The Effect of Leverage on Performance: Domestically-Oriented vs. Internationally-Oriented Firms
Research in International Business and Finance, Vol. 34, 2015, pp. 265-280
37 Pages Posted: 17 Feb 2014 Last revised: 30 May 2015
Date Written: May 2, 2014
This paper examines the relation between financial leverage and firm performance for a panel of 159,375 (mostly private) non-financial firms in Thailand during the global financial crisis of 2007-2009. We find that leverage is negatively associated with firm performance in the full sample analysis. However, when we divide the sample into domestically-oriented firms and internationally-oriented firms, the effect of leverage on performance is negative for the domestically-oriented firms and is positive for the internationally-oriented firms. In addition, firm size moderates the effect of leverage on performance. That is, for both the domestically-oriented firms and the internationally-oriented firms, the impact of leverage on performance is substantially larger in magnitude for the larger firms than for the small firms.
Keywords: financial leverage; firm size; internationalization; firm performance; Thailand
JEL Classification: E2; E4; G3; G32
Suggested Citation: Suggested Citation