Corporate Financial Policies and Performance Around Currency Crises

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Finance Papers
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Corporate Finance
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Finance and Financial Management
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Bris, Arturo
Koskinen, Yrjo
Pons, Vicente
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This paper studies firm-level leverage and performance measures before and after a currency crisis, using data from 17 countries. We show that, prior to a crisis, companies that expect to benefit from currency depreciations increase their leverage more than companies that are expected to be harmed by the depreciation. Profitability and financial fragility ratios display consistent patterns. We provide evidence that the Asian crisis is different from the previous European and Latin American ones: In Asia, all firms become more fragile after the crisis and their profitability declines and leverage increases further, whereas elsewhere there are clear signs of recovery after a crisis occurs.

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2004-01-01
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The Journal of Business
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At the time of publication, author Yrjo Koskinen was affiliated with Boston University School of Management and CEPR. Currently, he is a faculty member at the Wharton School at the University of Pennsylvania.
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