Leverage versus volatility: Evidence from the capital structure of European firms

Alaoui, Abdelkader O. El; Bacha, Obiyathulla Ismath; Masih, Mansur; Asutay, Mehmet

doi:10.1016/j.econmod.2016.11.023

Cited by 14 publications

(9 citation statements)

References 18 publications

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“…Esse indicador é construído pela razão do passivo sobre o patrimônio líquido, sendo que na base de dados deste estudo 60% das firmas apresentam essa razão sendo maior que 1. Conforme indicam Alaoui et al (2017), o grau de endividamento pode aumentar a volatilidade das empresas. Ao dividir a amostra, a magnitude dos efeitos sobre as variáveis que determinam a estrutura de capital e as condições macroeconômicas não se alteram.…”

Section: Resultsunclassified

“…De modo geral, espera-se que os índices que refletem o endividamento ou as dívidas de uma empresa possuam um efeito positivo na volatilidade; quanto maior for o nível de dívidas, maior será o risco de falência de uma firma. Isso está de acordo com os resultados encontrados porAlaoui et al (2017), que foram efeitos prejudiciais da dívida sobre a volatilidade das empresas com alto endividamento e um efeito positivo na volatilidade das empresas com baixo nível de endividamento.Adicionalmente, a participação de recursos de terceiros na estrutura de capital será explorada mediante o Grau de Alavancagem Financeira (GAF); este avalia como o capital de terceiros influencia a rentabilidade de seus proprietários, sendo a fórmula exposta na terceira linha da Tabela 1. Se o custo do endividamento for menor que o retorno produzido pela aplicação do capital, o grau de alavancagem financeira será maior que 1, indicando que é financeiramente benéfico se endividar.…”

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Alavancagem financeira, estrutura patrimonial e a volatilidade dos ativos negociados na B3

Oliveira

2020

Race

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Este artigo possui o objetivo de mensurar o efeito da alavancagem financeira e da estrutura patrimonial das empresas listadas na B3 (Brasil, Bolsa, Balcão) na volatilidade de seus ativos negociados em Bolsa. Para isso, estimou-se um modelo de painel com efeitos fixos utilizando dados trimestrais e calculou-se a volatilidade trimestral por meio do desvio padrão dos preços de fechamento diários dos ativos. Os dados utilizados incluem os balanços trimestrais desde o período de 2010 até o primeiro trimestre de 2017, e o preço dos ativos negociados em Bolsa. Os resultados demonstram que a estrutura de capital das empresas influencia a volatilidade de seus ativos, especialmente variáveis, como o grau de alavancagem, a composição do endividamento e a imobilização do patrimônio. Empresas com níveis maiores de endividamento são mais sensíveis a esses efeitos, bem como empresas do setor de varejo e transportes.

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Alavancagem financeira, estrutura patrimonial e a volatilidade dos ativos negociados na B3

Oliveira

2020

Race

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“…The Sharīʿah-compliant companies have a lower level of volatility (risk) compared to the same returns compared to the non-Sharīʿah compliant ones (el Alaoui et al, 2017). In particular, high multiples PE could mean that companies are overvalued.…”

Section: Conclusion Implications and Future Lines Of Researchmentioning

confidence: 99%

“…In particular, el Alaoui et al (2017) analyzed the relationship between a firm's leverage, return and share price volatility from the capital structure theory and Islamic finance perspective. From this point of view, the capital structure can be determined on the basis of different determinants such as company level, industry level, country level or financial level.…”

Section: Introductionmentioning

confidence: 99%

The impact of leverage on the cost of capital and market value

Battisti

Bollani

Miglietta

et al. 2020

MRR

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Purpose This paper aims to investigate the impact of leverage on the cost of capital and market value in the Indonesia Stock Exchange (IDX), where there are Sharīʿah and non-Sharīʿah compliant firms. Design/methodology/approach This study uses a mixed methods sequential exploratory design and is based on an empirical analysis undertaken with a sample of firms listed on the IDX. In particular, a qualitative analysis was conducted to identify the Sharīʿah-compliant firms and the qualitative study was designed to compare some financial elements in Sharīʿah and non-Sharīʿah compliant listed companies. The correlations among the main elements observed are considered and a principal component analysis describes the framework. Findings First, the results of the analysis show that for the Sharīʿah-compliant companies, identified as those that apply Islamic principles, the lower level of leverage that it is typical of these type of firms implies a higher cost of capital [cost of equity and weighted average cost of capital (WACC)] than non-Sharīʿah ones. Secondly, for the Sharīʿah-compliant companies, the lower level of leverage entails a higher market value measured by the multiples method (price/earning and enterprise value/operating profit) than for non-Sharīʿah ones. Originality/value This paper sheds new light on how leverage can affect the cost of capital and market value in the case of Sharīʿah and non-Sharīʿah compliant listed companies in the IDX. In particular, this research highlights the fact that Sharīʿah-compliant firms, despite having a higher WACC, create more market value compared to non-Sharīʿah compliant ones.

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“…Among the studies that analyze a group of countries, Okicic (2014) andEl Alaoui et al (2017) study European countries. Okicic focuses on Central and Eastern Europe and find that negative shocks increase the volatility of stock returns more than positive shocks, pointing to the existence of a leverage effect.…”

Section: Literature Reviewmentioning

confidence: 99%

Opportunity or Crisis? Volatility and Leverage Effect in the World’s Largest Economies

Bhunia¹,

Yaman²

2019

ijafr

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This paper examines the relationship between asset volatility and leverage for the three largest economies (based on purchasing power parity) in the world; US, China, and India. Collectively, these economies represent Int$56,269 billion of economic power, making it important to understand the relationship among these economies that provide valuable investment opportunities for investors. We focus on a volatile period in economic history starting in 1997 when the Asian financial crisis began. Using autoregressive models, we find that Chinese stock markets have the highest volatility among the three stock markets while the US stock market has the highest average returns. The Chinese market is less efficient than the US and Indian stock markets since the impact of new information takes longer to be reflected in stock prices. Our results show that the unconditional correlation among these stock markets is significant and positive although the correlation values are low in magnitude. We also find that past market volatility is a good indicator of future market volatility in our sample. The results show that positive stock market returns result in lower volatility compared to negative stock market returns. These results demonstrate that the largest economies of the world are highly integrated and investors should consider volatility and leverage besides returns when investing in these countries.

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Leverage versus volatility: Evidence from the capital structure of European firms

Cited by 14 publications

References 18 publications

Alavancagem financeira, estrutura patrimonial e a volatilidade dos ativos negociados na B3

Alavancagem financeira, estrutura patrimonial e a volatilidade dos ativos negociados na B3

The impact of leverage on the cost of capital and market value

Opportunity or Crisis? Volatility and Leverage Effect in the World’s Largest Economies

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