Zero-leverage and firm performance – Evidence from Taiwan

Chong-Chuo Chang, San-San Kyi, Kuen-Shiou Yang and Hsiang-Pei Wu

Research in International Business and Finance, 2025, vol. 73, issue PB

Abstract: This study sets out to explore the influence of a zero-leverage policy on firm profitability and value. The results suggest that zero-leverage policy exhibits significant and positive effects on firm performance. This study also considers the potential mechanism of the zero-leverage variables and firm characteristics. The results proved that the zero-leverage policy can reduce the negative impact of corporate governance problems on the firm and further improve firm performance. Additionally, the zero-leverage policy can help firms lower their risk and enhance their overall performance. The zero-leverage is more effective in the improvement of firm performance if there are high financial constraints. This study obtains the results of robustness after controlling the endogeneity problem and testing for the industrial adjustment.

Keywords: Zero-leverage; Firm profitability; Firm value (search for similar items in EconPapers)
JEL-codes: G30 G32 G33 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:73:y:2025:i:pb:s0275531924004495

DOI: 10.1016/j.ribaf.2024.102656

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