Volatility and Leverage: an Analysis of Latin American Companies

• Autor(a) principal: Rosa, Arthur Antonio Silva
• Data de Publicação: 2023
• Outros Autores: Ribeiro, Kárem Cristina de Sousa, Carvalho, Luciano Ferreira
• Tipo de documento: Artigo
• Idioma: por; eng
• Título da fonte: Contabilidade, Gestão e Governança
• Texto Completo: https://revistacgg.org/index.php/contabil/article/view/2992
• topic: Volatilidade; Alavancagem; Crise; EGARCH; GMM; Volatility; Leverage; Crisis; EGARCH; GMM

Objective: To analyze the relationship between the leverage level and the volatility of Latin American stocks, from January 2005 to June 2020. Method: A multiple linear regression was used, with the coefficients estimated by the GMM and with the data arranged in a panel. Volatility was estimated by the EGARCH model and six leverage measures were used. Originality/Relevance: The study analyzes the relationship between volatility and leverage in the context of Latin America and shows that periods of crisis can affect this relationship. The results are relevant for managers, who can strategically adjust the degree of leverage in order to maximize the company's value for shareholders, and also for investors, as it allows for a better alignment between their risk profile and the desired return. Results: The results indicate that there is a positive relationship between the degree of leverage of the firm and the volatility of assets. It was also found that, in periods of crisis, even if companies reduce their leverage levels, volatility will tend to increase due to the uncertainties related to these periods. Theoretical/Methodological Contributions: In the analysis of the relationship between leverage and volatility, the moderating effect of periods of crisis was also verified and the endogeneity between the variables was considered through the GMM. In addition, volatility was estimated using the EGARCH model, which considers volatility asymmetries, with results controlled by corporate and macroeconomic variables.