Corporate Financial Policies and Performance Prior to Currency Crises

Yrjö Koskinen () and Arturo Bris ()
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Arturo Bris: International Center for Finance

Yale School of Management Working Papers from Yale School of Management

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, while still making positive net investments. 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 deprecations. These results are consistent with the recent literature that puts the financial policies and performance of corporations as the central issue in currency crises.

Keywords: currency crises; corporate leverage; capital structure; profitability; exchange rates (search for similar items in EconPapers)
JEL-codes: F3 F4 G3 (search for similar items in EconPapers)
Date: 2001-07-07
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Citations: View citations in EconPapers (1)

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Working Paper: Corporate Financial Policies and Performance Prior to Currency Crises (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:ysm:somwrk:ysm187

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