Investment Opportunities and Leverage During Global Financial Crisis: Evidence From the UAE

Abstract

I extend prior work by examining the role of corporate governance in moderating the negative effect of investment opportunities and leverage with firm performance during crisis and non-crisis times. I used a firm-level panel that spans the period 2008 to 2012 of all listed firms on Abu Dhabi Stock Exchange and Dubai Financial Market. I applied for the first time Refined Economic Value Added (REVA) as a new measurement of performance. Results show lack of significant influence of corporate governance on firm performance and this influence is significantly negative during crisis. I also document that corporate governance worsen the leverage relationship with firm performance during crisis and improve the relationship in non-crisis time. I provide evidence that corporate governance plays a different role in different time periods.