Premium
INFORMATION CONTENT OF FINANCIAL LEVERAGE: A COMMENT
Author(s) -
Park Manyong
Publication year - 1994
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1994.tb00310.x
Subject(s) - leverage (statistics) , stock (firearms) , confounding , chen , economics , business , econometrics , financial economics , finance , computer science , mathematics , statistics , artificial intelligence , engineering , mechanical engineering , paleontology , biology
Kim, Chen and Nance in a previous article in this journal (January 1992) classified sample firms into two groups based on the relationship between change in stock prices and financial leverage to test the existence of optimal financial leverage. The inherent weakness of this methodology is that interpretation of test results on the existence of optimal financial leverage can be misleading in the case of serious confounding events.