In this paper a hazard function analysis is performed on a set of European firms in order to identify a stochastic relationship among financial structure and profits. The relative proportions of debt and equity financing appear to influence expected profitability with a different degree for each nation. Within each country, relevant differences are recorded among listed and non listed firms. These results highlight the role of institutional factors, in particular related to credit and stock markets, in reducing informational asymmetries between investors and managers. The cross-sectional study is performed by means of degradation analysis, an engineering tool new in economics.
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Paper provided by Universita' Politecnica delle Marche (I), Dipartimento di Economia in its series Working Papers with number
315.
Find related papers by JEL classification: C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
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