Testing the Leverage Effect for the Companies Listed on the Capital Market

Andrei Stanculescu and Petre Brezeanu ()

Annals of the University of Petrosani, Economics, 2009, vol. 9, issue 4, 249-256

Abstract: The financial theory admits that levered firms record a value surplus compared to unlevered firms, at least because of the tax savings, related to interest. A series of fundamental studies indicate this phenomenon. However, incurred debt, especially the long term debt, has a more consistent influence on performance, as stated by the Modigliani-Miller model. To this respect, the paper proposes the empirical testing of this model, using financial-accounting data of firms listed on the Romanian capital market. In particular, the statistical significance of the leverage effect will be analyzed, on a sample of companies listed on the Bucharest Stock Exchange.

Keywords: leverage effect; financial lever; financial return; regression; capital market (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:pet:annals:v:9:i:4:y:2009:p:249-256

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