Journal Articles

Permanent URI for this collectionhttps://mro.massey.ac.nz/handle/10179/7915

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Subject: search.filters.subject.Cash Holdings

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    Determinants and Consequences of Financial Constraints: A Review of the Empirical Literature
    (The Hong Kong Polytechnic University, 2021-09-01) Habib A; Costa M; Jia J
    We synthesise the empirical literature on the determinants and consequences of financial constraints in the disciplines of accounting and finance, critique the findings, and offer suggestions for future research. A prolonged run of financial constraints can eventually lead to corporate failure, because a company’s financial performance depends on its ease of access to external financing. Determinants of financial constraints encompass firm-level fundamental, macro-economic, and corporate governance variables, with an overwhelming majority of papers using the investment-cash flow sensitivity model for measuring financial constraints. We also review the empirical literature on the consequences of financial constraints. Financial constraints lead to higher cash holdings, less asymmetric cost behaviour, and fewer innovations. Constrained firms also use income-increasing accruals more aggressively than unconstrained firms do. Finally, financially constrained firms avoid taxes in order to produce temporary cash tax savings.
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    Oil Price Volatility, Organization Capital, and Firm Performance
    (Pompea College of Business, University of New Haven, 2022-11) Kamal JB; Costa MD; Habib A
    We examine the relationship between oil price volatility and firm performance, and the moderating role of organization capital on this relationship. Using U.S. firm-level data during the period of 1986-2017, our analysis reveals several key findings. Consistent with the real option theory, we find that oil price volatility negatively affects firm performance. However, this adverse effect of oil price volatility is reduced for firms with high levels of organization capital. Interestingly, this moderating effect of organization capital is more pronounced for firms with large cash holdings. Overall, our findings substantiate the idea that firms with high levels of organization capital can hedge oil price related volatilities effectively. Findings from several robustness tests support our key results.