The energy-saving projects’ impact on the level of an enterprise’s financial stability
Economic Annals-XXI: Volume 195, Issue (1-2), Pages: 36-49
Citation information:
Al Sharari, F., Yemelyanov, O., Dziurakh, Yu., Sokil, O., & Danylovych, O. (2022). The energy-saving projects’ impact on the level of an enterprise’s financial stability. Economic Annals-XXI, 195(1-2), 36-49. doi: https://doi.org/10.21003/ea.V195-04
Fayez Al Sharari
PhD,
Associate Professor,
Department of Administrative and Financial Sciences,
Al-Balqa Applied University
Al-Salt, 19117, Jordan
fayiz.sharari@bau.edu.jo
ORCID ID: https://orcid.org/0000-0003-2299-7342
Olexandr Yemelyanov
D.Sc. (Economics),
Associate Professor,
Department of Business Economics and Investment,
Lviv Polytechnic National University
12 Stepan Bandera Str., Lviv, 79013, Ukraine
oleksandr.y.yemelianov@lpnu.ua
ORCID ID: https://orcid.org/0000-0002-1743-1646
Yurii Dziurakh
PhD (Public Administration),
Associate Professor,
Department of Administrative and Financial Management,
Lviv Polytechnic National University
12 Stepan Bandera Str., Lviv, 79013, Ukraine
yurii.m.dziurakh@lpnu.ua
ORCID ID: https://orcid.org/0000-0001-7131-7468
Oleh Sokil
D.Sc. (Economics),
Professor,
Department of Administrative and Financial Management,
Lviv Polytechnic National University
12 Stepan Bandera Str., Lviv, 79013, Ukraine
sokil.oleg@ukr.net
ORCID ID: https://orcid.org/0000-0002-3121-826X
Olena Danylovych
PhD Student,
Department of Business Economics and Investments,
Lviv Polytechnic National University
12 Stepan Bandera Str., Lviv, 79013, Ukraine
olena.t.danylovych@lpnu.ua
ORCID ID: https://orcid.org/0000-0002-3313-6276
The energy-saving projects’ impact on the level of an enterprise’s financial stability
Abstract. The article developed and tested tools for assessing the impact of debt financing of energy saving projects on the financial sustainability of those enterprises that implement these projects. In particular, an indicator for assessing the level of financial stability of business entities is proposed. The calculation of this indicator is based on a comparison of the forecast value of the flow of income of the enterprise, which it can use to fulfill its obligations to creditors, with the minimum allowable value of this flow, at which these obligations will be guaranteed to be fulfilled by the enterprise. A model for assessing the impact of debt financing of energy saving measures at enterprises on the level of their financial stability has been developed. Analytical expressions have been established for the limiting values of the part of the loan financing of energy-saving projects, under which the financial stability of the enterprise after the implementation of these projects will not decrease or will be at the minimum acceptable level. This made it possible to identify the conditions under which the introduction of investment measures at enterprises aimed at improving energy efficiency leads to an increase in the level of financial stability of business entities. These conditions provide for a limitation on the share of borrowed funds in the structure of sources of financing for energy saving projects, taking into account the forecast values of return on investment and other indicators that affect the ability of enterprises to fulfill their loan obligations in a timely manner. An empirical analysis was carried out on a sample of Ukrainian enterprises belonging to three types of economic activity. This analysis showed, in particular, that an increase in the investment activity of enterprises in the field of energy conservation has a positive impact on their level of financial stability. It was also found that the increase in the share of debt financing of energy-saving projects, to a certain extent, negatively affected the financial stability of the enterprises that implemented these projects. However, at any level of debt financing, the implementation of energy-saving projects made it possible to increase the average financial stability of the companies under study.
The purpose of the article is to develop and use tools for assessing the impact of debt financing of energy saving projects on the financial sustainability of those enterprises that implement these projects.
Keywords: Energy Saving Project; Debt Financing; Enterprise; Financial Stability; Investment Activity; Energy Saving
JEL Classification: G30; G31; Q39; M21
Acknowledgements and Funding: The authors received no direct funding for this research.
Contribution: The authors contributed equally to this work.
Data Availability Statement: The dataset used is publicly available from the sources referred to in the paper.
DOI: https://doi.org/10.21003/ea.V195-04
References
- Yemelyanov, O., Petrushka, T., Symak, A., Trevoho, O., Turylo, A., Kurylo, O., Danchak, L., Symak, D., & Lesyk, L. (2020). Microcredits for Sustainable Development of Small Ukrainian Enterprises: Efficiency, Accessibility, and Government Contribution. Sustainability, 12(15), 6184.
https://doi.org/10.3390/su12156184 - Rostamkalaei, A., & Freel, M. (2016). The cost of growth: small firms and the pricing of bank loans. Small Business Economics, 46, 255-272.
https://doi.org/10.1007/s11187-015-9681-x - Yang, W. (2018). Empirical Study on Effect of Credit Constraints on Productivity of Firms in Growth Enterprise Market of China. Journal of Finance and Economics, 6(5), 173-177.
http://pubs.sciepub.com/jfe/6/5/2/index.html - Lin, Y., & Li, L. (2018). Empirical Analysis of Microcredit in Western China: Based on Empirical Analysis. Journal of Chongqing Technology and Business University, 5, 1-15.
https://caod.oriprobe.com/articles/54970691/Empirical_Analysis_of_Microcredit_in_Western_China_Based_on_Empirical_.htm - Akinleye, G. T., & Olarewaju, O. O. (2019). Credit Management and Profitability Growth in Nigerian Manufacturing Firms. Acta Universitatis Danubius. OEconomica, 15(2), 445-456.
http://journals.univ-danubius.ro/index.php/oeconomica/article/view/5281/5232 - Gill, A. S., Mand, H. S., Sharma, S. P., & Mathur, N. (2012). Factors that Influence Financial Leverage of Small Business Firms in India. International Journal of Economics and Finance, 4(3), 33-45.
https://doi.org/10.5539/ijef.v4n3p33 - Javed, Z. H., Rao, H. H., Akram, B., & Nazir, M. F. (2015). Effect of Financial Leverage on Performance of the Firms: Empirical Evidence from Pakistan. SPOUDAI Journal of Economics and Business, 65(1-2), 87-95.
https://EconPapers.repec.org/RePEc:spd:journl:v:65:y:2015:i:1-2:p:87-95 - Hoque, M. A. (2017). Impact of financial leverage on financial performance: Evidence from textile sector of Bangladesh. IIUC Business Review, 6, 75-84.
http://dspace.iiuc.ac.bd:8080/xmlui/handle/88203/687 - Adenugba, Α. Α., Ige, Α. Α., & Kesinro, Ο.Ρ. (2016). Financial leverage and firms’ value: A study of selected firms in Nigeria. European Journal of Research and Reflection in Management Sciences, 4(1), 14-32.
https://www.idpublications.org/wp-content/uploads/2016/01/Full-Paper-FINANCIAL-LEVERAGE-AND-FIRMS’-VALUE-A-STUDY-OF-SELECTED-FIRMS-IN-NIGERIA.pdf - Lehenchuk, S. F., Valinkevych, N. V., Vyhivska, I. M., & Khomenko, H. Y. (2020). The significant principles of development of accounting support for innovative enterprise financing. International Journal of Advanced Science and Technology, 29(8 Special Issue), 2282-2289.
http://sersc.org/journals/index.php/IJAST/article/view/14701 - Agarwal, S., Chomsisengphet, S., & Driscoll, J. C. (2004). Loan Commitments and Private Firms. Finance and Economics Discussion Series (FEDS), Working Paper No. 2004-27.
https://doi.org/10.2139/ssrn.593862 - Choi, S., Furceri, D., Huang, Y., Loungani, P. (2018). Aggregate uncertainty and sectoral productivity growth: The role of credit constraints. Journal of International Money and Finance, 88, 314-330.
https://doi.org/10.1016/j.jimonfin.2017.07.016 - Yemelyanov, O., Symak, A., Petrushka, T., Lesyk, R., & Lesyk, L. (2018). Evaluation of the Adaptability of the Ukrainian Economy to Changes in Prices for Energy Carriers and to Energy Market Risks. Energies, 11(12), 3529.
https://doi.org/10.3390/en11123529 - Akinleye, G. T., & Olarewaju, O. O. (2019). Credit Management and Profitability Growth in Nigerian Manufacturing Firms. Acta Universitatis Danubius: Oeconomica, 15(2), 445-456.
https://ideas.repec.org/a/dug/actaec/y2019i2p445-456.html - Alrowwad, A. M., Alhasanat, K. A., Sokil, O., Halko, S., & Kucherkova, S. (2022). Sustainable transformation of accounting in agriculture. Agricultural and Resource Economics: International Scientific E-Journal, 8(2), 5-29.
https://doi.org/10.51599/10.51599/are.2022.08.02.01 - Angori, G., & Aristei, D. A. (2018). A Panel Data Analysis of Firms’ Access to Credit in the Euro Area: Endogenous Selection, Individual Heterogeneity and Time Persistence. SSRN.
https://doi.org/10.2139/ssrn.3254358 - Rostamkalaei, A., & Freel, M. S. (2016). The cost of growth: small firms and the pricing of bank loans. Small Business Economics, 46, 255-272.
https://doi.org/10.1007/s11187-015-9681-x - Bhalli, M., Hashmi, S., & Majeed, A. (2017). Impact of Credit Constraints on Firms Growth: A Case Study of Manufacturing Sector of Pakistan. Journal of Quantitative Methods, 1(1), 4-40.
https://doi.org/10.29145/2017/jqm/010102 - Krasniqi, В. А. (2010). Are small firms really credit constrained? Empirical evidence from Kosova. International Entrepreneurship and Management Journal, 6, 459-479.
https://doi.org/10.1007/s11365-010-0135-2 - Gryazeva, E., Mayorova, O., Malchikova, N., Nemkova, M., & Paravina, M. (2021). International financial fraud: economic and psychological aspects, classification and ways of minimization. Economic Annals-XXI, 189(5-6(1)), 15-25.
https://doi.org/10.21003/ea.V189-02 - Mtsitsi, L., Dzanja, J. K., Gondwe S., & Kamwana, B. C. (2016). Effects of Microcredit on the Financial Performance of Small Scale Cooking Oil Processors in Central Malawi. Journal of Agricultural Science, 8(6), 159-168.
https://doi.org/10.5539/jas.v8n6p159 - Dong, J., & Huo, H. (2017). Identification of Financing Barriers to Energy Efficiency in Small and Medium-Sized Enterprises by Integrating the Fuzzy Delphi and Fuzzy DEMATEL Approaches. Energies, 10(8), 1172.
https://doi.org/10.3390/en10081172 - Malakhov, V. A. (2012). Assessing the economic effect from introduction of energy-saving technologies in the field of heat supply. Thermal Engineering, 59, 250-257.
https://doi.org/10.1134/S0040601512030093 - Aroshidze, A. (2021). The sustainable enterprise development tetrad and assessment of its balance. Economic Annals-XXI, 192(7-8(2)), 125-136.
https://doi.org/10.21003/ea.V192-10 - Weron, R. (2014). Electricity price forecasting: A review of the state-of-the-art with a look into the future. International Journal of Forecasting, 30(4), 1030-1081.
https://doi.org/10.1016/j.ijforecast.2014.08.008 - Yemelyanov, O., Symak, A., Petrushka, T., Zahoretska, O., Kusiy, M., Lesyk, R., & Lesyk, L. (2019). Changes in Energy Consumption, Economic Growth and Aspirations for Energy Independence: Sectoral Analysis of Uses of Natural Gas in Ukrainian Economy. Energies, 12(24), 4724.
https://doi.org/10.3390/en12244724 - Sokil, O., Zhuk, V., Holub, N., & Levchenko, O. (2019). Accounting and Analytical Methods for Identifying Risks of Agricultural Enterprises’ Sustainable Development. In V. Nadykto (Ed.), Modern Development Paths of Agricultural Production: Trends and Innovations (pp. 561-569). Springer, Cham.
https://doi.org/10.1007/978-3-030-14918-5_55
Received 20.10.2021
Received in revised form 22.11.2021
Accepted 26.11.2021
Available online 9.02.2022