On the relationship between systematic risk and financial and operating risk: the case of the Greek listed firms

Fotini Voulgaris and Athanasia Rizonaki

Global Business and Economics Review, 2011, vol. 13, issue 3/4, 204-221

Abstract: The study analyses the effect of operating and financial risk and other factors such as profitability, liquidity, dividend payout, size and growth on systematic risk for Greek listed firms, after Greece's entrance in the Monetary Union. The study also examines whether the explanatory power of the fundamental drivers of systematic risk is time sensitive. A panel data multivariate regression methodology is used. The findings suggest that the degrees of financial and operating leverage, the interest coverage ratio, the growth in total assets and the dividend payout ratio help explain variations in beta. It is shown that there is a negative relationship between DOL * DFL and systematic risk and that the examined relationships are time-sensitive. The study also denotes that the Athens Stock Exchange General Index is not appropriate for the estimation of beta for the Greek listed firms.

Keywords: systematic risk; operating leverage; financial leverage; listed firms; panel data; risk factors; Greece; profitability; liquidity; dividend payouts; company size; Economic and Monetary Union; EMU; European Union; EU; fundamental drivers; time sensitivity; multivariate regression; interest coverage ratio; asset growth; total assets; beta variations; negative relationships; leverage degrees; DOL; DFL; Athens; stock exchanges; general index companies; beta estimation; global business; economics; finance; accounting. (search for similar items in EconPapers)
Date: 2011
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