| Özet notu |
Japan is widely regarded as one of the world's most advanced nations. The country's<br/>electronics industry, in particular, is consistently ranked among the global leaders in<br/>innovation. Industries such as automotive, construction, electronics, metal<br/>manufacturing, and telecommunications have traditionally leaned more heavily on<br/>debt financing for both their day-to-day operations and investment endeavors, rather<br/>than relying on equity financing. In Japan, debt financing is favored as a cost-effective<br/>source of capital when compared to equity financing.<br/>The study aimed to determine the effect of financial leverage on the financial<br/>performance of Japanese firms. The study selected 257 automotive, construction,<br/>electronic, metal, and telecommunications companies between 2000 and 2021. To find<br/>the effect of financial leverage on financial performance, the study used the random<br/>effect and the GMM to estimate the effect of the firms' leverage on financial<br/>performance. It was found that interest coverage has a positive and statistically<br/>significant effect on ROA, ROE, and Tobin's Q. It was discovered that cash coverage<br/>has a positive and statistically significant effect on ROE. The investigation revealed<br/>that debt service obligations have a negative and statistically significant effect on<br/>financial performance.<br/>Coverage ratios, including assets coverage, cash coverage, interest coverage, and<br/>annual debt service ratio, provide insights into a firm's financial health and stability.<br/>The coverage ratios are crucial for assessing the risk exposure of non-financial firms,<br/>and effective risk management involves evaluating the company's capacity to service<br/>its debt, maintain liquidity, and mitigate financial distress. The impact of coverage<br/>ratios on financial performance contributes to developing policies that enhance<br/>financial stability and reduce systemic risks within the non-financial sector. Insights<br/>into how coverage ratios impact financial performance guide firms in optimizing their<br/>capital structure, managing debt levels, and making informed decisions about<br/>investment and financing activities.<br/>Maintaining adequate cash coverage is crucial for liquidity management, where<br/>financial managers focus on strategies to ensure sufficient cash reserves to cover shortterm<br/>obligations. Monitoring and controlling interest expenses are essential for<br/>improving the interest coverage ratio. Managers explore opportunities to negotiate<br/>iv<br/>favorable interest rates, refinance debt when beneficial, and strategically manage the<br/>company's capital structure to minimize interest burdens. Financial managers develop<br/>comprehensive debt service planning, which includes aligning debt repayment<br/>schedules with cash flow patterns, exploring debt restructuring options, and ensuring<br/>that the company comfortably meet its debt obligations. Financial executives and<br/>managers navigate the complexities of financial management, optimize coverage<br/>ratios, and contribute to the financial health and performance of non-financial<br/>institution firms in the Tokyo Stock Exchange. |