TABLE OF, CONTENT INTRODUCTION, OF THE THESISTABLE OF, CONTENT INTRODUCTION, OF THE THESISTABLE OF, CONTENT INTRODUCTION, OF THE THESISWhen it comes to defining debt, analysts arent always in agreement Preferred stock, for example, is sometimes classified as equity, but the preferred dividend, par value, and liquidation rights make.
When it comes to defining debt, analysts aren't always in agreement Preferred stock, for example, is sometimes classified as equity, but the preferred dividend, par value, and liquidation rights make it appear more like debt When preferred stock is included in total debt, the D/E ratio rises, making the firm appear riskier When preferred stock is included in the equity element of the D/E ratio, the denominator rises and the ratio falls When preferred stock is included in the D/E ratio, it may be a huge problem for corporations like real estate investment trusts (REITs) 1.3 Factor affecting debt management among life insurance companies 1.3.1 Internal factors Based on “Factors influencing debt financing decisions of corporations – theoretical and empirical literature review” of Micah O Nyamita, Hari L Garbharran and Nirmala Dorasamy, there are main factors: Figure 1.3: Internal factors that affect debt management among life insurance companies (Source: Factors influencing debt financing decisions of corporations – theorical and empirical literature review) • Debt financing and corporation size The size of a company also has a significant impact on its debt financing choice Because larger firms have been shown to have reduced bankruptcy risk and may be more diversified, the trade-off hypothesis supports a positive relationship between corporate size and debt financing level Furthermore, Deesomsak, Paudyal, and Pescetto stated that large firms have lower debt agency costs, lower monitoring costs, less variable cash flows, and better credit market access, and that they require more debt to effectively benefit from the tax shield As a result, according to this hypothesis, the size of a firm has a favorable influence on debt financing levels Bigger corporations are also thought to be more transparent, and they have higher debt levels because they may issue larger amounts of debt and spread the costs of issuance This connection, on the other hand, might be either favorable or bad Their positive connection reasoning supports the aforementioned trade-