Research Outputs
Group affiliation and ownership concentration as determinants of capital structure decisions: Contextualizing the facts for an emerging economy
This study considers the firm’s affiliation with business groups and the ownership structure as determinants of leverage decisions in Chilean firms. The major findings show that group-affiliated firms take advantage of internal capital markets and transactions with related parties (e.g., low transference price or loans at competitive interest rates) that reduces the demand for external debt. Majority shareholders in affiliated firms behave as controllers of managers, on the one hand, and avoid the supervisory role of debt, on the other hand. In stand-alone firms, supervision led by majority shareholders is complemented by the monitoring role of debt through higher levels of leverage. We conclude that further developments in capital structure theories adjusted to the particularities of the different institutional contexts are needed
Capital structure in the Chilean corporate sector: Revisiting the stylized facts
The purpose ofthis paper is to analyze the traditional drivers ofthe capital structure, in addition to others particularities ofthe Chilean corporate sector. Using panel data methodology, this study examines the potential drivers of the capital structure in a sample of 157 Chilean firms. To do that, this study also includes variables not commonly used in the literature (e.g. ownership concentration, business groups affiliation, and dividends), as distinctive elements of the Chilean corporate sector. Our results show a positive effect of firm size and ownership concentration on firms leverage; as well as a negative effect of the pay-out policy, growth opportunities, non-debt tax shields, and profitability on the leverage. Some expected relationships in theAnglo-Saxon context are also curiously observed in Chile. Nevertheless, there are some relations that are not in line with the current literature such as the negative relationship between asset tangibility and leverage. Finally, firms’ affiliation to economic groups allows them to take advantage of internal capital markets, increasing leverage. This suggests that some of the insights from the current theoretical bodies are not portable across countries, and consequently, much remains to be done in order to understand the impact of different institutional features on capital structure choices. Emerging markets provide a challenge to existing models that need to be reformulated to accommodate the characteristics of these markets. This study contributes in this direction by taking into consideration the particularities of an emerging Latin American Economy.
The zero-debt puzzle in BRICS countries: Disentangling the financial flexibility and financial constraints hypotheses
This study analyzes the zero-debt decisions of BRICS firms using a bivariate probit model. The leading hypotheses are financial flexibility and financial constraints. On the demand-side, our findings reveal that managerial debt aversion, early lifecycle stage, growth opportunities, solvency, and concentrated ownership contribute to the lack of debt. Similarly, a country's institutional quality correlates with firms' debt-free status. On the supply-side, creditors fund companies with poor financial records in countries with robust markets and economic freedom. Financial flexibility and restrictions leading to zero debt are linked to firm and institutional characteristics in emerging countries.
Debt, or not debt, that is the question: A Shakespearean question to a corporate decision
Capital structure theories are unable to properly explain the zero-debt puzzle, frequently observed in firms around the world. Our paper’s contribution is to identify the variables that measure either firm’s characteristics or environmental effects, in order to explain why firms have and eventually keep a debt-free policy. Our study includes a comprehensive sample of firms from 47 countries in the period 1996–2014. Our results indicate that all equity companies are small, with no growth opportunities, with a low level of tangible assets, high proportion of liquid assets, profitable, and with diluted insider ownership. Furthermore, it is more probable to find low levels of debt in countries with good governance indicators or when the economy is not growing.
Capital structure decisions: What Spanish CFOs think
Purpose: The way business practice adjusts to the models proposed by financial theory has been under moderate yet constant scrutiny from the academic world. The purpose of this paper is to contribute to this line of research by showing CFOs’ perceptions of Spanish companies with regard to their capital structure decisions. Design/Methodology: The empirical approach is examined using information gathered through a survey answered by 140 CFOs of Spanish companies during 2011. Results are obtained from mean difference tests and ordered probit estimations. Findings: The results of the paper show that managers attach importance to establishing and monitoring a target debt ratio and the capacity to maintain additional debt in order to provide financial flexibility. In addition, CFOs prefer internal financing to external, using debt when internal funds do not allow investments to be funded. Originality/Value: On the whole, the results of this research show that trade-off and pecking order theories are not alternative views of the same problem, but represent complementary approaches of how companies define their capital structures.