The Impact of Financial Leverage on Firm Performance: Evidence from Russia

13 Pages Posted: 2 Apr 2015 Last revised: 26 May 2017

Multiple version iconThere are 2 versions of this paper

Date Written: April 2, 2015

Abstract

The relationship between financial leverage and firm performance is studied in this paper. Financial leverage can positively influence firm performance because leverage can be treated as a tool for disciplining management. The results for a large sample of Russian joint-stock companies over the period 2004-2013 years show, however, that the impact of financial leverage on Russian firms’ performance has been negative. The findings are robust to using different measures of firm performance, checking sub-samples and time clusters and employing alternative estimation approach. The results thus support pecking-order theory but are not consistent with trade-off or free-cash-flow theories.

Keywords: Financial Leverage, Firm Performance, Return on Assets, Return on Equity, Operating Margin

JEL Classification: E2, E4, G3, G32

Suggested Citation

Ilyukhin, Evgeny, The Impact of Financial Leverage on Firm Performance: Evidence from Russia (April 2, 2015). Available at SSRN: https://ssrn.com/abstract=2589013 or http://dx.doi.org/10.2139/ssrn.2589013

Evgeny Ilyukhin (Contact Author)

York University ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

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