Publication: Financial Sustainability of A Firm: Debt-based or Equity-based Financing to Pursue
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Date
2023
Journal Title
Journal ISSN
Volume Title
Publisher
Bank Indonesia Institute
Abstract
This study examines the potential of utilizing equity-based financing by companies in achieving financial sustainability as compared to debt-based financing. To this end, a conceptual framework of equity-based financing over debt-based financing is developed to provide an understanding of the concept of equity-based financing. Subsequently, this study analyses the credit risk exposure between equity and debt for selected sectors in Malaysia. More specifically, a Monte Carlo method is employed to examine the feasibility of the equity-based financing model in fostering the financial sustainability of companies through simulation of equity-based and debt-based financing models from the global financial crisis (GFC) period to the Covid-19 phase. This study finds that equity-based financing can reduce credit risk exposure when returns are tied to the company’s performance. The findings also show that equity-based financing can achieve financial sustainability regardless of any economic events. To conclude, equity-based financing can thus be a viable capital financing option for companies because it can contribute to long-term financial sustainability.
Description
Vol 9 No 2
Keywords
Equity-based financing, Financial sustainability, Monte carlo simulation, Economic crisis
Citation
Sha’ari, U. A., Hamzah, S. R. B., & Kamil, K. H. (2023). Financial Sustainability of A Firm: Debt-based or Equity-based Financing to Pursue. Journal of Islamic Monetary Economics and Finance, 9(2), 199–224. https://doi.org/10.21098/jimf.v9i2.1653
URI
https://jimf-bi.org/index.php/JIMF/article/view/1653
https://www.scopus.com/record/display.uri?eid=2-s2.0-85164520580&origin=resultslist&sort=plf-f&src=s&sid=0e0cc298ecf5c768c5f20709b52d364a&sot=b&sdt=b&s=TITLE-ABS-KEY%28Financial+Sustainability+Of+A+Firm%3A+Debt-based+Or+Equity-based+Financing+To+Pursue%29&sl=130&sessionSearchId=0e0cc298ecf5c768c5f20709b52d364a&relpos=0
https://oarep.usim.edu.my/handle/123456789/10779
https://www.scopus.com/record/display.uri?eid=2-s2.0-85164520580&origin=resultslist&sort=plf-f&src=s&sid=0e0cc298ecf5c768c5f20709b52d364a&sot=b&sdt=b&s=TITLE-ABS-KEY%28Financial+Sustainability+Of+A+Firm%3A+Debt-based+Or+Equity-based+Financing+To+Pursue%29&sl=130&sessionSearchId=0e0cc298ecf5c768c5f20709b52d364a&relpos=0
https://oarep.usim.edu.my/handle/123456789/10779