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Zero-leverage and firm performance – Evidence from Taiwan

Author

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  • Chang, Chong-Chuo
  • Kyi, San-San
  • Yang, Kuen-Shiou
  • Wu, Hsiang-Pei

Abstract

This study sets out to explore the influence of a zero-leverage policy on firm profitability and value. The results suggest that zero-leverage policy exhibits significant and positive effects on firm performance. This study also considers the potential mechanism of the zero-leverage variables and firm characteristics. The results proved that the zero-leverage policy can reduce the negative impact of corporate governance problems on the firm and further improve firm performance. Additionally, the zero-leverage policy can help firms lower their risk and enhance their overall performance. The zero-leverage is more effective in the improvement of firm performance if there are high financial constraints. This study obtains the results of robustness after controlling the endogeneity problem and testing for the industrial adjustment.

Suggested Citation

  • Chang, Chong-Chuo & Kyi, San-San & Yang, Kuen-Shiou & Wu, Hsiang-Pei, 2025. "Zero-leverage and firm performance – Evidence from Taiwan," Research in International Business and Finance, Elsevier, vol. 73(PB).
    • Handle: RePEc:eee:riibaf:v:73:y:2025:i:pb:s0275531924004495
    DOI: 10.1016/j.ribaf.2024.102656
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    Keywords

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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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