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Corporate Financial Policies and Performance Prior to Currency Crises

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Listed:
  • Arturo Bris
  • Yrj?? Koskinen
  • Vicente Pons

Abstract

Using company level data from 17 countries that have suffered a currency crisis during the past decade, this paper documents that firms have increasing leverage and declining profitability prior to a crisis. After sorting companies into two groups based on their exchange rate beta, we show that companies that benefit from currency depreciations have higher leverage, lower earnings to revenue ratios and lower interest coverage ratios compared to firms that are harmed by currency depreciations. These results are consistent with the recent literature that puts the financial policies and performance of corporations as the central issue in currency crisis.

Suggested Citation

  • Arturo Bris & Yrj?? Koskinen & Vicente Pons, 2001. "Corporate Financial Policies and Performance Prior to Currency Crises," William Davidson Institute Working Papers Series 386, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2001-386
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    References listed on IDEAS

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    More about this item

    Keywords

    currency crisis; corporate leverage; capital structure; profitability; exchange rates;

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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