Analysis of the conceptual model of indicators affecting financing in crisis conditions: Insights from Covid-19 Pandemic and sanction

Document Type : Research Paper

Authors

1 Ph.D. Candidate. Departement of Accounting, Faculty of Economic and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran

2 2. Associate Prof. Departement of Accounting, Faculty of Economic and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran

3 3. Associate Prof. Departement of Economic, Faculty of Economic and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran

4 4. Assistant Prof.. Departement of Accounting, Faculty of Economic and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran

10.22051/jfm.2024.46603.2910

Abstract

Abstract

One of the key factors for the development and stability of countries' economies is the creation of a suitable financing system for companies. The financing system of the companies should be updated and optimized should provide an appropriate response in face of various opportunities and threats. In the last decade, companies in the country faced two major crises, the intensification of sanctions and Covid-19, which seems to have had a profound effect on their financing. In this regard, the present study identified the dimensions affecting the development of the financing system of companies by comprehensively studying the research literature and then experimentally tested the proposed model under the influence of sanctions and covid-19 using the structural equation method. In other words, this study sought to answer the challenge of how the effectiveness of the financing model is influenced by the sanctions and covid-19.For this purpose, the data of 159 companies during the years 2013 to 2022 (1590 companies-years) were compiled to examine 14 hypotheses and were tested using the structural equation method using SmartPLS4 software in the form of three separate models.The financing model was divided into three parts: internal, short-term external and long-term external.The results of the research showed that the sanctions and covid-19 crisis have an effect on audit characteristics, financial performance, market performance, investment efficiency, political Communication on internal financing through retained earnings, as well as the effect of financial performance, market performance, investment efficiency, political Communication and Corporate characteristics significantly reduce short-term and long-term external financing and increase the impact of economic uncertainty on internal financing through retained earnings and short-term and long-term external financing.Finally, based on the determination coefficients of all three research models, it was determined that the selected structures have more explanatory power for long-term financing than internal financing and short-term financing.

Keywords

Main Subjects

References

 
Abuselidze, G., & Slobodianyk, A. (2020). Social responsibility of business and government in the conditions of the COVID-19 pandemic. In E3S Web of Conferences (Vol. 210). Les Ulis: EDP Sciences.
Aibar-Guzmán, B., García-Sánchez, I. M., Aibar-Guzmán, C., & Hussain, N. (2022). Sustainable product innovation in agri-food industry: Do ownership structure and capital structure matter? Journal of Innovation & Knowledge, 7(1), 100160.
Akhlaghi Yazdinejad, E., Saheb Al-Zamani, S., & Danshi, V. (2023). Investigating the Impact of Financing Restrictions on the Relationship between Debt and Investment. Accounting and Auditing Research, 15(59), 87-100. (in Persian)
Alhassan, I., & Islam, K. A. (2021). Liquidity management and financial performance of listed oil and gas companies in Nigeria. International journal of accounting & finance review, 8(1), 15-25.
Alshhadat, M. Q., & Al-Hajaya, K. (2023). Corporate governance in the COVID-19 pandemic: current practices and potential improvement. Corporate Governance: The International Journal of Business in Society.
Amador-Torres, J. S. (2017). Finance-neutral potential output: An evaluation in an emerging market monetary policy context. Economic Systems, 41(3), 389-407.
BabaeiParkohi, Z., Ebrahimi, S. K., & Amri-Asrami, M. (2023). The Impact of Governmental Ownership, Political Connections, and Related-Party Transactions on External Financing and Investment. Financial Management Strategy, 11(2), 53-76. (in Persian)
Boubakri, N., & Ghouma, H. (2010). Control/ownership structure, creditor rights protection, and the cost of debt financing: International evidence. Journal of Banking & Finance, 34(10), 2481-2499.
Briozzo, A., & Albanese, D. (2020). Voluntary audit, investment, and financing decisions in Latin American small and medium enterprises. Journal of International Accounting, Auditing and Taxation, 38, 100302.
Brown, D., Sorrell, S., & Kivimaa, P. (2019). Worth the risk? An evaluation of alternative finance mechanisms for residential retrofit. Energy Policy, 128, 418-430.
Carnovale, S., Rogers, D. S., & Yeniyurt, S. (2019). Broadening the perspective of supply chain finance: The performance impacts of network power and cohesion. Journal of Purchasing and Supply Management, 25(2), 134-145.
Cassar, G., & Holmes, S. (2003). Capital structure and financing of SMEs: Australian evidence. Accounting & Finance, 43(2), 123-147.
Chadha, S., & Seth, H. (2021). Ownership structure and capital structure: a panel data study. International Journal of Business Innovation and Research, 24(3), 385-396.
Chang, W. L., & Benson, V. (2023). Migration and financial transactions: factors influencing mobile remittance service usage in the pandemic. Information Technology & People, 36(5), 2112-2136.
Chen, Y., & Ma, Y. (2021). Financing constraints, internal control quality and cost stickiness. Journal of Business Economics and Management, 22(5), 1231-1251.
Cho, H., Chung, J. R., & Kim, Y. J. (2021). Fixed asset revaluation and external financing during the financial crisis: Evidence from Korea. Pacific-Basin Finance Journal, 67, 101517.
Cole, R. A., & Sokolyk, T. (2018). Debt financing, survival, and growth of start-up firms. Journal of Corporate Finance, 50, 609-625.
De Franco, G., Kothari, S. P., & Verdi, R. S. (2011). The benefits of financial statement comparability. Journal of Accounting research, 49(4), 895-931.
Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1995). Detecting earnings management. Accounting review, 193-225.
dehbashi, M. (2024). Examining the impact of the Corona epidemic on the capital market price index in Iran. Journal of Investment Knowledge, 13(51), 301-318. (in Persian)
Demerjian, P.R., Lev, B., Lewis, M.F., McVay, S.E. (2012). Managerial ability and earnings quality. The Accounting Review, 88(2), 463-498.
Djennas, M. (2016). Business cycle volatility, growth and financial openness: Does Islamic finance make any difference? Borsa Istanbul Review, 16(3), 121-145.
D'Mello, R., & Toscano, F. (2020). Economic policy uncertainty and short-term financing: The case of trade credit. Journal of Corporate Finance, 64, 101686.
Elemes, A., & Filip, A. (2022). Financial reporting quality and private firms’ access to trade credit capital. The International Journal of Accounting, 57(02), 2250010.
Ellul, A., Erel, I., & Rajan, U. (2020). The COVID-19 pandemic crisis and corporate finance. The Review of Corporate Finance Studies, 9(3), 421-429.
Estrada, M. A. R., Koutronas, E., & Lee, M. (2021). Stagpression: the economic and financial impact of the COVID-19 pandemic. Contemporary Economics, 15(Special Issue), 19.
Etemadi, H., & Ahmadi Gvrjy, J. (2017). Effects of political communication on investment and Reducing financing constraints in Tehran Stock Exchange. Accounting and Auditing Research, 9(34), 4-23.
Fischer, M. (2017). The source of financing in mergers and acquisitions. The Quarterly Review of Economics and Finance, 65, 227-239.
Flaminiano, J. P., & Francisco, J. P. (2021). Firm characteristics and credit constraints among SMEs in the Philippines.
Frazer, W. J. (1958). Some Factors Affecting Business Financing. Southern Economic Journal, 33-47.
García-Ramos, R., & Díaz, B. D. (2021). Board of directors’ structure and firm financial performance: A qualitative comparative analysis. Long Range Planning, 54(6), 102017.
Girardone, C., Kokas, S., & Wood, G. (2021). Diversity and women in finance: Challenges and future perspectives. Journal of Corporate Finance, 71, 101906.
Gonzalez-Urango, H., Mu, E., Ujwary-Gil, A., & Florek-Paszkowska, A. (2024). Analytic network process in economics, finance and management: Contingency factors, current trends and further research. Expert Systems with Applications, 237, 121415.
Goodell, J. W. (2020). COVID-19 and finance: Agendas for future research. Finance research letters, 35, 101512.
Gungoraydinoglu, A., Çolak, G., & Öztekin, Ö. (2017). Political environment, financial intermediation costs, and financing patterns. Journal of Corporate Finance, 44, 167-192.
Hadi, S., & Supardi, S. (2020). Revitalization strategy for small and medium enterprises after corona virus disease pandemic (Covid-19) in Yogyakarta. J. Xian Univ. Archit. Technol, 12(4), 4068-4076.
Hamrouni, A., Boussaada, R., & Toumi, N. B. F. (2019). Corporate social responsibility disclosure and debt financing. Journal of Applied Accounting Research, 20(4), 394-415.
Hegazy, M. A. A., El-Haddad, R., & Kamareldawla, N. M. (2022). Impact of auditor characteristics and Covid-19 Pandemic on KAMs reporting. Managerial Auditing Journal, 37(7), 908-933.
Heggie, I. G., & Vickers, P. (1998). Commercial management and financing of roads (Vol. 23). World Bank Publications.
Huang, H. H., Kerstein, J., & Wang, C. (2018). The impact of climate risk on firm performance and financing choices: An international comparison. Journal of International Business Studies, 49(5), 633-656.
Jansen, D. W., & Tsai, C. L. (2010). Monetary policy and stock returns: Financing constraints and asymmetries in bull and bear markets. Journal of Empirical finance, 17(5), 981-990.
Jansen, K., Michiels, A., Voordeckers, W., & Steijvers, T. (2023). Financing decisions in private family firms: a family firm pecking order. Small Business Economics, 61(2), 495-515.
Javeed, S. A., Teh, B. H., Ong, T. S., Chong, L. L., Abd Rahim, M. F. B., & Latief, R. (2022). How does green innovation strategy influence corporate financing? Corporate social responsibility and gender diversity play a moderating role. International Journal of Environmental Research and Public Health, 19(14), 8724.
Kaka, E. J. (2021). Covid-19 and auditing. Journal of Applied Accounting and Taxation, 6(1), 1-10.
khajavi, S., Nasirifar, H., & Ghadirian-Arani, M. (2021). Political Connections and Accounting Information Quality: Evidence from Financial Restatement. Empirical Studies in Financial Accounting, 18(71), 1-32. (in Persian)
Kleinke, J. D., & McGee, N. (2015). Breaking the bank: three financing models for addressing the drug innovation cost crisis. American Health & Drug Benefits, 8(3), 118.
Kuah, Y. C., Zakaria, Z., & Choong, C. K. (2020). The Impact of Managerial Characteristics on Capital Structure in Malaysian Manufacturing SMEs. International Journal of Banking and Finance (IJBF), 15(1), 21-37.
Lassoued, N., & Khanchel, I. (2021). Impact of COVID-19 pandemic on earnings management: Evidence from financial reporting in European firms. Global Business Review, 09721509211053491.
Lee-Ross, D., & Lashley, C. (2012). Organization behaviour for leisure services. Routledge.
Lemma, T. T., Khan, A., Muttakin, M. B., & Mihret, D. G. (2019). Is integrated reporting associated with corporate financing decisions? Some empirical evidence. Asian Review of Accounting, 27(3), 425-443.
Levy, H. B. (2020). Financial reporting and auditing implications of the COVID-19 pandemic. The CPA Journal, 90(5), 26-33.
Li, X. M., & Qiu, M. (2021). The joint effects of economic policy uncertainty and firm characteristics on capital structure: Evidence from US firms. Journal of International Money and Finance, 110, 102279.
Lysiak, L., Kachula, S., Hrabchuk, O., & Ziuzin, V. (2021). Development of corporate social responsibility and financing of social programs: regional aspect.
Mahmud, A., Ding, D., & Hasan, M. M. (2021). Corporate social responsibility: Business responses to Coronavirus (COVID-19) pandemic. SAGE open, 11(1), 2158244020988710.
Mennati, V., & Barzegari, O. (2023). The Effect of Internal Audit Performance on Reducing Perceived Risk. Financial Accounting Research, 14(4), 1-28. (in Persian)
Merton, R. C. (1973). Theory of Rational Option Pricing. The Bell Journal of Economics and Management Science, 141-183.
mirzaee, J., khodadadi, V., Jorjor Zadeh, A., salehi, A. K., & Nasiri, S. (2023). The role of internal audit quality in the fight against corruption With emphasis on the components of resistance economics. Journal of Management Accounting and Auditing Knowledge, 12(46), 543-562. (in Persian)
Mohamed Zabri, S., Ahmad, K., & Adonia, S. A. (2021). The influence of managerial characteristics on external financing preferences in smaller enterprises. The case of Malaysian micro-sized enterprises. Cogent Business & Management, 8(1), 1912524.
Moradi, M., Salehi, M., Tarighi, H., & Saravani, M. (2020). Audit adjustments and corporate financing: Evidence from Iran. Journal of Accounting in Emerging Economies, 10(4), 521-543.
Mueller, A., & Sensini, L. (2021). Determinants of financing decisions of SMEs: evidence from hotel industry. International Journal of Business and Management, 16(3), 117-127.
Mugaloglu, E., Polat, A. Y., Tekin, H., & Kılıç, E. (2022). Assessing the impact of Covid-19 pandemic in Turkey with a novel economic uncertainty index. Journal of Economic Studies, 49(5), 821-832.
Murtaza, S., & Azam, I. (2019). The relationship between ownership structure and capital structure: evidence from chemical sector of Pakistan. SEISENSE Journal of Management, 2(4), 51-64.
Muttakin, M. B., Mihret, D., Lemma, T. T., & Khan, A. (2020). Integrated reporting, financial reporting quality and cost of debt. International Journal of Accounting & Information Management, 28(3), 517-534.
Nasar, A. J. M., Saleh, A. O. H., & Alhajri, F. M. S. (2020). Methods of financing Waqf development in Singapore. International Journal of Business Ethics and Governance, 25-42.
Nyamita, M. O., Nyamita, H. L., & Dorasamy, N. (2014). Factors influencing debt financing decisions of corporations–theoretical and empirical literature review. Problems and perspectives in management, (12, Iss. 4 (contin.)), 189-202.
Oke, L. A., Sanni, M., & Ijaiya, M. A. (2019). Firm characteristics and access to bank financing: evidence from SMES in north central Nigeria. Amity Journal of Finance, 4(2), 70-87.
Owaga, B. (2020). Competitive strategies and the financial sustainability of commercial banks in Kenya (Doctoral dissertation, Strathmore University).
Pavlović, N., & Čelić, I. (2020). The analysis of competitive strategies from the perspective of small and medium enterprises. Менаџмент у хотелијерству и туризму, 8(1), 101-110.
Pourebrahimi, Mohammadreza, Daliri, Alireza, Saghafi, Ali, Abdoh tabrizi, Hossein. (2021). Investigating the effect of corporate and performance variables on the choice of financing method and the interaction of financing method on these variables. Journal of Innovation and Value Creation.18 (9).99-122. (in Persian)
Prakash, V. (2007). Trends in growth and financing of higher education in India. Economic and Political Weekly, 3249-3258.
Pratami, A., Feriyanto, N., Sriyana, J., & Pratama, I. (2022). Are Shariah Banking Financing patterns pro-cyclical? An Evidence from ASEAN Countries. Cuadernos de Economía, 45(127), 82-91.
Quah, H., Haman, J., & Naidu, D. (2021). The effect of stock liquidity on investment efficiency under financing constraints and asymmetric information: Evidence from the United States. Accounting & Finance, 61, 2109-2150.
Rahman, M., Mia, A., Ismail, I. B., & Isa, C. R. (2018). Factors affecting the financing cost of microfinance institutions: Panel evidence. Enterprise Development & Microfinance, (2), 103-117.
Rahmani Noroozabad, S., Anvary Rostamy, A. A., Khalili, K., & Mohammadi, E. (2020). Corporate Financing Strategies in Normal and Crisis Conditions: Evidence from Tehran Stock Exchange. Journal of Asset Management and Financing, 8(2), 13-30. (in Persian)
Rajamani, K. (2021). Debt financing and financial performance: Empirical evidence of Indian SMEs listed in BSE-SME platform. In Eurasian Economic Perspectives: Proceedings of the 29th Eurasia Business and Economics Society Conference (pp. 217-230). Springer International Publishing.
Rezagharehbagh, R., & Mohammadi, P. (2015). Impact of Financing Approach on Corporate’s Financial Performance in Economic Fluctuations (Case Study of Automotive Industry). Financial Management Strategy, 3(1), 51-70. (in Persian)
Rose, N. (2020). Will competition be another covid-19 casualty? The Hamilton Project, Brookings, 2020-15.
Sadeghloo, T., Qeidari, H. S., Salehi, M., & Jalali, A. F. (2018). Obstacles and methods of financing for the development of local entrepreneurship in Iran. International Journal of Development Issues.
Samadi, A. H., Owjimehr, S., & Halafi, Z. N. (2021). The cross-impact between financial markets, Covid-19 pandemic, and economic sanctions: The case of Iran. Journal of policy modeling, 43(1), 34-55.
Saona, P., Muro, L., & Alvarado, M. (2020). How do the ownership structure and board of directors' features impact earnings management? The Spanish case. Journal of International Financial Management & Accounting, 31(1), 98-133.
Serrasqueiro, Z., Leitão, J., & Smallbone, D. (2021). Small-and medium-sized enterprises (SME) growth and financing sources: Before and after the financial crisis. Journal of Management & Organization, 27(1), 6-21.
Sohilauw, M. I., Nohong, M., & Sylvana, A. (2020). The relationship between financial literacy, rational financing decision, and financial performance: An empirical study of small and medium enterprises in Makassar. Jurnal Pengurusan, 59, 89-102.
Sohrabi, M. (2017). The Relationship between Non-Financial Innovative Management Accounting Tools and Risk and Return of Iranian Stock Market Listed Companies. Dutch Journal of Finance and Management, 1(2), 40.
Tabash, M. I., Farooq, U., Ashfaq, K., & Tiwari, A. K. (2022). Economic policy uncertainty and financing structure: a new panel data evidence from selected Asian economies. Research in International Business and Finance, 60, 101574.
Taheri, M. (2023). The Relationship Between Financing Restrictions and Financing Strategies: An Emphasis on the Mediating Role of Corporate Governance. Journal of Asset Management and Financing, 11(2), 1-18.(in Persian)
Tayachi, T., Hunjra, A. I., Jones, K., Mehmood, R., & Al-Faryan, M. A. S. (2023). How does ownership structure affect the financing and dividend decisions of firm? Journal of Financial Reporting and Accounting, 21(3), 729-746.
Tommaso, F. D. (2020). The new Italian legislation on corporate governance and business crisis. The impact of Covid–19 on SMEs and the recent rules to mitigate the effects. Financial Markets, Institutions and Risks, 4(4), 91-108.
Tseng, J. (2021). How do finance companies' advantages affect competitive strategies in short‐and intermediate‐term loan markets? A theoretical analysis. International Journal of Finance & Economics, 26(3), 4295-4302.
Wetzel, P., & Hofmann, E. (2019). Supply chain finance, financial constraints and corporate performance: An explorative network analysis and future research agenda. International Journal of Production Economics, 216, 364-383.
Wuttke, D. A., Blome, C., Heese, H. S., & Protopappa-Sieke, M. (2016). Supply chain finance: Optimal introduction and adoption decisions. International Journal of Production Economics, 178, 72-81.
Xiang, D., & Worthington, A. C. (2017). The impact of government financial assistance on the performance and financing of Australian SMEs. Accounting Research Journal.
Yan, B., & Yuan, H. (2020). The Impact of Financing Pressure on the Relationship between Top Managers’ Characteristics and Earnings Management.
Yao, J. J., Qi, Y. A., & Guo, B. (2022). Corporate social responsibility, debt financing cost and enterprise innovation. Scientific Reports, 12(1), 21909.
Ying, H., & Dawei, Z. (2019). Manager's Characteristics, Debt Financing and Firm Value. China Economist, 14(5), 96-110.
zarei, G., & abdollahzadeh shaghaghi, A. (2018). The Relationship Between Information Disclosure Quality and Foreign Financing of Companies Acquired in Tehran Stock Exchange: The Moderator of Corporate Growth and Ownership Structure. Financial Management Perspective, 8(23), 33-60.(in Persian)
Zhang, D., & Vigne, S. A. (2021). The causal effect on firm performance of China's financing–pollution emission reduction policy: Firm-level evidence. Journal of Environmental Management, 279, 111609.

Files

History

  • Receive Date: 03 March 2024
  • Revise Date: 02 June 2024
  • Accept Date: 23 August 2024

Share

How to cite

Statistics