Corporate Financial Policies and Performance Around Currency Crises

Posted: 23 Feb 2004

See all articles by Arturo Bris

Arturo Bris

IMD International; European Corporate Governance Institute (ECGI); Yale University - International Center for Finance

Yrjo Koskinen

Haskayne School of Business, University of Calgary

Vicente Pons-Sanz

Yale School of Management

Abstract

This paper studies firm-level leverage and performance measures before and after a currency crisis has occurred using data from 17 countries. We show that prior to a crisis, companies that are expected to benefit from currency depreciations increase their leverage more than other companies. Profitability and financial fragility ratios display similar patterns. We provide evidence that the Asian crisis is different from the previous European and Latin American ones: in Asia all firms become more fragile after the crisis and their profitability declines and leverage increases further, whereas elsewhere there are clear signs of recovery after a crisis has occurred.

Keywords: Currency crises, corporate leverage, capital structure, profitability, exchange rates

JEL Classification: F3, F4, G3

Suggested Citation

Bris, Arturo and Koskinen, Yrjo J and Pons-Sanz, Vicente Pascual, Corporate Financial Policies and Performance Around Currency Crises. Journal of Business, Vol. 77, No. 4, October 2004. Available at SSRN: https://ssrn.com/abstract=505402

Arturo Bris

IMD International ( email )

Ch. de Bellerive 23
P.O. Box 915
CH-1001 Lausanne
Switzerland

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Yale University - International Center for Finance ( email )

Box 208200
New Haven, CT 06520
United States

Yrjo J Koskinen (Contact Author)

Haskayne School of Business, University of Calgary ( email )

SH 154, 2500 University Drive NW
Calgary, Alberta T2N 1N4
Canada
+1-403-220-5540 (Phone)

HOME PAGE: http://haskayne.ucalgary.ca/haskayne_info/profiles/yrjo-koskinen

Vicente Pascual Pons-Sanz

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

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