Government Borrowing, Capital Structure and Liquidity Policies: Evidence from Iran

Alireza Orangian, Mohammad Nadiri, Mohsen Ansari

Resumo


This paper investigates whether there is a significant relationship between government borrowing and firms’ capital structure and liquidity in Iran as a developing economy. In addition, the most innovative aspect of our research is to inspect which source of government debt has the most impact on the firm’s financing and liquidity policies. We carry out our inquiry on non-financial corporations listed in Tehran Stock Exchange from 2006 to 2017. The econometric model utilized in this study is the Generalized Method of Moments (GMM). We consider some other proved firm-specific and country-level factors as control variables in our model development according to the previous researches. Moreover, in addition to the econometric model, we harness Sobol’ sensitivity analysis and Support Vector Regression (SVR) for selecting the most influential source of government borrowing to reveal whether econometric and machine learning methods have the same result in this case and to compare them. The econometric results evince that not only the total government borrowing and corporate liquidity have negative influences on leverage ratio as the determinant of capital structure, but also government debt to the bank sector and other lending institutes plays the most essential role. It also shows the affinity of capital structure and liquidity literature implicitly. Additionally, the SVR model indicates similar results to the econometric model.


Palavras-chave


Capital structure; Government borrowing; GMM; Liquidity; SVR

Texto completo:

PDF (English)

Referências


Ansari, M., & Akhoondzadeh, M. (2019). Mapping water salinity using Landsat-8 OLI satellite images (Case study: Karun basin located in Iran). Advances in Space Research, 65(5), 149-1502.

Ayturk, Y. (2017). The effects of government borrowing on corporate financing: Evidence from Europe. Finance Research Letters, 20, 96-103.

Badoer, D.C., James, C.M. (2015). The determinants of long-term corporate debt issuances. The Journal of Finance, 71 (1), 457-492.

Baker, H. & Martin, G., Capital Structure and Corporate Financing Decisions: Theory, Evidence, and Practice. The Robert W. Kolb Series in Finance, 2011 John Wiley & Sons, Inc.

Bayless, M. & Chaplinsky, S. (1996). Is There a Window of Opportunity for Seasoned Equity Issuance?. Journal of Finance, 51(1), 253–278.

Brounen, D., De Jong, A., Koedijk, K. (2006). Capital structure policies in Europe: survey evidence. Journal of Banking and Finance, 30 (5), 1409–1442.

Buiter, W.H. (1977). “Crowding out” and the effectiveness of fiscal policy. Journal of Public Economics, 7(3), 309-328.

De Jong, A. Kabir, R. & Nguyen, T. (2007). Capital Structure around the World: The Roles of Firm-and country-specific Determinants. Journal of Banking & Finance, 32, 1954–1969.

Dos Santos Cardoso, V. R., & Pinheiro, M. C. (2020). The influence of recession and macroeconomic variables on sectorial capital structure. Revista Contabilidade e Financas, 31(84), 392–408.

Elmendorf, D.W. & Mankiw, N.G. (1999). Government debt. In: Taylor J.B. & Watson M.W. (eds), Handbook of Macroeconomics, Vol. 1. Britain: Elsevier, 1615–1669.

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. (2009). Capital Structure Decisions: Which Factors Are Reliably Important?. Financial Management, 38, 1-37.

Frank, M.Z. & Goyal, V.K. (2004). The Effect of Market Conditions on Capital Structure Adjustment. Finance Research Letters, 1, 47-55.

Friedman, B.M. (1978). Crowding out or crowding in? Economic Consequences of Financing Government Deficits, Brookings Papers on Economic Activity, 1978 (3), 593–641.

Graham, J.R., Harvey, C.R. (2001). The theory and practice of corporate finance: evidence from the field. Journal of Financial Economics, 60 (2), 187–243.

Graham J.R., Leary M.T. & Roberts M.R. (2014). How does government borrowing affect corporate financing and investment? NBER Working Paper, page 20581.

Greenwood, R., Hanson, S., Stein, J.C. (2010). A gap-filling theory of corporate debt maturity choice. The Journal of Finance, 65 (3), 993–1028.

Homma, T. & Saltelli, A. (1996). Importance measures in global sensitivity analysis of nonlinear models. Reliability Engineering & System Safety, 52(1), 1-17.

Hubbard G. (2012). Consequences of government deficits and debt. International Journal of Central Banking, 8 (S1), 203–235.

Krishnamurthy, A. & Vissing-Jorgensen, A. (2012). The aggregate demand for treasury debt. Journal of Political Economy, 120(2), 233–267.

Liang, Y. Shi, K. Wang, L. & Xu, J. (2017). Local Government Debt and Firm Leverage: Evidence from China. Asian Economic Policy Review, 12, 210–232.

Lussuamo, J., & Serrasqueiro, Z. (2021). What are the determining factors in the capital structure decisions of small and medium-sized firms in Cabinda, Angola?, Revista Contabilidade & Financas,32(87), 476-491.

Modigliani, F., & Miller, M.H. (1963). Corporate Income Taxes and the Cost of Capital: A Correction. The American Economic Review, 53(3), 433-443.

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., & 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.

Myers, S.C. (1984). The Capital Structure Puzzle. The Journal of Finance, 39(3), 575-592.

Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (2001). Corporate cash holdings. Journal of applied corporate finance. 14(1), 55-67.

Oztekin, O. (2015). Capital Structure Decisions around the World: Which Factors Are Reliably Important?. Journal of Financing and Quantitative Analysis, 5(3), 301–323.

Parsons, C. Titmam, S. (2008). Capital Structure and Corporate Strategy, Handbook of Empirical Corporate Finance, Volume 2. Chapter 13. Elsevier B.V.

Ritter, Jay R., & Welch, I. (2002). A Review of IPO Activity, Pricing, and Allocations. Journal of Finance, 57(4), 1795–1828.

Ross, Stephen A. (1977). The Determination of Financial Structure: The Incentive Signaling Approach. Bell Journal of Economics, 8(1), 23–40.

Schölkopf, B., Smola, A. J. & Bach, F. (2002). Learning with kernels: support vector machines, regularization, optimization, and beyond: MIT press.

Sobol, I. M. (1993). Sensitivity estimates for nonlinear mathematical models. Mathematical modelling and computational experiments, 1(4), 407-414.

Spencer R.W. & Yohe W.P. (1970). The “crowding out” of private expenditures by fiscal policy actionsx. Federal Reserve Bank of St. Louis Review, (Oct):12–24.

Sudret, B. (2008). Global sensitivity analysis using polynomial chaos expansions. Reliability engineering & system safety, 93(7), 964-979.

Wang, L. a., Zhou, X., Zhu, X., Dong, Z. & Guo, W. (2016). Estimation of biomass in wheat using random forest regression algorithm and remote sensing data. The Crop Journal, 4(3), 212-219.




DOI: https://doi.org/10.20397/2177-6652/2021.v21i4.2305

Métricas do artigo

Carregando Métricas ...

Metrics powered by PLOS ALM

Apontamentos

  • Não há apontamentos.




Direitos autorais 2021 Revista Gestão & Tecnologia

Licença Creative Commons
Esta obra está licenciada sob uma licença Creative Commons Atribuição - NãoComercial 4.0 Internacional.