TY - JOUR
T1 - Leverage and Firms’ Vulnerability
T2 - Do Crises and Industry Matter?
AU - Novita, Santi
AU - Tjahjadi, Bambang
AU - Ismiyanti, Fitri
N1 - Funding Information:
The authors thank the anonymous referee, Andry Irwanto, as a supervisor in this study. This study was supported by Airlangga University (Faculty Research Grant scheme).
Publisher Copyright:
© 2021, International Journal of Economics and Management. All Rights Reserved.
PY - 2021/8
Y1 - 2021/8
N2 - This study aims to test whether a firm with a higher degree of leverage is more likely to be vulnerable during the financial crisis. The research sample comprises non-financial firms in Indonesia, Malaysia, and Korea during the period 2007-2019. Besides considering the duration and type of industry in comparing the effect of leverage, this study utilizes the pre-crisis period to determine the vulnerability. Using logistic regression, the result indicates that a higher degree of leverage is more likely to reduce a firms’ financial health as expected, but surprisingly the effect is higher during the industry crisis than the global financial crisis. Furthermore, the nature of the industry provides different effects of leverage on firms’ vulnerability. A further concern of the industry characteristic is needed, especially the new and emerging industries, particularly in evaluating and crafting regulation relates to leverage. Additional tests explore channels through which leverage generates these effects.
AB - This study aims to test whether a firm with a higher degree of leverage is more likely to be vulnerable during the financial crisis. The research sample comprises non-financial firms in Indonesia, Malaysia, and Korea during the period 2007-2019. Besides considering the duration and type of industry in comparing the effect of leverage, this study utilizes the pre-crisis period to determine the vulnerability. Using logistic regression, the result indicates that a higher degree of leverage is more likely to reduce a firms’ financial health as expected, but surprisingly the effect is higher during the industry crisis than the global financial crisis. Furthermore, the nature of the industry provides different effects of leverage on firms’ vulnerability. A further concern of the industry characteristic is needed, especially the new and emerging industries, particularly in evaluating and crafting regulation relates to leverage. Additional tests explore channels through which leverage generates these effects.
KW - Crises
KW - industry characteristic
KW - leverage
KW - vulnerability
UR - http://www.scopus.com/inward/record.url?scp=85113883302&partnerID=8YFLogxK
M3 - Article
AN - SCOPUS:85113883302
SN - 1823-836X
VL - 15
SP - 161
EP - 174
JO - International Journal of Economics and Management
JF - International Journal of Economics and Management
IS - 2
ER -