Browsing by Author "Coelho, Francisco de Moura Oliveira"
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- How firm-shareholders relationship, other than equity, influences a firm’s performance and what drives it : the portuguese casePublication . Coelho, Francisco de Moura Oliveira; Reis, Ricardo César Ribeiro Ventura FerreiraA topic that is not being covered by the existing literature is that of the loans to and from shareholders and the all the type of relationships between a firm and its shareholders. This research focuses on the financial determinants of that relationship and its consequences on profitability. Using a dataset of 2016 financial data for more than 8,000 Portuguese firms, we were able to study the impact of these “special equity mechanisms” in the accounting records. As primary assumption of this research study, it was considered that assets and liabilities related to shareholders are 100% loans to and from them. It was found that firms with a relationship with shareholders other than common equity present higher net profits than the others. However, it was not found that firms that lend money to their shareholders present higher net profits than the ones that borrow from shareholders. We also found that leverage and profitability influence positively the existence of special equity instruments, while liquidity contributes negatively. Finally, we found empirical evidence of the Pecking Order Theory in the subsequent years after equity raising for firms in need of capital. The purpose of this research study, with its assumptions and conclusions, was to offer another perspective of an accounting instrument that is not being sufficiently covered in existing literature.