How Do Large Depreciations Affect Firm Performance?
Name
How Do Large Depreciations Affect Firm 4379-02.pdf
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214.36 KB
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Adobe PDF
Checksum (MD5)
5aed399e2e04dcb17db4cf70cacd619d
Author(s)
Forbes, Kristin
Date Issued
October 23, 2002
Series/Report no.
MIT Sloan School of Management Working Paper;4379-02
Abstract
This paper examines how 12 "major depreciations" between 1997 and 2000 affected different
measures of firm performance in a sample of over 13,500 companies from around the world. Results
suggest that in the year after depreciations, firms have significantly higher growth in market capitalization,
but significantly lower growth in net income (when measured in local currency). Firms with a higher
share of foreign sales exposure have significantly better performance after depreciations, according to a
range of indicators. Firms with higher debt ratios tend to have lower net income growth, but there is no
robust relationship between debt exposure and the other performance variables. Larger firms frequently
have worse performance than smaller firms, although the significance and robustness of this result
fluctuates across specifications
Subjects
Depreciation
Performance
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