Financial distress and firm performance: Evidence from the Asian financial crisis
نویسنده
چکیده
Using a sample of 277 firms from eight East Asian economies, the relationship between financial distress and firm performance during the Asian Financial Crisis of 1997-1998 was tested. The crisis provides an exogenous shock which reduces the endogeneity issues between firm performance and leverage. The results from this study reaffirm that firms with low financial leverage tend to perform better than firms with high financial leverage. Additionally, the crisis magnifies the negative relationship between financial distress and firm performance. Highleverage firms experience worse performance during a crisis.
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