Abstract
This paper compares the performance of portfolios of debt free firms to comparable portfolios of leveraged firms. The results of the study indicate that investments in portfolios of debt free firms tend to generate higher returns than investments in their peer portfolios of leveraged firms over long and short periods. The results have clear implications for investment decisions and investment performance. Investors tend to reward firms that resist the urge to borrow heavily and operate with debt free balance sheets and penalize firms that have high levels of debt. Moreover, during market downturns, debt free firms will not have the additional burden of debt and may be able to recover much faster than companies that carry a debt load over a long period of time, and therefore would outperform leveraged firms. This latter assertion may be retested after the latest international financial crises come to an end.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
