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| Author: | Kim, I.-W. Chen, K. H. Nance, J. |
| Title: | Information content of financial leverage: an empirical study. |
| Journal: | Journal of Business Finance and Accounting
1992 : JAN, VOL. 19:1, p. 133-152 |
| Index terms: | INFORMATION GEARING EMPIRICAL RESEARCH |
| Language: | eng |
| Abstract: | This study examines the information content of financial leverage. Previous studies have yielded inconclusive evidence due to, in part, the presence of confounding factors and use of indirect testing methods. This study uses a strict sampling procedure to control the effects of known important confounding variables. Effects of several other potential confounding events are also tested. In addition, this study uses a direct correlation method that yields a clear empirical implication on the effects of changes in financial leverage. The results of this study fail to support the irrelevance theorem, maximum debt theorem, and bad news theorem. The evidence does, however , show support of the optimal financial leverage theorem. |
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