Abstract
The purpose of this article is to find out whether firms that operate with debt-free balance sheet are rewarded more by the investors at large. For this, we form portfolios of debt-free firms and compare their performance with performance of matching portfolios of leveraged firms from the same industry and of similar size. Both absolute and risk-adjusted return measures are used as performance proxies. Our results show that debt-free firms tend to outperform the leveraged counterparts in terms of both absolute and risk-adjusted performance measures.
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