• The Journal of Asian Finance, Economics and Business
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• 제7권11호
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• pp.607-617
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• 2020

This study investigates the causal relationship between public and private external debt and economic growth in developing countries. Our model includes 18 selected Asian developing and transition economies from 1995 thru 2019. We employ the dynamic heterogeneous panel data methods, pooled mean group (PMG), robust cross-sectional augmented autoregressive distributed lag (CS-ARDL), and pairwise panel causality test. The results of PMG and CS-ARDL show the existence of causality between external debt and economic growth both in the short-run and long-run. The pairwise Granger causality test found the bidirectional causal relationship runs from total external debt, public external debt, and private external debt to economic growth and economic growth to external debt. The results showed first the existence of causality in the short-run and long-run between external debt and economic growth and the second, bi-directional causality that runs from external debt to economic growth and economic growth to external debt. Both the dynamic models and robust estimator found the same inferences about the impact of main variables on economic growth in Asian developing and transition economies. The findings of this study suggest to assure debt management, investment in productive sectors, increase domestic savings, decrease external dependency, and focus on international trade.

• Asia-Pacific Journal of Business
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• 제7권1호
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• pp.1-10
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• 2016

This study attempts to investigate the effects of different types of debts on economic growth in Bangladesh using time series data spanning from 2000 to 2015. In this study, the RDL model has been applied to determine the long run relationship among the selected variables. The result of the ARDL model shows that there exists a long term relationship between economic growth and the debt variables. It was evident from the findings that there exists bidirectional causality between public sector external debt and economic growth. Causality between private external debt and economic growth has been found to be insignificant. However, causality between domestic debt and economic growth showed a unidirectional causality from domestic debt to economic growth and not vice versa. Causality tests suggest that impact of domestic debt on economic growth is more effective compared to external debts.

• The Journal of Asian Finance, Economics and Business
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• 제8권10호
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• pp.11-17
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• 2021

This study aims to know the contribution of external debt to Indonesia's economic growth. The data used a source from the Central Bank of Indonesia from 2011 to 2020. This empirical study uses a quantitative approach with Error Correction Model as the regression method. Government expenditure, government revenue, export, import, inflation, and exchange rate are control variables. The result of the descriptive statistic shows economic growth in Indonesia increased gradually from 2011 to 2020. The increase in economic growth occurred regardless of the contribution of external debt. It does, however, inform the public that Indonesia's economic system has seen successful investments. The result of the study is classified into long-term and short-term. External debt contributes to growth in the long term and has a significant impact. The study's findings will give Indonesia optimism that it can manage external debt as a source of domestic investment. This research may also persuade Indonesia to maintain its economic potency in the future. In the future, this research can be perfected, by adding a threshold level on the amount of Indonesia's external debt.

• Nuclear Engineering and Technology
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• 제54권9호
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• pp.3299-3309
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• 2022

Nuclear energy has the potential to play an influential role in energy transition efforts than is now anticipated by many countries. Realizing sustainable human development and reducing global climate crises will become more difficult without significantly increasing nuclear power. This paper aims to probe the role of nuclear energy, external debt, and financial globalization in sustaining human development and environmental conditions simultaneously in BRICS (Brazil, Russia, India, China, and South Africa) countries. This study applied a battery of second-generation estimation approaches over the period from 1990 to 2019. These methods are useful and robust to cross-countries dependencies, slope heterogeneity, parameters endogeneity, and serial correlation that are ignored in conventional approaches to generate more comprehensive and reliable estimates. The empirical findings indicate that nuclear energy and financial globalization contribute to human development, whereas external debt inhibits it. Similarly, financial globalization accelerates ecological deterioration, but nuclear energy and external debt promote environmental sustainability. Moreover, the study reveals bidirectional feedback causalities between human development, carbon emissions and nuclear energy consumption. The study offers useful policy guidance on accomplishing sustainable and inclusive development in BRICS countries.

• Journal of the Korea Society of Computer and Information
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• 제25권12호
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• pp.333-339
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• 2020

This study investigated the determinants of debt ratio in public institutions. For this purpose, we analyzed the impact of external and internal factors on debt ratio. In this paper, external factors included government grants and deficits compensation, and internal factors included inefficient management. The results of this study are as follows. First, we find that there is a significant positive relation between government grants and debt ratio. This result means that the higher government grants, the higher debt ratio. Second, we also find that there is a significant positive relation between deficits compensation and debt ratio. This implies that the institutions subject to deficits compensation have higher debt ratio. Third, we can not find a significant relation between welfare benefit and debt ratio. This finding implies that inefficient management is not a factor on debt ratio of public institutions. The results documented in this paper provide important policy implications for investigating the determinants of debt ration in public institutions.

• Journal of Distribution Science
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• 제13권10호
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• pp.73-82
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• 2015

Purpose - This paper aims to investigate whether information asymmetry could explain capital structures in Korean corporations. According to Myers (1984), firms prefer internal funding to external financing due to the costs associated with information asymmetry. When external financing is necessary, firms prefer to issue debt rather than equity by the same reasoning. Since Shyam-Sunder and Myers (1999), numerous studies continue to debate the validity of the theory. In this paper, we show how the theory depends on assumptions and incorporated variables. We hope our investigation can provide helpful implications regarding capital structure, information asymmetry, and other firm characteristics. Specifically, our empirical results are complementary to the analysis of Son and Lee's (2015), a recent study that examines the pecking order theory prediction for Korean retail firms. Research design, data, and methodology - We test empirical models that are some variants of model used in Shyam-Sunder and Myers (1999). The financial and accounting data are provided by WISEfn for the firms listed on the KOSPI during 1990 to 2013. Bond ratings are supplied by the Korea Investor Service (KIS). We take into account the heterogeneity in debt capacity; a firm's debt capacity is measured by using the method of Lemmon and Zender (2010) based on its bond ratings. Finally, we estimate empirical models suggested by Shyam-Sunder and Myers (1999), Frank and Goyal (2003), and Lemmon and Zender (2010). Results - First, we find that Shyam-Sunder and Myers' (1999) prediction fails to explain total debt changes of Korean firms. Second, we find a non-monotonic relationship between total debt changes and financial deficits with respect to debt capacity. This contradicts the prediction of Lemmon and Zender (2010) that argues the pecking order theory survives with a monotonically increasing relationship. Third, we estimate a negative correlation coefficient between financial deficit and current debt changes. The result is the complete opposite of the prediction of Lemmon and Zender (2010). Finally, we also confirm the non-monotonic relationship between non-current debt changes and financial deficits with respect to debt capacity. Yet, the slope of coefficient is smaller than that of total debt change case. Indeed, the results are, to some extent, consistent with the prediction of pecking order theory, if we exclude the mid-debt capacity firms. Conclusions - Our empirical results complementary to the analysis of Son and Lee (2015), a recent study focusing on capital structure in Korean retail firms; their paper suggests interesting topics regarding capital structure, information asymmetry, and other firm characteristics in Korean corporations. Contrary to Son and Lee (2015), our results show that total debt changes and current debt changes are inconsistent with the prediction of Shyam-Sunder and Myers (1999). However, similar to Son and Lee (2015), non-current debt changes are consistent with the pecking order prediction, in the case of excluding the mid-level debt capacity firms. This contrast allows us to infer that industry characteristics significantly affect the validity of the pecking order prediction. Further studies are needed to analyze the economics behind this phenomenon, which is beyond the scope of our paper. In addition, the estimation bias potentially matters regarding the firm-level debt capacity calculation. We also reserve this topic for future research.

• The Journal of Asian Finance, Economics and Business
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• 제9권4호
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• pp.261-272
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• 2022

This study examined the association between key audit matters (KAM) and the cost of debt. Financial records and auditors' reports were used to collect data for the fiscal years 2016 and 2017, which were the first two years after KAM was implemented in Thailand. Samples are listed companies in Thailand, where the financial system is primarily debt-based and external auditors play an important role in maintaining financial reporting quality. The final samples for the two-year period consist of 770 observations. The KAM is measured in three aspects: the number of issues, the number of words, and the readability, while the cost of debt is measured by the ratio of interest expense to total debt. The research finds that the KAM readability is significantly and negatively related to the cost of debt. Meanwhile, the number of issues and words have no significant effect on the cost of debt. The finding suggests that auditors' writing skills play a crucial role in the lending decisions of creditors.

• The Journal of Asian Finance, Economics and Business
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• 제7권9호
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• pp.283-291
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• 2020

Although the corporate governance plays a crucial role in protecting shareholder wealth, the effect of corporate governance on cost of debt is unclear. On one hand, the corporate governance reduces asymmetric information between corporate and external investor including debtholder leading to a decreasing in cost of debt financing. On the other hand, bondholders require higher rate of return for an improvement corporate governance. Hence, this study aims to investigate the relationship between the mechanism to improve corporate governance namely board effectiveness and the cost of debt in an emerging market. As we aim to explore the relationship between cost of debt and board effectiveness, we select corporation in Thailand as our sample because the businesses in Thailand are major debt-financing. Hence, our sample include listed firm in Stock Exchange of Thailand between 2007 and 2016. Our main findings support the sub-optimal investment hypothesis in that improved board effectiveness is associated with higher cost of borrowing. In addition, we find that the number of board member-board size, the number of board meeting, and the percentage of non-executive on audit committee play are positively associated with the cost of debt financing. Furthermore, we perform two-stage-least square (2SLS) to ensure that our results are far from endogeneity issue.

• The Journal of Asian Finance, Economics and Business
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• 제7권7호
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• pp.105-112
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• 2020

The study investigates and measures the impact of capital structure, profitability and financial performance on the success of the business organization. Capital structure of the business organization refers to the proportion of external funds and internal funds, i.e., debt and equity. In Saudi Arabia, petrochemicals companies are working on equity, but financial performance reflects negative trend for the period 2004 to 2016. The research is based upon secondary data available on the websites of petrochemicals companies of Saudi Arabia. Financial Ratio variability analysis and Trend Indices of financial ratios (TI_CBI) measure and compare the financial variability and sensitivity of financial ratios of the business organization. Correlation between Trend Indices (TI_CBI) of independent variable and dependent variables are to be calculated to know the impact of changes in debt equity on other dependent variables. The results reveal the unexpected performance of petrochemicals companies due to under-utilization of the resources caused by low demand and lower prices of the products governed by some internal and external factors. The study finds that size, demand, cost of production, profitable streams of products, and low cost capital in external funds are the factors responsible for overall growth development of the petrochemicals industry of Saudi Arabia.

• Asia-Pacific Journal of Business
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• 제14권1호
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• pp.215-229
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• 2023

Purpose - Based on the funding-horizon theory, this study aims to test the effects of cash needs and the persistence of external funding needs on firms' external financing. Design/methodology/approach - Financial data of Korean listed companies were collected from DataGuide. Immediate and near-term cash shortfalls are defined using the methodology of Haung and Ritter (2021). We estimate multinomial logit regressions for the financing choice. Findings - First, all three cash depletion variables used in our study increase the likelihood of external financing. Second, firms prefer to issue debt to meet immediate spending and equity to meet long-lived cash needs. Third, this effect is more pronounced for high R&D firms. Fourth, chaebol firms with internal capital markets defer raising external capital for immediate and near-term cash needs. Research implications or Originality - This paper provide empirical evidence that immediate and near-term cash needs induce external financing, and the persistence of cash needs affects the choice between debt and equity, the finding which is consistent with the funding-horizon theory of financing decisions. Being the first paper to test the funding-horizon theory using Korean data, this paper contributes to the literature on the capital structure of Korean firms.