Equity Performance of Zero-debt Firms vis-Ã -vis Their Leveraged Counterparts

Soumya Guha Deb and Pradip Banerjee

Global Business Review, 2015, vol. 16, issue 5, 800-811

Abstract: The purpose of this article is to find out whether firms that operate with debt-free balance sheet are rewarded more by the investors at large. For this, we form portfolios of debt-free firms and compare their performance with performance of matching portfolios of leveraged firms from the same industry and of similar size. Both absolute and risk-adjusted return measures are used as performance proxies. Our results show that debt-free firms tend to outperform the leveraged counterparts in terms of both absolute and risk-adjusted performance measures.

Keywords: Zero-debt portfolio; leveraged portfolio; absolute performance measure; risk-adjusted performance measure (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:sae:globus:v:16:y:2015:i:5:p:800-811

DOI: 10.1177/0972150915591458

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