Document Type
Article
Publication Date
9-1-1996
Journal / Book Title
Journal of Economics and Finance
Abstract
This paper empirically investigates a complete theoretical model relating the operating characteristics of a firm to the total, systematic, and unsystematic risk of its equity. The degree of operating leverage, the ratio of net profits to firm value, and the variability of unit output are all found to be positively correlated with each of the three risk measures. The degree of financial leverage, while positively related to total and unsystematic risk, does not appear to be related to systematic risk. After controlling for the business risk of the firm, no evidence can be found of an interaction between the degree of operating leverage and the degree of financial leverage.
DOI
10.1007/BF02920604
MSU Digital Commons Citation
Lord, Richard, "The Impact of Operating and Financial Risk on Equity Risk" (1996). Department of Accounting and Finance Faculty Scholarship and Creative Works. 117.
https://digitalcommons.montclair.edu/acctg-finance-facpubs/117
Published Citation
Lord, R. A. (1996). The impact of operating and financial risk on equity risk. Journal of Economics and Finance, 20(3), 27-38.