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Financial And Operating Risk Analysis Of Two Romanian-Hungarian Border Counties

Author

Listed:
  • Tibor Tarnóczi

    (Department of Economics, Faculty of Economics and Social Sciences, Partium Christian University, Oradea, Romania)

  • Edit Veres

    (Department of Economics, Faculty of Economics and Social Sciences, Partium Christian University, Oradea, Romania)

  • Edina Kulcsár

    (Department of Economics, Faculty of Economics and Social Sciences, Partium Christian University, Oradea, Romania)

Abstract

The study analyzes the risk of companies selected from two Romanian-Hungarian border counties (Bihor and Hajdú-Bihar counties) by the degree of operational and financial leverage ratios. A total of 1,674 companies from the two counties were included in the analysis, in approximately half and half proportions. In the study, operating, financial and combined leverage ratios are used for risk analysis. Because of the large variance of the ratios, outliers were filtered out. The filtering was based on the degree of the combined leverage ratio, which resulted in 107 companies excluded. In the analysis of sectors, there are significant differences in DOL ratio values between counties. For the DFL indicator, the values are much more balanced. There are also larger differences for DCL, which are likely to be caused by DOL values. The analysis showed no statistically significant difference in leverage ratios between the total county data or the sector-disaggregated county data. The analysis also suggested that some accounting reports may contain manipulations but that further investigations are needed to substantiate them adequately.

Suggested Citation

  • Tibor Tarnóczi & Edit Veres & Edina Kulcsár, 2021. "Financial And Operating Risk Analysis Of Two Romanian-Hungarian Border Counties," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 242-250, July.
    • Handle: RePEc:ora:journl:v:1:y:2021:i:1:p:242-250
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    File URL: http://anale.steconomiceuoradea.ro/volume/2021/n1/027.pdf
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    References listed on IDEAS

    as
    1. Hafiz Muhammad Zia ul haq & Muhammad Sohail Shafiq & Muhammad Kashif & Saba Ameer, 2020. "Determining Force behind Value Premium: The Case of Financial Leverage and Operating Leverage," JRFM, MDPI, vol. 13(9), pages 1-15, September.
    2. Steven Stelk & Sang‐Hyun Park & Simon Medcalfe & Michael T. Dugan, 2018. "An additional analysis of estimation techniques for the degree of financial leverage," Review of Financial Economics, John Wiley & Sons, vol. 36(3), pages 220-231, July.
    3. Cao, Viet Nga, 2015. "What explains the value premium? The case of adjustment costs, operating leverage and financial leverage," Journal of Banking & Finance, Elsevier, vol. 59(C), pages 350-366.
    4. Sarkar, Sudipto, 2018. "Optimal DOL (degree of operating leverage) with investment and production flexibility," International Journal of Production Economics, Elsevier, vol. 202(C), pages 172-181.
    5. Chen, Zhiyao & Harford, Jarrad & Kamara, Avraham, 2019. "Operating Leverage, Profitability, and Capital Structure," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 54(1), pages 369-392, February.
    6. Sudipto Sarkar, 2020. "The relationship between operating leverage and financial leverage," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(S1), pages 805-826, April.
    7. Darrat, Ali F. & Mukherjee, Tarun K., 1995. "Inter-industry differences and the impact of operating and financial leverages on equity risk," Review of Financial Economics, Elsevier, vol. 4(2), pages 141-155.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    corporate risk; degree of operating leverage; degree of financial leverage; comparative financial analysis;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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