Relationship between financial risks and firm value: A moderating role of capital adequacy
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Author(s)Tahir Saeed JagiraniLink to ORCID Index: https://orcid.org/0000-0002-5526-6442
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Lim Chee CheeLink to ORCID Index: https://orcid.org/0000-0001-6255-8884
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Zunarni Binti Kosim
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DOIhttp://dx.doi.org/10.21511/imfi.20(1).2023.25
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Article InfoVolume 20 2023, Issue #1, pp. 293-303
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- 273 Views
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74 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
The study of firm value and financial risks became more important after the global financial crisis of 2007–2008, as the required risk was mismanaged, resulting in a deterioration in firm value. It is important to study the relationship between financial risks and firm value. This study aims to examine the moderating effect of capital adequacy on the relationship between financial risks and the firm value of listed banks in Pakistan. This study is based on half-yearly secondary data of 560 sample observations from 2009 to 2021. Multiple regression and panel data estimation techniques were employed for the analysis. The study used firm value as a dependent variable, proxied by Tobin’s Q, along with five independent variables and one moderating variable. The results of this study indicate that a higher capital adequacy ratio (CAR) increases firm value and has a moderating effect on financial risks and firm value. Nonperforming loans, net interest margin, and cost income ratio are found to have a significant negative relationship with firm value. The study concludes that the stock prices of listed banks in Pakistan are declining persistently, which causes the stock’s worth to shift from being inflated to being undervalued.
- Keywords
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JEL Classification (Paper profile tab)G32, G21, L25, O16
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References43
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Tables8
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Figures1
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- Figure 1. Logical relationship between variables
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- Table 1. Half-yearly observations of listed banks of Pakistan
- Table 2. Summary of variables and measurements
- Table 3. Descriptive statistics
- Table 4. Goodness of fit test
- Table 5. Regression results of financial risks and firm value
- Table 6. Pearson correlation
- Table 7. Moderating effects of CAR on financial risks and Tobin’s Q
- Table 8. Hypotheses testing results
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Inventory management, cost of capital and firm performance: evidence from manufacturing firms in Jordan
Ashraf Mohammad Salem Alrjoub ,
Muhannad Akram Ahmad
doi: http://dx.doi.org/10.21511/imfi.14(3).2017.01
Investment Management and Financial Innovations Volume 14, 2017 Issue #3 pp. 4-14 Views: 2353 Downloads: 1701 TO CITE АНОТАЦІЯSeveral studies have examined the relationship between inventory management and firm performance. However, most of these studies ignore the impact of inventory types on the relationship. Moreover, the relationship is influenced by some factors such as cost of capital which has not been considered. This study examines the moderating effect of cost of capital on the relationship between inventory types and firm performance. The data of 48 firms for the period 2010-2016 which formed 279 firm-year observations were used in this study. With the use of Pearson correlation and panel Generalized Method of Moments (GMM) estimation, the findings show that inventory management with consideration of its types influence firm performance in the long term. In addition, it is also found that cost of capital moderates the relationship between inventory management and firm performance. However, the interaction between cost of capital and inventory types has different implications. It is suggested that firms should consider cost of capital when making decision on inventory types and align their inventory control to fit in to the changes in their business environment.
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The impact of foreign ownership on corporate governance: evidence from an emerging market
Rawan Shubita , Moade Fawzi Shubita
doi: http://dx.doi.org/10.21511/imfi.16(2).2019.09
Investment Management and Financial Innovations Volume 16, 2019 Issue #2 pp. 101-115 Views: 1642 Downloads: 221 TO CITE АНОТАЦІЯThis research explores the influence of foreign ownership on non-financial public shareholding firms in the Amman Stock Exchange (ASE). The study involved an investigation into the connection between non-Jordanian ownership and the company growth opportunity, stock liquidity, leverage, dividend policy and business output. The results highlight that foreign ownership can provide improved corporate governance practices by playing a decisive role in increasing the growth opportunity and enhancing the firms’ market valuation, as measured by Tobin’s Q. Moreover, the findings indicate that companies with foreign board membership have better operating performance and higher firm value. The rewards were reaped by foreign investors based on their superior monitoring ability, which affects the decisions made and actions taken by management.
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Working capital management and shareholders' wealth creation: evidence from non-financial firms listed on the Johannesburg Stock Exchange
Investment Management and Financial Innovations Volume 14, 2017 Issue #1 pp. 80-88 Views: 1466 Downloads: 1408 TO CITE АНОТАЦІЯWorking capital plays a vital role in shareholders’ wealth creation, yet there is a dearth of empirical studies on the relationship between working capital management and firm value in the South African economic environment. This study attempts to fill this gap by using Richards and Laughlin’s (1980) Cash Conversion Cycle theory to investigate the impact of working capital management efficiency and its separate components on firm value of South African firms listed on the Johannesburg Stock Exchange (JSE). Panel data regression methodology was used to analyze accounting data obtained from I-Net Bridge/BFA McGregor for 75 firms for the 10 year period, 2003 to 2012, to determine the nexus between WCM and profitability (proxied by return on assets). The key findings of the study are as follows: 1) there exists a significant positive relationship between firm value and both inventory conversion period and receivables conversion period; 2) the relationship between the cash conversion cycle and firm value is positive but insignificant; 3) there is a significant positive relationship between accounts payable deferral period (PDP) and profitability; 4) firm size and firm value are significantly positively related, and 5) there is a significant negative relationship between leverage and firm value.
