Leverage and corporate performance: International evidence

By Víctor M. González. 2012

147 citations recorded by the source corpus.

This paper analyzes the effect of financial leverage on corporate operating performance and how this effect varies across countries. Results for 10,375 firms in 39 countries indicate that the performance of firms with greater leverage is significantly reduced compared to their competitors in industry downturns, in line with the importance of financial distress costs. However, this effect varies according to the legal origin of the countries, being positive in French civil law countries. The protection of shareholder rights and the strength of legal enforcement are the main variables explaining the effect of financial leverage on performance.

Subfields: Accounting

View Paper: https://www.semanticscholar.org/paper/0041a73dbbb475d9ae099d9de208f762b5b1eb5d

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Citations in the corpus

Corporate governance, capital structure and firm performance: Evidence from Thailand (2017, background): “…governance on firm performance (Chen et al., 2005; Hossain et al., 2001), (2) the effect of corporate governance on financial leverage (Connelly et al., 2012; Jiraporn et al., 2012), and (3) the effect of financial leverage on firm performance (González, 2013; Vithessonthi and Tongurai, 2015).”
Does Boardroom Gender Diversity Matter? Evidence from a Transitional Economy (2015, background): “In a similar vein, González (2013) argued that the association between financial leverage and FP is likely to be contingent upon two contradictory antecedents: (i) the cost of financial distress; and (ii) the benefits of the disciplinary role of debt financing.”
Cash conversion cycle and corporate performance: Global evidence (2018, background): “Leverage (LEV) is defined as the ratio of the total debt divided by the total assets (Cho, 1998; González, 2013; Lin and Fu, 2017; Pombo and Taborda, 2017).”
The link among board characteristics, corporate social responsibility performance, and financial performance: Evidence from the hospitality and tourism industry (2020, background): “…for the following reasons: firm size may impact firms’ financial performance through economies of scale (Lee, 2009); and leverage influences firms’ financial performance due to its disciplining role (González, 2013) and the provision of capital for investment (Vithessonthi & Tongurai, 2015).”
Corruption, Types of Corruption and Firm Financial Performance: New Evidence from a Transitional Economy (2018, result): “This finding also supports the argument of González (2013) who suggests that a firmwith higher financial debt can force managers into value-maximising decisions.”