Are highly leveraged firms more sensitive to an economic downturn?

Hossein Asgharian

The European Journal of Finance, 2003, vol. 9, issue 3, 219-241

Abstract: The paper tests the hypothesis that highly leveraged firms lose market shares to their less leveraged rivals in an industry downturn. Both parametric and semiparametric regression methods are applied to analyse the relationships between firm performance and leverage. It is found that the highly leveraged firms in distressed industries face relatively lower sales growth and stock returns but are still able to retain a relatively higher growth in profitability. The findings may suggest that the decline in sales of the highly leveraged firms might be a result of managers' preferences to decrease the activity of product lines with low profitability.

Keywords: financial distress; firm performance; nonlinear model; semiparametric regression; robust regression (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/13518470210132381 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:eurjfi:v:9:y:2003:i:3:p:219-241

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/REJF20

DOI: 10.1080/13518470210132381

Access Statistics for this article

The European Journal of Finance is currently edited by Chris Adcock

More articles in The European Journal of Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().