Leverage, foreign borrowing and corporate performance: firm-level evidence for India
Applied Economics Letters, 2008, vol. 15, issue 8, 607-616
This article examines the association between corporate leverage and profitability. Using firm-level data on manufacturing sector in India for 1995-2004, the findings indicate that corporate profitability and cash flows declines as leverage rises. More importantly, the marginal effect of an increase in leverage on earnings is larger for firms that participate in international debt markets than other firms. The results are robust after controlling for the economic environment and various firm-specific controls.
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