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Are Highly Leveraged Firms More Sensitive to an Economic Downturn?

In English

Författare

Summary, in English

The paper tests the hypothesis that highly leveraged firms lose market shares to their less leveraged rivals in an industry downturn. Both parametric and semiparametric regression methods are applied to analyse the relationships between firm performance and leverage. It is found that the highly leveraged firms in distressed industries face relatively lower sales growth and stock returns but are still able to retain a relatively higher growth in profitability. The findings may suggest that the decline in sales of the highly leveraged firms might be a result of managers' preferences to decrease the activity of product lines with low profitability.

Publiceringsår

2003

Språk

Engelska

Sidor

219-241

Publikation/Tidskrift/Serie

European Journal of Finance

Volym

9

Issue

3

Dokumenttyp

Artikel i tidskrift

Förlag

Taylor & Francis

Ämne

  • Economics

Nyckelord

  • semiparametric regression
  • robust regression
  • nonlinear model
  • firm performance
  • financial distress

Status

Published

ISBN/ISSN/Övrigt

  • ISSN: 1466-4364