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 KosimLink to ORCID Index: https://orcid.org/0009-0008-9848-4010
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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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- 848 Views
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291 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: 2854 Downloads: 2081 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: 2059 Downloads: 314 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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Does capital structure affect firm value in Vietnam?
Tien Dat Dang , Thi Van Trang Do
doi: http://dx.doi.org/10.21511/imfi.18(1).2021.03
Investment Management and Financial Innovations Volume 18, 2021 Issue #1 pp. 33-41 Views: 1970 Downloads: 1180 TO CITE АНОТАЦІЯThis study aims to examine whether the capital structure and several factors have significant influences on firm value in Vietnam. To achieve this objective, 435 non-financial listed companies have been selected from 2012 to 2019 on Vietnamese stock exchanges. Four groups of firms continue to be chosen from the total to investigate the differences in the outcomes among industries. The results altogether using the GMM method show that the impact of capital structure and other control variables on firm value is significant, yet different across industries: capital structure has a significant positive impact on firm value in the food and beverage industry, but has a significant negative effect on the value of the firm in wholesale trade and construction, as well as real estate industry, while has an insignificant influence on enterprise value considering all industries. Apart from the firm size, the impact of other control factors on firm value also indicates mixed results.
