAPTER 2: LITERATURE REVIEWS 10 2.1 Theoretical Background: 10 2.2 Empirical evidence: 11 CHAPTER 3: METHODOLOGY 17 3.1 Research Method 17 3.2 Research Model 17 3.3 Research Hypothesis: 18 3.4 Data Collection 18 3.5 Population and Sample Size 18 3.6 Research Technique 19 INTRODUCTION *...
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...Bachelor of Finance & Banking Thesis -------------------------------------- The impact of capital structure on profitability of listed construction companies on Hanoi Stock Exchange from 2008 to 2013 FALL 2014 Instructor Mr. Tran Viet Dung Group members Nguyen Thi Thanh Tam (FB00464) Nguyen Thi Viet Chinh (FB00405) Hoang My Linh (FB00073) Dang Thi Hong Hanh (FB00253) Nguyen Thi Kieu Trang (FB00078) Hanoi, December 2014 Table of Contents List of tables 3 List of figure 4 Abstract 5 Chapter 1: Introduction and Thesis Outline 6 1. Background 6 2. Research objective 8 3. Research question 8 4. Data and methodology 8 4.1 Data 8 4.2 Methodology 9 5. Thesis outline 9 Chapter 2: Literature Review and theoretical models 10 1. Theorem review 10 1.1. Modigliani- Miller theorem review 10 1.2. Agency theory 12 1.3. Trade-off theory 14 1.4 Pecking Order Theory 19 1.5 Market-timing theory 20 2. Variable review 22 2.1. Return on Asset and Return on Equity 22 2.2. Capital structure 23 3. Empirical studies 24 3.1. Relationship between capital structure and firm performance 24 3.2. Empirical studies of relationship between determinants of capital structure and profitability 28 4. Summary of the empirical studies 30 Chapter 3: Methodology 31 1. Introduction 31 2. Data collection methods 32 2.1. Sampling techniques 32 2.2. Data collection procedure 34 3. Variables and hypotheses 34 3.1. Dependent...
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...Journal of Financial Research Vol. 5, No. 1; 2014 Shareholders’ Wealth and Debt- Equity Mix of Quoted Companies in Nigeria Amos O. Arowoshegbe1 & Francis Kehinde Emeni2 1 Department of Accounting, Ambrose Alli University, Ekpoma, Edo State, Nigeria 2 Department of Accounting, University of Benin, Benin City, Edo State, Nigeria Correspondence: Amos O. Arowoshegbe Ph.D; ACA., Department of Accounting, Ambrose Alli University, Ekpoma, Edo State, Nigeria. Tel: 234-80-3742-2421. E-mail: futona4christ2@gmail.com Received: October 15, 2013 doi:10.5430/ijfr.v5n1p107 Accepted: October 31, 2013 Online Published: January 10, 2014 URL: http://dx.doi.org/10.5430/ijfr.v5n1p107 Abstract The study examined the relationship between shareholders’ wealth and debt-equity mix of quoted companies in Nigeria. The study was based on a panel data set from 1997 to 2011 comprising sixty non – financial companies. The study specified two panel regression models. Two measures of shareholders’ wealth: Return on Equity (ROE) and Earnings per Share (EPS) were taken as the dependent variables respectively. The principal explanatory variable for each of the models was Debt Ratio (DR). The results of the study conform to our a-priori expectation that there is a significant negative relationship between shareholders’ wealth and debt-equity mix of quoted companies in Nigeria. This is not unexpected considering the inactive debt market in Nigeria, the dominance of the money market in the Nigerian financial system...
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...TOPIC: ANALYSIS OF EQUITY SHARE CAPITAL AS A SOURCE OF FINANCE IN AN ORGANISATION RESEARCH PAPERS The 2 research papers under study are 1. The effect of CEO ownership and shareholder rights on cost of equity share capital. 2. What motivates seasoned equity offerings? Evidence from the use of issue proceeds. COST OF EQUITY CAPITAL AND ITS EFFECTS TO THE MANAGEMENT Introduction This paper investigates the cost of equity capital and its effects to the management which intends to hinder shareholders right. The purpose of which is to investigate whether managerial ownership affects the associations between the shareholders rights and the cost of equity capital. There are two variables in the article which can be clearly identified. The variables are; 1) The shareholders rights and 2) The cost of the equity capital. 1) THE SHAREHOLDERS Shareholders should have the right to discipline the managers, who are the employees of the organization, in the case of the mismanagement or the improper use of the funds. The shareholders have right to demand for the success of the organization through competing aggressively in order to gain profitability. The shareholders have right to elect and remove the management from the office and also to access or evaluate the books of accounts of the organization. 2) COST OF EQUITY CAPITAL Rate of return of equity Current market price and the nominal value of equity capital CONCEPTUAL FRAMEWORK THE AGENCY PROBLEMS: THE MANAGEMENT...
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...Trade-off, Signaling, and Market-Timing Theories of Capital Structure: a Review Anton Miglo University of Bridgeport 2010 Online at http://mpra.ub.uni-muenchen.de/46691/ MPRA Paper No. 46691, posted 6. May 2013 19:07 UTC The Pecking Order, Trade-off, Signaling, and Market-Timing Theories of Capital Structure: a Review Anton Miglo Associate professor, University of Bridgeport, School of Business, Bridgeport, CT 06604, phone (203) 576-4366, email: amiglo@bridgeport.edu. This version: 2013 Initial version: 2010 Abstract. This paper surveys 4 major capital structure theories: trade-off, pecking order, signaling and market timing. For each theory, a basic model and its major implications are presented. These implications are compared to the available evidence. This is followed by an overview of pros and cons for each theory. A discussion of major recent papers and suggestions for future research are provided. Introduction The modern theory of capital structure began with and the famous proposition of Modigliani Miller (1958) that described the conditions of capital structure irrelevance. Since then, been changing these conditions to explain factors driving capital many economists have structure decisions. Harris and Raviv (1991) synthesized major theoretical literature in the field, related these to the known empirical evidence, and suggested promising avenues for future research. They argued that asymmetric information theories of capital structure are less...
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...Proposal for Research On Capital Structure Determinants of the Pharmaceutical Companies in Bangladesh: A study in Incepta pharmaceutical Company Limited. Mirpur Cantonment, Dhaka-1216 Proposal for Research On Capital Structure Determinants of the Pharmaceutical Companies in Bangladesh: A study in Incepta pharmaceutical Company Limited. Prepared for Md. Sawkat Ali Lieutenant Colonel Internship Supervisor Faculty of Business Studies Prepared by |Ronald Halder | |ID – M 0910013 | |M.B.A 10th batch | Mirpur Cantonment, Dhaka-1216 September 19, 2010 December 19, 2010 Md. Sawkat Ali Lieutenant Colonel Internship Supervisor Faculty of Business Studies Bangladesh University of Professionals Mirpur Cantonment, Dhaka-1216. Dear Sir: Subject: Submission of Proposal for research on “Capital Structure Determinants of the Pharmaceutical Companies in Bangladesh: A study in Incepta pharmaceutical Company Limited”. Here I developed a proposal on “Capital Structure Determinants of the Pharmaceutical Companies in Bangladesh: A study in Incepta pharmaceutical Company Limited”. The proposal will focus on the steps of research through several variables. The main findings of the research will be to find out the determinants of capital structure and find the most vital one through statistical analysis and interpretation. I highly appreciate you for creating such opportunity...
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...of Business and Economics Department of Accounting and Finance THE DETERMINANTS OF CAPITAL STRUCTURE Evidence from Commercial Banks in Ethiopia By K i b ro m M e h a ri F i s s e h a Reg.No.-CBE/PR0025/01 Research Project Submitted to the Department of Accounting and Finance, College of Business and Economics, Mekelle University, for the partial fulfillment of the degree of Master of Finance and Investment Under the Guidance of Aregawi Gebremichael (Ph.D. Candidate) Assistant Professor May, 2010 Mekelle, Ethiopia i THE DETERMINANTS OF CAPITAL STRUCTURE Evidence from Commercial Banks in Ethiopia By Kibrom Mehari Fisseha Reg. No. CBE/PR0025/01 ii DECLARATION I, Kibrom Mehari Fisseha, hereby declare that the project work entitled “The Determinants of Capital Structure: Evidence from Commercial Banks in Ethiopia” submitted by me for the award of the degree of Master of Science in Finance and Investment of Mekelle University, is original work and it hasn’t been presented for the award of any other Degree, Diploma, Fellowship or other similar titles of any other university or institution. Place: Mekelle Signature: Date: May, 2010 ………………….. KIBROM MEHARI FISSEHA iii CERTIFICATION I certify that the project work entitled “The Determinants of Capital Structure” is a bona-fide work of Mr. Kibrom Mehari who carried out the research under my guidance. Certified further, that to the best of my knowledge the work reported...
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...Financial Theories Overview Edward E. Edgar University of Phoenix Financial Theories Overview The following is an overview of 10 different financial theories prevalent today. The overview will include a brief description of the theory, an example of the theory, and other attributes of the theory. There will also be a conclusion to sum up a general understanding of the theories and their applications. Efficiency theory Efficiency theory has been around since the 60s and, is an extension of the efficiency theory of a capitalist society. Generally the theory is that scant resources are distributed by the owner in an efficient manner. The owner choses the best outcome for his or her investment and regulates resources and products accordingly. This is extended to the stock market in the 60s and has been a prevalent theory since. The theory as applied to the stock market says that all information of the market is fully reflected in the price of the stock and efficiently assimilated (Fama, 1970). Examples Generally stock returns are compared to overall market returns. A mutual fund company will compare their returns to the general stock market return and state they are a certain percentage above or below the market standard returns. Most will try to say they have beaten the market average. This is true for most investing firms and, is used as a selling point for the company or mutual fund. Attributes If this theory was to be taken to the extreme one would have to say that...
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...of Profitability and Financial Leverage on Firm’s Capital Structure By [Your Name] [Instructor’s Name] [Institution’s Name] [Date] Declaration While conducting the proposed research work, I, being a hard-working, innovative and conscientious researcher, come up with the factual severity of consequences allied with an act of plagiarising content from others’ work. Moreover, I do comprehend the rules and regulations my university encompasses against submitting a plagiarised document. Adhering to all these strict and restricted rules and regulations against plagiarism, I have made all possible endeavours to keep my research report under the level of allowed percentage of plagiarism. Before presenting my research report to my esteemed research guiders and professors, I, hereby declare the authenticity and uniqueness of the presented dissertation, which is, by all means, an innovative piece of writing and is an outcome of hypothetically and logically researched facts and figures allied with the project subject matter which I meticulously researched during my investigative course project. Although, this dissertation is an original piece of research but still, there are some ideas, concepts and theories that are being taken and inspired from previously presented works in this particular domain for endowing my researched topic with a literal and theoretical support as well as for influencing the analyzed outcomes of the proposed research-based exposition. ...
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...Chapter 4 The economics of Financial Reporting Regulation The case for unregulated markets for accounting information * Support for unregulated marketing all relate to the incentives for a firm to report information about itself to owners and to the capital market. * Agency theory explains why incentives exist for voluntary reporting to owners. * Wider voluntary reporting to the capital market is explained by signaling theory * The arguments supporting unregulated markets for accounting information are largely deductive in nature. Agency Theory * Predicts and explains the behavior of parties involved with the firm. * It conceives of the firm itself as a nexus of agency relationship and seeks to understand organizational behavior by examining how parties to agency relationships within the firm maximize their own utility. * One major relationship is between the management group and the owners of the firm. * Managers are hired to administer the firms’ activities. * Owners and Managers may have different goals and may not be in perfect agreement. While owners are interested to maximize return of investment and security prices, managers have a wider range of economic interests and psychological needs. Because of this conflict, owners communicate with managers in such a way as to minimize conflict between the goals of two groups. * Costs relating to monitoring management reduce managers’ compensation. Therefore managers have an...
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