Abstract
| Original language | English |
|---|---|
| Pages (from-to) | 350 - 366 |
| Number of pages | 17 |
| Journal | Journal of Banking and Finance |
| Volume | 59 |
| DOIs | |
| Publication status | Published - 2015 |
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What explains the value premium? The case of adjustment costs, operating leverage and financial leverage. / Cao, Viet Nga.
In: Journal of Banking and Finance, Vol. 59, 2015, p. 350 - 366.Research output: Contribution to journal › Article › Research › peer-review
TY - JOUR
T1 - What explains the value premium? The case of adjustment costs, operating leverage and financial leverage
AU - Cao, Viet Nga
PY - 2015
Y1 - 2015
N2 - This paper empirically examines and compares the different theoretical predictions on how adjustment costs, operating and financial leverage influence the value premium. Consistent with Ozdagli (2012), financial leverage plays a dominant role, supported by adjustment costs (which represent the degree of investment irreversibility). Specifically, the observed value premium is driven by the financial leverage differences between value and growth firms, partially neutralized by investment irreversibility. The relation between the value premium and investment irreversibility is contrary to the intuition in Zhang (2005) and Cooper (2006). Operating leverage does not significantly influence the value premium.
AB - This paper empirically examines and compares the different theoretical predictions on how adjustment costs, operating and financial leverage influence the value premium. Consistent with Ozdagli (2012), financial leverage plays a dominant role, supported by adjustment costs (which represent the degree of investment irreversibility). Specifically, the observed value premium is driven by the financial leverage differences between value and growth firms, partially neutralized by investment irreversibility. The relation between the value premium and investment irreversibility is contrary to the intuition in Zhang (2005) and Cooper (2006). Operating leverage does not significantly influence the value premium.
U2 - 10.1016/j.jbankfin.2015.04.033
DO - 10.1016/j.jbankfin.2015.04.033
M3 - Article
VL - 59
SP - 350
EP - 366
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
ER -