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Equity Performance of Zero-debt Firms vis-Ã -vis Their Leveraged Counterparts

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  • Soumya Guha Deb
  • Pradip Banerjee

Abstract

The purpose of this article is to find out whether firms that operate with debt-free balance sheet are rewarded more by the investors at large. For this, we form portfolios of debt-free firms and compare their performance with performance of matching portfolios of leveraged firms from the same industry and of similar size. Both absolute and risk-adjusted return measures are used as performance proxies. Our results show that debt-free firms tend to outperform the leveraged counterparts in terms of both absolute and risk-adjusted performance measures.

Suggested Citation

  • Soumya Guha Deb & Pradip Banerjee, 2015. "Equity Performance of Zero-debt Firms vis-Ã -vis Their Leveraged Counterparts," Global Business Review, International Management Institute, vol. 16(5), pages 800-811, October.
    • Handle: RePEc:sae:globus:v:16:y:2015:i:5:p:800-811
    DOI: 10.1177/0972150915591458
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    References listed on IDEAS

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