Cash liquidity and financial constraints in relation to the market performance of Brazilian companies
Journal Title: Revista Contabilidade & Finanças - Year 2023, Vol 33, Issue 90
Abstract
This article aimed to verify the influence of cash liquidity and financial constraints on the market performance of Brazilian companies. According to pecking order theory, organizations choose retained earnings over debts or new share issuances, which may be linked to specific costs. However, trade-off theory highlights that taxes mean that financial policy and debt can be relevant to company value. Thus, this study aims to provide new insights on these topics and knowledge for investigating cash liquidity and financial constraints in relation to performance. The cash liquidity of organizations and financial constraints are important phenomena for performance, given that, in this study, there was an increase in performance. The results suggest that organizations choose to underinvest in the setting due to the difficulty of obtaining credit. Thus, there is an evident need for organizations to present liquidity so as not to lose investment opportunities. Despite the financial constraints, the organizations represent, to some extent, a good investment option, as they prefer excess cash to resources for new investments. The population of this study is formed of companies listed on the B3 S.A. – Brasil, Bolsa, Balcão. The analysis period corresponded to the years from 2014 to 2018 and the KZ index is calculated to classify the organizations regarding their level of constraint. Next, multiple linear regression was run, controlling for year and sector fixed effects. There is a need for organizations to present liquidity to attract new investors. However, companies that find themselves financially constrained can also represent a good investment option as they choose excess cash. In the market, there are some resistances regarding financially constrained organizations, but there may be considerable liquidity in them.
Authors and Affiliations
Ames, Alice Carolina; Nunes, Rodolfo Vieira; Silva, Tarcísio Pedro da
Keywords
Related Articles
- EP ID EP713769
- DOI 10.1590/1808-057x20211391.en
- Views 75
- Downloads 0
Does debt structure heterogeneity reduce the cost of capital?
This paper seeks to investigate the relationship between the level of debt structure heterogeneity and the cost of debt of publicly and privately held Brazilian companies in the period from 2020 to 2019. Debt structure h...
Use of the tax benefit of conventional remuneration of share capital by Portuguese companies
This article aimed to analyze the use of the tax benefit of conventional remuneration of share capital (CRSC) by Portuguese companies and perceive the influence of tax policies on their financing decisions. Most of the s...
Sharing, liking, surfing, and not studying! Cyberloafing by Accounting Sciences students
Guided by the possibility of the learning process being affected by cyberloafing behavior, this study analyzed the precedents and consequences of engagement in cyberloafing behavior by Accounting Sciences students based...
The CEO’s origin and fame in relation to company performance and market perception
This article investigated decisions to change chief executive officer (CEO) and the relationships between the characteristics of the new CEO chosen and both company performance and stock market perceptions. Our study aim...
Does duration of competitive advantage drive long-term returns in the stock market?
The purpose of this article was to develop a new indicator to estimate the aggregate long-term expected return on stocks. There is not a widely used method to model directly the aggregated expected return of the stock ma...