Small Business Financing: Survey Evidence in West Texas

We investigate the financial sources of small firms through a survey of sample firms from West Texas. Evidence shows that the two most common start-up financing alternatives are personal savings and commercial bank loans. Commercial banks remain the most popular source of financing for present and future needs, followed by leasing companies and credit unions. Informal types of financing such as business credit cards, and trade credit are used in addition to lines of credit for transaction and working capital purposes. Firms typically review their financial performance monthly and use common cash balances as the primary financial tool

Interlocking directorships and firm performance: the role of board diversity

Purpose This study aims to examine the impact of interlocking directorships on firm performance in Turkey, with a specific focus on the moderating role of board diversity. Design/methodology/approach Using a panel dataset comprising the top 100 firms listed on Borsa Istanbul from 2014 to 2018, this study employs regression analysis to investigate the relationship between interlocking directorships, board diversity, and firm performance. It firm-level financial data and directorship information to assess the effects of interlocking directorships on firm performance while also considering the moderating influence of board diversity. Findings The findings of this study reveal several important insights. First, the results confirm the “busyness hypothesis” as an increase in the number of interlocks per director negatively impacts firm performance, indicating reduced monitoring effectiveness. However, the study also demonstrates that board diversity plays a significant moderating role. Specifically, board diversity positively influences the relationship between interlocking directorships and firm performance, suggesting that a diverse board can mitigate the negative effects of interlocks and enhance overall firm performance. Originality/valueThis study contributes to the existing literature in several ways. First, this study extends our understanding of the relationship between interlocking directorships and firm performance, considering contingency factors in the Turkish market. Second, our findings imply that board diversity mitigates the negative impact of busy interlocking directorates and improves firm performance, which provides invaluable directions to firms in setting their boards. Moreover, this research enhances corporate governance practices in Turkey and beyond in other emerging markets with similar corporate governance mechanisms by identifying the importance of board diversity and its moderating influence

Survey Research in Finance: Views from Journal Editors

We survey editors from 15 core and 35 non-core finance journals to learn their views about specific issues involving survey research. Based on responses from 25 editors, none of their journals has an established policy involving the publication of survey research. The evidence shows that survey-based manuscripts typically go through the same review process as other manuscripts. However, editors of core versus non-core journals have mixed views about the role that survey research should play in the finance literature. The editors provide their views about the strengths and weaknesses of survey research as well as topic areas that would benefit from using this approach. A review of a finance journals shows that the publication of survey-based papers is an infrequent event for most journals

Survey Research in Finance: Views from Journal Editors

We survey editors from 15 core and 35 non-core finance journals to learn their views about specific issues involving survey research. Based on responses from 25 editors, none of their journals has an established policy involving the publication of survey research. The evidence shows that survey-based manuscripts typically go through the same review process as other manuscripts. However, editors of core versus non-core journals have mixed views about the role that survey research should play in the finance literature. The editors provide their views about the strengths and weaknesses of survey research as well as topic areas that would benefit from using this approach. A review of a finance journals shows that the publication of survey-based papers is an infrequent event for most journals

Stock Repurchases And False Signals

Each year many firms repurchase shares of their common stock. Research evidence shows that when firms announce the repurchase of common stock, their share prices typically rise.  Numerous studies attribute these increases to a signaling effect.  But some firms that announce their intention of repurchasing shares of common stock either repurchase no shares at all or repurchase fewer shares than initially announced. Although the practice of firms intentionally announcing the repurchase of more shares than they expect to repurchase is illegal, the expected increase in share prices may give firms an incentive to make such false announcements. This study surveys top financial executives to learn the extent that firms repurchase fewer shares than announced, identify the reasons for this activity, and learn how managers view this activity.  We surveyed 642 firms that conducted common stock repurchases from January 1998 to September 1999.  Based on 218 responses, we find that while managers are uncertain about the legality of this activity, they believe that the intentional repurchase of fewer shares than announced is unethical, sends a false signal to the market, and damages the firm’s credibility with its stockholders.  Managers also believe that firms repurchasing fewer shares than announced should publicly reveal both the reason for not repurchasing all shares and the amount by which the repurchase fell short of the firm’s announced intentions.  Despite these beliefs, managers report that repurchasing fewer shares than announced is a common practice

How Norwegian Managers View Dividend Policy

We report the results of a 2004 survey from managers of dividend-paying Norwegian firms listed on the Oslo Stock Exchange about their views on dividend policy. Specifically, we identify the most important factors in making dividend policy decisions and managers\u27 views about various dividend-related issues. The most important determinants of a firm\u27s dividend policy are the level of current and expected future earnings, stability of earnings, current degree of financial leverage, and liquidity constraints. No significant correlation exists between the overall rankings of factors influencing dividend policy between Norwegian and U.S. managers. Norwegian managers express mixed views about whether a firm\u27s dividend policy affects firm value. Respondents point to the possible role of dividend policy as a signaling mechanism. No support exists for the tax-preference explanation for paying dividends

Distributing excess cash: the role of specially designated dividends

This study explores why firms distribute excess cash as specially designated dividends (SDDs) instead of using regular dividends or repurchasing shares. We survey top managers of NASDAQ, AMEX, and NYSE firms issuing at least one SDD between 1994 and 2001. The results show that firms tend to pay SDDs when they experience strong earnings and cash flows and want to increase at least temporarily the yield to shareholders. Having strong earnings and cash flows also provide an impetus for regular dividend increases, but paying regular dividends is part of a firm\u27s standard dividend policy. The primary motives for repurchasing shares are to take advantage of perceived market undervaluation of the firm\u27s shares and to improve performance measures, especially. Overall, the results lend support to the signaling explanation for the disbursement of excess funds, but not the free cash flow or wealth transfer explanations

The Impact Of Insider Trading On Market Liquidity In The NASDAQ Market

This study examines the relationship between insider trading and market liquidity (spread and depth) of NASDAQ-100 stocks. Tests on an intraday sample of sell trades show no evidence of cross-sectional association between the width of the spread and insider trading, but detect some widening of the spread after the fact. Overall, our results provide mixed evidence on the ability of NASDAQ dealers to unravel informed order flow and adjust spreads accordingly. Their short-term behavior suggests an inability to detect insider trading and widen spreads, but their behavior over time suggests that dealers may attempt to recover what they apparently lose at a given point and time

The Impact Of Insider Trading On Market Liquidity In The NASDAQ Market

This study examines the relationship between insider trading and market liquidity (spread and depth) of NASDAQ-100 stocks.  Tests on an intraday sample of sell trades show no evidence of cross-sectional association between the width of the spread and insider trading, but detect some widening of the spread after the fact.  Overall, our results provide mixed evidence on the ability of NASDAQ dealers to unravel informed order flow and adjust spreads accordingly.  Their short-term behavior suggests an inability to detect insider trading and widen spreads, but their behavior over time suggests that dealers may attempt to recover what they apparently lose at a given point and time