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Investigating the Effects of Firm-Specific Factors on Businesses' Investment Financing Decisions

Year 2022, Volume: 22 Issue: 2, 102 - 117, 17.10.2022
https://doi.org/10.30976/susead.1065035

Abstract

Purpose - In this paper, how firm size, firm profitability, and firm growth opportunities affect the investment financing decisions of firms is examined with the dynamic multi-equation system method.
Methodology –In the paper, investment financing decisions of 22,694 different firms operating in 76 different countries over 1994 - 2019 were investigated using the seemingly unrelated regression method.
Findings –Findings show that: (1) As firm size increases, the use of long-term financial debt in financing capital expenditures and working capital investments increases. (2) As firm profitability increases, the use of long-term financial debt and cash reserves in financing investments increases, while the equity issuance decreases (3) Firms with high growth opportunities decrease their equity issuances in financing their capital expenditures, while increase their long-term debt uses.
Conclusions –Investment financing decisions vary with the characteristics of the firms.

References

  • Alves, P. F. P., & Ferreira, M. A. (2011). Capital structure and law around the world. Journal of Multinational Financial Management, 21(3), 119-150.
  • Alves, P., & Francisco, P. (2015). The impact of institutional environment on the capital structure of firms during recent financial crises. The Quarterly Review of Economics and Finance, 57, 129-146.
  • Baker, M., & Wurgler, J. (2002). Market timing and capital structure. The journal of finance, 57(1), 1-32.
  • Belkhir, M., Maghyereh, A., & Awartani, B. (2016). Institutions and corporate capital structure in the MENA region. Emerging Markets Review, 26, 99-129.
  • Benavides, J., & Berggrun, L. (2012). Business financing in Colombia: The debt and equity mix. Academia. Revista Latinoamericana de Administración, (49), 17-29.
  • Benlemlih, M. (2017). Corporate social responsibility and firm debt maturity. Journal of Business Ethics, 144(3), 491-517.
  • Booth, L., Aivazian, V., Demirguc‐Kunt, A., & Maksimovic, V. (2001). Capital structures in developing countries. The journal of finance, 56(1), 87-130.
  • Cheng, S. R., & Shiu, C. Y. (2007). Investor protection and capital structure: International evidence. Journal of Multinational Financial Management, 17(1), 30-44.
  • Cho, S. S., El Ghoul, S., Guedhami, O., & Suh, J. (2014). Creditor rights and capital structure: Evidence from international data. Journal of Corporate Finance, 25, 40-60.
  • Choi, H., & Suh, J. (2017). Investment financing: evidence from Korea. Accounting & Finance, 57, 147-184.
  • DeAngelo, H., DeAngelo, L., & Stulz, R. M. (2010). Seasoned equity offerings, market timing, and the corporate lifecycle. Journal of financial economics, 95(3), 275-295.
  • Demirgüç-Kunt, A., & Maksimovic, V. (1996). Stock market development and financing choices of firms. The World Bank Economic Review, 10(2), 341-369.
  • Demirgüç-Kunt, A., & Maksimovic, V. (1999). Institutions, financial markets, and firm debt maturity. Journal of financial economics, 54(3), 295-336.
  • Elsas, R., Flannery, M. J., & Garfinkel, J. A. (2014). Financing major investments: Information about capital structure decisions. Review of Finance, 18(4), 1341-1386.
  • Etudaiye-Muhtar, O. F., Ahmad, R., & Matemilola, B. T. (2017). Corporate debt maturity structure: The role of firm level and institutional determinants in selected African countries. Global Economic Review, 46(4), 422-440.
  • Fama, E. F., & French, K. R. (2002). Testing trade-off and pecking order predictions about dividends and debt. The review of financial studies, 15(1), 1-33.
  • Fama, E. F., & French, K. R. (2021). Financing Decisions Who Issues Stock? (pp. 750-788). University of Chicago Press.
  • Fan, J. P., Titman, S., & Twite, G. (2012). An international comparison of capital structure and debt maturity choices. Journal of Financial and quantitative Analysis, 47(1), 23-56.
  • Frank, M. Z., & Goyal, V. K. (2003). Testing the pecking order theory of capital structure. Journal of financial economics, 67(2), 217-248.
  • Frank, M. Z., & Goyal, V. K. (2009). Capital structure decisions: which factors are reliably important?. Financial management, 38(1), 1-37.
  • Gatchev, V. A., Spindt, P. A., & Tarhan, V. (2009). How do firms finance their investments?: The relative importance of equity issuance and debt contracting costs. Journal of Corporate Finance, 15(2), 179-195.
  • Gatchev, V. A., Pulvino, T., & Tarhan, V. (2010). The interdependent and intertemporal nature of financial decisions: An application to cash flow sensitivities. The Journal of Finance, 65(2), 725-763.
  • Graham, J. R., & Harvey, C. R. (2001). The theory and practice of corporate finance: Evidence from the field. Journal of financial economics, 60(2-3), 187-243.
  • Gungoraydinoglu, A., & Öztekin, Ö. (2011). Firm-and country-level determinants of corporate leverage: Some new international evidence. Journal of Corporate Finance, 17(5), 1457-1474.
  • Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.
  • Kraus, A., & Litzenberger, R. (1973). A state-preference of optimal capital structure and corporate debt capacity. Journal of Finance, 33, 45-63.
  • Krivogorsky, V., Joh, G. H., & DeBoskey, D. G. (2018). The influence of supply side factors on firm's borrowing decisions: European evidence. Global Finance Journal, 35, 202-222.
  • Leary, M. T., & Roberts, M. R. (2010). The pecking order, debt capacity, and information asymmetry. Journal of financial economics, 95(3), 332-355.
  • Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American economic review, 48(3), 261-297.
  • Myers, S. C. (1984). The capital structure puzzle. Journal of Finance, 39, 574–592.
  • Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of financial economics, 13(2), 187-221.
  • Nguyen, P. D. & Dong, P. T. A. (2013). Determinants of corporate investment decisions: The case of Vietnam. Journal of Economics and Development, 15 (1), 32 – 48.
  • Öztekin, Ö. (2015). Capital structure decisions around the world: which factors are reliably important?. Journal of financial and quantitative analysis, 50(3), 301-323.
  • Park, K., & Jang, S. S. (2018). Pecking order puzzle: Restaurant firms’ unique financing behaviors. International Journal of Hospitality Management, 70, 99-109.
  • Pour, E. K., & Lasfer, M. (2019). Taxes, governance, and debt maturity structure: International evidence. Journal of International Financial Markets, Institutions and Money, 58, 136-161.
  • Rajan, R. G., & Zingales, L. (1995). What do we know about capital structure? Some evidence from international data. The journal of Finance, 50(5), 1421-1460.
  • Shah, A., Shah, H. A., Smith, J. M., & Labianca, G. J. (2017). Judicial efficiency and capital structure: An international study. Journal of Corporate Finance, 44, 255-274.
  • Shyam-Sunder, L., & Myers, S. C. (1999). Testing static tradeoff against pecking order models of capital structure. Journal of financial economics, 51(2), 219-244.
  • Titman, S., & Wessels, R. (1988). The determinants of capital structure choice. The Journal of finance, 43(1), 1-19.

Firmaya Özgü Faktörlerin İşletmelerin Yatırım Finansmanı Kararları Üzerindeki Etkilerinin İncelenmesi

Year 2022, Volume: 22 Issue: 2, 102 - 117, 17.10.2022
https://doi.org/10.30976/susead.1065035

Abstract

Amaç - Bu çalışmada firma büyüklüğünün, firma büyüme fırsatlarının ve firma kârlılığının işletmelerin yatırım finansmanı kararlarını nasıl etkilediği dinamik çoklu denklem sistemi yöntemi ile incelenmiştir.
Yöntem - Çalışmada 1994-2019 yılları arasında 76 farklı ülkede faaliyet gösteren 22,694 farklı firmanın yatırım finansmanı kararları, görünüşte ilişkisiz regresyon yöntemi ile incelenmiştir.
Bulgular –Elde edilen bulgulara göre: (1) Firma büyüklüğü arttıkça maddi duran varlık ve çalışma sermayesi yatırımlarının finansmanında uzun vadeli finansal borç kullanımı artmaktadır. (2) Firma kârlılığı arttıkça maddi duran varlık yatırımlarının finansmanında uzun vadeli finansal borç ve nakit rezervi kullanımı artmakta ve diğer taraftan hisse senedi kullanımı ise azalmaktadır. (3) Büyüme olanakları yüksek olan firmalar ise maddi duran varlık yatırımlarının finansmanında hisse senedi ihraçlarını azaltmakta ve uzun vadeli kredi kullanımlarını ise artırmaktadırlar.
Sonuç –İşletmelerin sahip oldukları özelliklere göre yatırım finansmanı kararları değişmektedir.

References

  • Alves, P. F. P., & Ferreira, M. A. (2011). Capital structure and law around the world. Journal of Multinational Financial Management, 21(3), 119-150.
  • Alves, P., & Francisco, P. (2015). The impact of institutional environment on the capital structure of firms during recent financial crises. The Quarterly Review of Economics and Finance, 57, 129-146.
  • Baker, M., & Wurgler, J. (2002). Market timing and capital structure. The journal of finance, 57(1), 1-32.
  • Belkhir, M., Maghyereh, A., & Awartani, B. (2016). Institutions and corporate capital structure in the MENA region. Emerging Markets Review, 26, 99-129.
  • Benavides, J., & Berggrun, L. (2012). Business financing in Colombia: The debt and equity mix. Academia. Revista Latinoamericana de Administración, (49), 17-29.
  • Benlemlih, M. (2017). Corporate social responsibility and firm debt maturity. Journal of Business Ethics, 144(3), 491-517.
  • Booth, L., Aivazian, V., Demirguc‐Kunt, A., & Maksimovic, V. (2001). Capital structures in developing countries. The journal of finance, 56(1), 87-130.
  • Cheng, S. R., & Shiu, C. Y. (2007). Investor protection and capital structure: International evidence. Journal of Multinational Financial Management, 17(1), 30-44.
  • Cho, S. S., El Ghoul, S., Guedhami, O., & Suh, J. (2014). Creditor rights and capital structure: Evidence from international data. Journal of Corporate Finance, 25, 40-60.
  • Choi, H., & Suh, J. (2017). Investment financing: evidence from Korea. Accounting & Finance, 57, 147-184.
  • DeAngelo, H., DeAngelo, L., & Stulz, R. M. (2010). Seasoned equity offerings, market timing, and the corporate lifecycle. Journal of financial economics, 95(3), 275-295.
  • Demirgüç-Kunt, A., & Maksimovic, V. (1996). Stock market development and financing choices of firms. The World Bank Economic Review, 10(2), 341-369.
  • Demirgüç-Kunt, A., & Maksimovic, V. (1999). Institutions, financial markets, and firm debt maturity. Journal of financial economics, 54(3), 295-336.
  • Elsas, R., Flannery, M. J., & Garfinkel, J. A. (2014). Financing major investments: Information about capital structure decisions. Review of Finance, 18(4), 1341-1386.
  • Etudaiye-Muhtar, O. F., Ahmad, R., & Matemilola, B. T. (2017). Corporate debt maturity structure: The role of firm level and institutional determinants in selected African countries. Global Economic Review, 46(4), 422-440.
  • Fama, E. F., & French, K. R. (2002). Testing trade-off and pecking order predictions about dividends and debt. The review of financial studies, 15(1), 1-33.
  • Fama, E. F., & French, K. R. (2021). Financing Decisions Who Issues Stock? (pp. 750-788). University of Chicago Press.
  • Fan, J. P., Titman, S., & Twite, G. (2012). An international comparison of capital structure and debt maturity choices. Journal of Financial and quantitative Analysis, 47(1), 23-56.
  • Frank, M. Z., & Goyal, V. K. (2003). Testing the pecking order theory of capital structure. Journal of financial economics, 67(2), 217-248.
  • Frank, M. Z., & Goyal, V. K. (2009). Capital structure decisions: which factors are reliably important?. Financial management, 38(1), 1-37.
  • Gatchev, V. A., Spindt, P. A., & Tarhan, V. (2009). How do firms finance their investments?: The relative importance of equity issuance and debt contracting costs. Journal of Corporate Finance, 15(2), 179-195.
  • Gatchev, V. A., Pulvino, T., & Tarhan, V. (2010). The interdependent and intertemporal nature of financial decisions: An application to cash flow sensitivities. The Journal of Finance, 65(2), 725-763.
  • Graham, J. R., & Harvey, C. R. (2001). The theory and practice of corporate finance: Evidence from the field. Journal of financial economics, 60(2-3), 187-243.
  • Gungoraydinoglu, A., & Öztekin, Ö. (2011). Firm-and country-level determinants of corporate leverage: Some new international evidence. Journal of Corporate Finance, 17(5), 1457-1474.
  • Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.
  • Kraus, A., & Litzenberger, R. (1973). A state-preference of optimal capital structure and corporate debt capacity. Journal of Finance, 33, 45-63.
  • Krivogorsky, V., Joh, G. H., & DeBoskey, D. G. (2018). The influence of supply side factors on firm's borrowing decisions: European evidence. Global Finance Journal, 35, 202-222.
  • Leary, M. T., & Roberts, M. R. (2010). The pecking order, debt capacity, and information asymmetry. Journal of financial economics, 95(3), 332-355.
  • Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American economic review, 48(3), 261-297.
  • Myers, S. C. (1984). The capital structure puzzle. Journal of Finance, 39, 574–592.
  • Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of financial economics, 13(2), 187-221.
  • Nguyen, P. D. & Dong, P. T. A. (2013). Determinants of corporate investment decisions: The case of Vietnam. Journal of Economics and Development, 15 (1), 32 – 48.
  • Öztekin, Ö. (2015). Capital structure decisions around the world: which factors are reliably important?. Journal of financial and quantitative analysis, 50(3), 301-323.
  • Park, K., & Jang, S. S. (2018). Pecking order puzzle: Restaurant firms’ unique financing behaviors. International Journal of Hospitality Management, 70, 99-109.
  • Pour, E. K., & Lasfer, M. (2019). Taxes, governance, and debt maturity structure: International evidence. Journal of International Financial Markets, Institutions and Money, 58, 136-161.
  • Rajan, R. G., & Zingales, L. (1995). What do we know about capital structure? Some evidence from international data. The journal of Finance, 50(5), 1421-1460.
  • Shah, A., Shah, H. A., Smith, J. M., & Labianca, G. J. (2017). Judicial efficiency and capital structure: An international study. Journal of Corporate Finance, 44, 255-274.
  • Shyam-Sunder, L., & Myers, S. C. (1999). Testing static tradeoff against pecking order models of capital structure. Journal of financial economics, 51(2), 219-244.
  • Titman, S., & Wessels, R. (1988). The determinants of capital structure choice. The Journal of finance, 43(1), 1-19.
There are 39 citations in total.

Details

Primary Language Turkish
Subjects Business Administration
Journal Section Articles
Authors

İlhan Çam 0000-0002-3076-0639

Gökhan Özer 0000-0002-3255-998X

Publication Date October 17, 2022
Submission Date January 29, 2022
Acceptance Date July 26, 2022
Published in Issue Year 2022 Volume: 22 Issue: 2

Cite

APA Çam, İ., & Özer, G. (2022). Firmaya Özgü Faktörlerin İşletmelerin Yatırım Finansmanı Kararları Üzerindeki Etkilerinin İncelenmesi. Sosyal Ekonomik Araştırmalar Dergisi, 22(2), 102-117. https://doi.org/10.30976/susead.1065035