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Industry and Financial Crises in Fragile and Zombie Firms: Does Leverage Matter?

Santi Novita ()
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Santi Novita: Airlangga University, Jalan Airlangga 4 60286, Surabaya, Indonesia Author-2-Name: Bambang Tjahjadi Author-2-Workplace-Name: Airlangga University, Jalan Airlangga 4 60286, Surabaya, Indonesia Author-3-Name: Andry Irwanto Author-3-Workplace-Name: Airlangga University, Jalan Airlangga 4 60286, Surabaya, Indonesia Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:

GATR Journals from Global Academy of Training and Research (GATR) Enterprise

Abstract: Objective - This paper shows how leverage affects firm's fragility and financial soundness during financial and industry crises. Methodology/Technique - Long term inefficient and zombie firms are explored through the effects of leverage in additional tests. Findings - There are two main results obtained from the sample of Indonesian non-financial firms from 2007 to 2016. First, leverage has a statistically significant correlation with firm's fragility. Second, leverage has an effect on firm's financial soundness during industry crisis. Novelty - Unlike the previous paper, this paper demonstrates a significant implication on the need to differentiate fragile firms and firms that are persistently inefficient, such as zombie firms.

Keywords: Fragility; Zombie; Financial Soundness; Leverage; Industry Crisis; Financial Crisis. (search for similar items in EconPapers)
JEL-codes: M20 M41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-eff and nep-sea
Date: 2018-09-30
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Published in Journal of Business and Economics Review, Volume 3, Issue 3

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