The influence of financial network linkage on capital structure

• Main Authors: Ho, Hang-Shun, 何航順
• Other Authors: Kuo, Hsien-Chang
• Format: Others
• Language: en_US
• Published: 2002
• Online Access: http://ndltd.ncl.edu.tw/handle/10494591535744440713

碩士 === 國立暨南國際大學 === 國際企業學系 === 90 === In global information technology (IT) supply chain, Taiwanese IT firms play an important role in the supplier of U.S. IT firms. The purpose of this study is to examine the influence of network linkage on the capital structure of Taiwan IT firms. A basic assumption in the network model is that individual firm is dependent on resources controlled by other firms. More specifically, we use financial network linkage factors, which are financial positions of U.S. IT firms, to surrogate the financial impact that influences the capital structure of Taiwanese firms through their network linkages in the same industry. We collect annual data of IT firms listed in Taiwan Stock Exchange Corporation for empirical analysis during 1995 to 2001. Owing to blending characteristics of both cross-sectional and time series data, we employ panel data analysis to improve the efficiency of econometric estimates. Specifically, we choose random effect model because there are time invariant variables in our models. Two important results are detected: (1) U.S. IT firms’ working capital, a direct measurement of a firm’s solvency, is significantly negatively correlated with Taiwanese IT firms’ capital structure. This implies that a downstream firm which has insufficient cash flow influences the upstream firm’s choosing more debt, because the downstream firm fails to pay on time. (2) As a result of positive correlation between U.S. firms’ current assets and Taiwanese firms’ capital structure, Taiwanese IT firms choose more debt to expand their business in order to avoid inefficient investment. Based on the results of interaction between Asian financial crisis and financial network linkage, we suggest that Taiwanese IT firms rapidly expand their business during our research span and yet be able to get away from crisis owing to a stronger linkage with U.S. firms, which have relatively good financial positions after Asian financial crisis.