• ISSN: 2010-023X (Print)
    • Abbreviated Title: Int. J. Trade, Economics and Financ.
    • Frequency: Quaterly
    • DOI: 10.18178/IJTEF
    • Editor-in-Chief: Prof.Tung-Zong (Donald) Chang
    • Managing Editor: Ms. Shira. W. Lu
    • Abstracting/ Indexing:  Crossref, Electronic Journals Library , EBSCO
    • E-mail: ijtef.editorial.office@gmail.com
HOME > Archive > 2023 > Volume 14 Number 3 (Aug. 2023) >
IJTEF 2023 Vol.14(3): 61-67 ISSN: 2010-023X
DOI: 10.18178/ijtef.2023.14.3.757

Burden of Leverage: How Leverage Affects Performance of Companies in America

Kunyan Wu

Abstract—The questions about the relationship between leverage and company performance have always been under heated discussion. Theories have demonstrated their interaction and drawn diverse conclusions. In order to figure out the proper leverage burden of a company for managers and investors, I study how leverage affect performance of U.S. companies. The results show that leverage has negative impact on the valuation, efficiency and risk of the company. The relationship holds both in the cross section and in the time series. However, leverage has negative impact on profitability for a company while positively influence the profitability for different companies in the same industry. The results suggests that excessive debt is likely to be a burden for the company and harm company performance under most circumstances. The study implies that managers may face lower company performance when burdening excessive debt and investors may take more risks when investing for higher leverage companies.

Index Terms—Leverage, interest coverage, company performance

Kunyan Wu is with Renmin University of China, Beijing 100872 China (e-mail: ijwky@outlook.com).

[PDF]

Cite: Kunyan Wu, "Burden of Leverage: How Leverage Affects Performance of Companies in America," International Journal of Trade, Economics and Finance vol.14, no.3, pp. 61-67, 2023.

Copyright © 2023 by the authors. This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).

PREVIOUS PAPER
Integrated Lean Service-Digital Marketing Model to Increase the Profitability of Debit Cards in Retail Banking
NEXT PAPER
Last page

Copyright © 2008-2024. International Journal of Trade, Economics and Finance. All rights reserved.
E-mail: ijtef.editorial.office@gmail.com