Operating Leverage and Stock Returns: International Evidence

Luis Garcia-Feijoo and Benjamin A. Jansen

No 202002, Working Papers from Middle Tennessee State University, Department of Economics and Finance

Abstract: We empirically test theories predicting the association of operating leverage with stock returns and the value premium using an international data sample. Results suggest that operating leverage is related to stock returns and the value premium across the sampled countries. Results are robust to cross-country differences, typical controls, multiple definitions of operating and financial leverage, and while controlling for the endogeneity of operating and financial leverage. This suggests that the explanation for the presence of the value premium lies in the underlying risk exposure of fixed asset risk of operating leverage which is expressed through the value premium. Results further suggest that strengthening labor protection exogenously increases operating leverage.

Keywords: Leverage; Value Premium; Stock Returns (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2020-01
New Economics Papers: this item is included in nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://capone.mtsu.edu/berc/working/Operating_Leve ... Evidence_2_10_20.pdf (application/pdf)

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:mts:wpaper:202002

Access Statistics for this paper

More papers in Working Papers from Middle Tennessee State University, Department of Economics and Finance Contact information at EDIRC.
Bibliographic data for series maintained by Benjamin Jansen ().