This paper aims to investigate the impact that the capital structure of a firm has on its stock price performance. We apply regression analysis at a sample consisting of Greek listed non-financial companies over the period 1998-2009, both at the full sample level and at four leverage deciles. In doing so, we test if leverage is priced as a risk factor by constructing a leverage factor. The main contribution of our work is that we diversify capital structure studies by broadening the limited work that has been accomplished on the base of leverage as an explanatory variable of returns. Our findings show that the leverage risk factor contains significant information content and that it adds a considerable portion in the explanation of stock returns.
This paper aims to investigate the impact of leverage on stock returns in three southern European countries, members of the Euro zone, Greece, Italy and Portugal from 2000 to 2010. The portfolio level analysis is performed both on a full sample basis and on an industry basis. The main contribution of our work is that we enhance the capital structure studies by broadening the limited work that has been accomplished on the base of leverage as an explanatory variable of returns. At the industry level analysis, a significant positive leverage effect is isolated only at Consumer Goods and Health Care industries in Italy and at Industrial sector in Portugal. In Greece, the industry effect of leverage is almost negligible.
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