Tarek Ibrahim Eldomiaty

Determinants of Corporate Capital Structure: Evidence from an Emerging Economy

Purpose – This research paper aims at examining the determinants of corporate leverage in Egypt according to the assumptions of three theories of capital structure: tradeoff, pecking order, and free cash flow.Design/methodology/approach – The methodology utilizes the benefits of the partial adjustment autoregressive model to measure the speed of adjusting long-term and short-term debts to a target level.Findings – The results indicate that companies use both long-term and short-term debt to adjust the leverage with a relative dependence on long-term debt; the tradeoff-related determinants of capital structure are taxes, debt/equity ratio and bankruptcy risk; the pecking order-related determinants of capital structure are growth and profitability; borrowing decisions are not affected by the assumptions of free cash flow. Overall, the explanatory powers of the three regression equations are high and significant which indicate that the model construction is quite indicative.Originality/value – The paper contributes to the literature in that it shows that the determinants of capital structure conform to those reported by other related studies in emerging markets as well as developed markets which supports the general conclusion that the determinants of capital structure in emerging and developed markets are converging.

Knowledge repositories in knowledge cities: institutions, conventions and knowledge subnetworks

Suggests another dimension of research in, and application of, knowledge management. This theoretical paper adopts a conceptual, multi‐disciplinary approach. First, knowledge can be stored and transmitted via institutions. Second, knowledge “subnetworks” or smaller groupings within larger networks can become key repositories of knowledge. The concept of knowledge “subnetworks” needs to be tested against empirical evidence, which should include a cross‐national comparison of knowledge‐based cities. The paper provides some insights to policy makers in designing or developing global cities. It is one of the few papers that discusses the connection between knowledge management and growth of global cities.

The Dynamics of Capital Structure and Heterogeneous Systematic Risk Classes in Egypt

Purpose – The purpose of this paper is to examine firms’ strategies to change long- and short-term debt financing in Egypt. It aims to examine a list of capital structure determinants that include the basic assumptions of the three well-known theories of capital structure: tradeoff, pecking order, and free cash.Design/methodology/approach – The paper utilizes the properties of partial adjustment model for three heterogeneous systematic risk classes: high, medium and low. The sensitivity analysis is carried out using the “extreme bound analysis”.Findings – The results indicate that Egyptian firms adjust short- and long-term debt according to the class of systematic risk; long-term debt is a source of financing at all classes of systematic risk; firms have obvious tendency to extent short- to long-term one; medium risk firms adjust long-term debt according to the industry average debt, and depend heavily on long-term debt financing; firms depend significantly and constantly on the liquidity position to adjust short-term debt levels; and medium risk firms are relatively affected by the basic assumptions of free cash flow and low-risk firms are relatively affected by the assumptions of the pecking order theory.Research limitations/implications – In general, the results provide evidence that the three theories have transitory effect from developed markets to transitional markets. In addition, the firm-specific variables (industry characteristic, size and time) provide an additional support to the robustness of the results.Originality/value – Few, if any studies, have been carried out in Egyptian data.

The Role of Social Conventions in the Diffusion of Open Source Software: Implications for Service Industries

In information and service products such as open source software, increasing returns occur on the production or supply side, as well as network externalities on the demand side. For open source software, the social community element needs to be integrated with the framework of increasing returns. This paper attempts to show that social conventions, and social herding behaviour are fundamental to the growth of the open source software. Such social conventions legitimise value and provide identification in the global online community and have important implications for service industries in general.

Governance Structures of Socially Complex Knowledge Flows: Exchange, Entitlement and Gifts

Abstract The intangible aspects of knowledge transfer in multinational corporations (MNCs) continue to be a crucial area of research in social science research and raise the issue of knowledge governance structures. The purpose of this conceptual note is twofold. Firstly, we believe that there is more than one governance structure for successful knowledge transfers and flows. We provide a typology of three governance structures: “exchange,” “entitlement,” “gifts.” Secondly, most MNCs will need to take advantage of all three or a combination of these three socially complex governance structures.

Intercultural relations in the European Union: Economic convergences verses social mobility

Abstract The purpose of this paper is to analyze intercultural relations within the European Union, with the 10 new members that have joined in 2004. We define intercultural relations in terms of the difference between the benefits of economic convergence versus the problems of social mobility issues implied by the economic convergence in the European Union, especially with regard to the labor market. This analysis has implications for any region that is experiencing rapid globalization.

The Effects of Accrual vs. Cash Flow Bases on Shareholder Value in Transitional Markets: Evidence from Egypt

This study examines the effects of the accruals vs. cash flow bases on firm’s MB ratio as a proxy for shareholder value. The methodology utilizes the benefits of the ‘partial adjustment model’ where it addresses the extent to which the shareholder value adjusts to a target level. The final results indicate that (a) the accrual basis helps adjust the shareholder value to a target level more than the cash flow basis, (b) the shareholder value is associated with profitability-related ratios and dividend-related ratios, (c) in both bases, the shareholders value is positively associated with earnings per share and price-to-earnings ratio, (d) the significant effects of firm-specific controls indicate that the shareholder value is affected by the accounting base in certain industries, certain size, and affected by the time as well. The results of the sensitivity analysis show that the accruals-based estimates and cash flow estimates are robust and reliable.

Signaling Corporate Market Value in Transition Economies: Perspectives from Egypt

This paper examines the dynamic determinants of signaling firm’s market value. The underlying assumption is that when a firm changes its capital structure, it actually changes the relative position and the market values of its capital suppliers’ securities holdings. As for the determinants of capital structure, the paper examines a comprehensive number of factors that have been examined or pointed out in the literature. The paper utilizes the properties of partial adjustment model where the desired (or target) level of market value is adjusted according to both of the changes in actual market values and changes in firm’s capital structure. The results indicate that firm’s market value is not affected by neither factors of tradeoff theory nor free cash flow theories of capital structure. If firm’s liquidity position is taken as a source of short‐term financing, the results indicate that factors of pecking order theory do exist. The premises of dividend irrelevancy and information asymmetry do exist with a negative estimate of the dividend payout ratio. The results also indicate that firms’ financial‐agency signaling is affected by eight factors. These factors are (1) debt financing, (2) bankruptcy risk, (3) type of industry, (4) size, (5) financial flexibility, (6) liquidity position, (7) interest rate and (8) transaction costs of borrowing or paying off debt.