Costs of Financial Distress: The German Evidence

28 Pages Posted: 1 Oct 2006 Last revised: 25 May 2008

See all articles by Bernhard Schwetzler

Bernhard Schwetzler

HHL Leipzig Graduate School of Management - Department of Finance

Carsten Reimund

Handelshochschule Leipzig (HHL) - Leipzig Graduate School of Management; Allianz SE

Florian Zainhofer

University of Fribourg (Switzerland) - Chair for Financial Management

Date Written: May 2008

Abstract

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

Schwetzler, Bernhard and Reimund, Carsten and Zainhofer, Florian, Costs of Financial Distress: The German Evidence (May 2008). Available at SSRN: https://ssrn.com/abstract=933567 or http://dx.doi.org/10.2139/ssrn.933567

Bernhard Schwetzler (Contact Author)

HHL Leipzig Graduate School of Management - Department of Finance ( email )

Jahnallee 59
D-04109 Leipzig
Germany
+49-341-9851-685 (Phone)
+49-341-9851-689 (Fax)

Carsten Reimund

Handelshochschule Leipzig (HHL) - Leipzig Graduate School of Management ( email )

Jahnallee 59
Leipzig, D-04109
Germany
+49-341-9851-687 (Phone)
+49-341-9851-689 (Fax)

Allianz SE

80802 Munich
Germany

Florian Zainhofer

University of Fribourg (Switzerland) - Chair for Financial Management ( email )

Fribourg, CH 1700
Switzerland

HOME PAGE: http://www.unifr.ch/finanzmanagement

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