Article ID: | iaor201522833 |
Volume: | 8 |
Issue: | 4 |
Start Page Number: | 327 |
End Page Number: | 334 |
Publication Date: | Dec 1985 |
Journal: | Journal of Financial Research |
Authors: | Beranek William, Clayton Ronnie |
Keywords: | risk, management, investment |
Financial leverage as reported by a consolidated financial statement may differ substantially from leverage for the parent company. To assess the financial risk for the parent (not the consolidated entity), employing consolidated data is hazardous; the problem is magnified by the fact that virtually all firms report only consolidated data. Consolidated leverage almost always equals or exceeds parent leverage for a wholly owned subsidiary, and many firms reporting only consolidated data have betas significantly greater than otherwise comparable firms that report both consolidated and parent company information.