Title: Value relevance of the degree of leverages

Authors: Pradeep Kumar Gupta; Shailendra Kumar; Piyush Verma

Addresses: LM Thapar School of Management, Thapar University, Derabassi Campus, Derabassi, SAS Nagar, Punjab, India ' Indian Institute of Information Technology, Allahabad, UP, India ' LM Thapar School of Management, Thapar University, Derabassi Campus, Derabassi, SAS Nagar, Punjab, India

Abstract: This study empirically investigates the impact of the degree of leverages on the stock returns for the firms operating in an emerging market. We examine this phenomenon on 232 manufacturing firms listed in National Stock Exchange (NSE) in India over a period from 2002 to 2011. The findings of this study indicate that the degrees of operating, financial and total leverage have statistically significant impact on the stock returns of the select listed Indian manufacturing firms over the period under study. This study is limited to the Manufacturing firms in India for a period from 2002 to 2011 including the recessionary period. Our study provides an important insight to the practitioners, the researchers and the investors for the significance of accounting numbers in the context of India, one of fastest growing emerging markets in the world.

Keywords: leverage degree; operating leverage; financial leverage; value relevance; stock returns; emerging markets; manufacturing industry; India; accounting.

DOI: 10.1504/IJBEM.2016.076603

International Journal of Business and Emerging Markets, 2016 Vol.8 No.2, pp.166 - 182

Received: 11 Apr 2015
Accepted: 14 Aug 2015
Published online: 17 May 2016 *

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