Comparative Models Between Equity-Based and Debt-Based Financing to Achieve Financial Sustainability

The contemporary financial system has long recognized debt as a convenient financial instrument. Nevertheless, following the crisis of 2007/2008, debt instruments were deemed to become the root cause of the global economic collapse. Since then, policymakers and economists have struggled to find w...

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Main Author:	Umul Ain’syah Binti Sha’ari
Format:	Thesis
Language:	en_US
Subjects:	equity-based risk-sharing social impact financial sustainability Islamic finance debt instruments
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spelling	my-usim-ddms-126662024-05-29T04:36:23Z Comparative Models Between Equity-Based and Debt-Based Financing to Achieve Financial Sustainability Umul Ain’syah Binti Sha’ari The contemporary financial system has long recognized debt as a convenient financial instrument. Nevertheless, following the crisis of 2007/2008, debt instruments were deemed to become the root cause of the global economic collapse. Since then, policymakers and economists have struggled to find ways to escape from interest-based financing to achieve better overall stability.Many efforts have beenmade, yet global debt is still at an enduring level. Hence, this research further explores the issue by demonstrating the potential of equity-based financing in the financial system based on several measures. Firstly, this research develops a proposed framework of equity-based over debt-based financing. Secondly, this research investigates credit risk exposure via the simulation of a sample company’s equity-based and debt-based financing. Lastly, this research examines the feasibility of equity-based financing to promote the financial sustainability to company and investors across 4 economic phases. Monte Carlo Simulation is applied to explore a company’s risk and returns performance when issuing equity-based and debt-based financing. Given the simulated scenarios for ten years period of Nestle Malaysia Berhad, the result highlights the potential of equity-based financing to reduce credit risk exposure when returns are based on the company’s performance. Additionally, equity-based financing provides low credit risk exposure, even for low-profitable companies. The simulation is repeated for 12 sectors across four different economic phases from 2007 until 2021 to check the robustness of equity-based financing. The result also highlights equity-based financing’s ability to achieve financial sustainability during different economic phases. Equity-based financing can therefore be an effective substitute for the current financing structure for those looking to enhance long-term sustainability despite a financial crisis. For future study, this research suggests the implementation of equity-based financing with a new Malaysian benchmark - Malaysia Overnight Rate (MYOR) from the lender’s perspective to enhance the credibility of equity financing. Universiti Sains Islam Malaysia 2023-05 Thesis en_US https://oarep.usim.edu.my/handle/123456789/12666 https://oarep.usim.edu.my/bitstreams/1ba000d8-3f17-4b32-842c-eb49cec89be9/download 8a4605be74aa9ea9d79846c1fba20a33 equity-based, risk-sharing, social impact, financial sustainability, Islamic finance debt instruments
institution	Universiti Sains Islam Malaysia
collection	USIM Institutional Repository
language	en_US
topic	equity-based risk-sharing social impact financial sustainability Islamic finance debt instruments
spellingShingle	equity-based risk-sharing social impact financial sustainability Islamic finance debt instruments Umul Ain’syah Binti Sha’ari Comparative Models Between Equity-Based and Debt-Based Financing to Achieve Financial Sustainability
description	The contemporary financial system has long recognized debt as a convenient financial instrument. Nevertheless, following the crisis of 2007/2008, debt instruments were deemed to become the root cause of the global economic collapse. Since then, policymakers and economists have struggled to find ways to escape from interest-based financing to achieve better overall stability.Many efforts have beenmade, yet global debt is still at an enduring level. Hence, this research further explores the issue by demonstrating the potential of equity-based financing in the financial system based on several measures. Firstly, this research develops a proposed framework of equity-based over debt-based financing. Secondly, this research investigates credit risk exposure via the simulation of a sample company’s equity-based and debt-based financing. Lastly, this research examines the feasibility of equity-based financing to promote the financial sustainability to company and investors across 4 economic phases. Monte Carlo Simulation is applied to explore a company’s risk and returns performance when issuing equity-based and debt-based financing. Given the simulated scenarios for ten years period of Nestle Malaysia Berhad, the result highlights the potential of equity-based financing to reduce credit risk exposure when returns are based on the company’s performance. Additionally, equity-based financing provides low credit risk exposure, even for low-profitable companies. The simulation is repeated for 12 sectors across four different economic phases from 2007 until 2021 to check the robustness of equity-based financing. The result also highlights equity-based financing’s ability to achieve financial sustainability during different economic phases. Equity-based financing can therefore be an effective substitute for the current financing structure for those looking to enhance long-term sustainability despite a financial crisis. For future study, this research suggests the implementation of equity-based financing with a new Malaysian benchmark - Malaysia Overnight Rate (MYOR) from the lender’s perspective to enhance the credibility of equity financing.
format	Thesis
author	Umul Ain’syah Binti Sha’ari
author_facet	Umul Ain’syah Binti Sha’ari
author_sort	Umul Ain’syah Binti Sha’ari
title	Comparative Models Between Equity-Based and Debt-Based Financing to Achieve Financial Sustainability
title_short	Comparative Models Between Equity-Based and Debt-Based Financing to Achieve Financial Sustainability
title_full	Comparative Models Between Equity-Based and Debt-Based Financing to Achieve Financial Sustainability
title_fullStr	Comparative Models Between Equity-Based and Debt-Based Financing to Achieve Financial Sustainability
title_full_unstemmed	Comparative Models Between Equity-Based and Debt-Based Financing to Achieve Financial Sustainability
title_sort	comparative models between equity-based and debt-based financing to achieve financial sustainability
granting_institution	Universiti Sains Islam Malaysia
_version_	1812444724216201216

Comparative Models Between Equity-Based and Debt-Based Financing to Achieve Financial Sustainability

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