Costs of Financial Distress: The German Evidence
28 Pages Posted: 1 Oct 2006 Last revised: 25 May 2008
Date Written: May 2008
In this paper we aim to verify the existence of costs of financial distress (cfd) for a sample of German CDAX firms using an ex-post approach originally due to Opler/Titman (1994). In contrast to this US-based study we do not find a significant interaction between high leverage and distress for German firms: firms in distressed industries with high ex ante leverage do not display lower sales growth than their ex-ante lower levered counterparts.
Keywords: Capital Structure, Costs of Financial Distress
JEL Classification: G32, G33
Suggested Citation: Suggested Citation