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Corporate Financial Policies and Performance Prior to Currency Crises

Author

Listed:
  • Yrjo Juhani Koskinen

    (Department of Finance)

  • Arturo Bris

    (International Center for Finance)

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, while still making positive net investments. 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 deprecations. These results are consistent with the recent literature that puts the financial policies and performance of corporations as the central issue in currency crises.

Suggested Citation

  • Yrjo Juhani Koskinen & Arturo Bris, 2001. "Corporate Financial Policies and Performance Prior to Currency Crises," Yale School of Management Working Papers ysm187, Yale School of Management.
    • Handle: RePEc:ysm:somwrk:ysm187
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    File URL: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=270643
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    Cited by:

    1. Goh, Ai-Ting & Olivier, Jacques, 2004. "Financing decisions of firms and central bank policy," Journal of International Money and Finance, Elsevier, vol. 23(7-8), pages 1187-1207.

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    Keywords

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    JEL classification:

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

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