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How Do Large Depreciations Affect Firm Performance?

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  • Forbes, Kristin

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

Suggested Citation

  • Forbes, Kristin, 2002. "How Do Large Depreciations Affect Firm Performance?," Working papers 4379-02, Massachusetts Institute of Technology (MIT), Sloan School of Management.
    • Handle: RePEc:mit:sloanp:1766
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    More about this item

    Keywords

    Depreciation; Performance;

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business
    • F3 - International Economics - - International Finance

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