Corporate Financial Policies and Performance Prior to Currency Crises

Arturo Bris, Yrjö Koskinen () and Vicente Pons

No 386, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: Using company level data from 17 countries that have suffered a currency crisis during the past decade, this paper documents that firms have increasing leverage and declining profitability prior to a crisis. After sorting companies into two groups based on their exchange rate beta, we show that companies that benefit from currency depreciations have higher leverage, lower earnings to revenue ratios and lower interest coverage ratios compared to firms that are harmed by currency depreciations. These results are consistent with the recent literature that puts the financial policies and performance of corporations as the central issue in currency crisis.

Keywords: currency crisis; corporate leverage; capital structure; profitability; exchange rates (search for similar items in EconPapers)
JEL-codes: F3 F4 G3 (search for similar items in EconPapers)
Pages: pages
Date: 2001-10-01
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Related works:
Working Paper: Corporate Financial Policies and Performance Prior to Currency Crises (2001)
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