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Are Highly Leveraged Firms More Sensitive to an Economic Downturn?

Asgharian, Hossein LU (2003) In European Journal of Finance 9(3). p.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.
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
semiparametric regression, robust regression, nonlinear model, firm performance, financial distress
in
European Journal of Finance
volume
9
issue
3
pages
219 - 241
publisher
Taylor & Francis
external identifiers
  • scopus:0344629433
ISSN
1466-4364
DOI
10.1080/13518470210132381
language
English
LU publication?
yes
id
e91cbe81-d499-430f-9d3a-1b47d889ff2d (old id 1387210)
date added to LUP
2009-04-20 12:27:25
date last changed
2018-01-07 05:45:22
@article{e91cbe81-d499-430f-9d3a-1b47d889ff2d,
  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.},
  author       = {Asgharian, Hossein},
  issn         = {1466-4364},
  keyword      = {semiparametric regression,robust regression,nonlinear model,firm performance,financial distress},
  language     = {eng},
  number       = {3},
  pages        = {219--241},
  publisher    = {Taylor & Francis},
  series       = {European Journal of Finance},
  title        = {Are Highly Leveraged Firms More Sensitive to an Economic Downturn?},
  url          = {http://dx.doi.org/10.1080/13518470210132381},
  volume       = {9},
  year         = {2003},
}