Analysis Of Cross-Sectional And Temporal Relationship Between Systematic Risk And Financial Leverage
Drs. Ibn Qizam, SE, MSi, Akt.
Faculty of Sharia State Islamic
This research is intended to examine both cross-sectionally and inter-temporally the Correlation Between financial leverage and systematic risk (beta). Financial leverage is usually Considered as one proxy of risk derived from financial data and domain name as one That has Distinctive determinants. Beta, on the other domain, is regarded as one proxy of risk derived from the market That has Some other determinants. That it is the research tries to combine both cross-sectionally and inter-temporally the two domains That most of the accounting Researchers little to devote Themselves.
Cross-sectionally, this result is fail to support Hypothesis 1, that is the relations Between financial leverage and systematic risk “Will Be Stronger Pls sizes of the firms are relatively Smaller That the other firms and conversely, the relations Between financial leverage and systematic risk” Will Be Pls Stronger is the relatively larger size That the others. Hypotheis 2 (the relation Between financial leverage and systematic risk negatively Will Be Stronger Pls help the firms Belong to a group of relatively more homogeneous industries than the Others, and conversely, the relations Between financial leverage and systematic risk positively be less strong will of the firms Pls Belong to a group of relatively less homogeneous industries than the others) and Hypothesis 3b (the relations Between financial leverage and systematic risk “Will Be Stronger Pls the significant effect of operating leverage is higher variable) is empirically supported (using interaction models Pls C.1 ). In spite of results the significant, the coefficients of financial leverage, operating leverage, and industry on the game show inconsistent effects Signs. The result, however, is consistent with Sufiyati (1977) `s findings Nowhere Some of her results showed That financial leverage was negatively related to beta.
On the other test, the inter-temporally the result shows, That financial leverage is significantly and symmetrically related to beta. That this means the two variables show bidirectional causality. The high (low) beta cans result in the high (low) financial leverage; and on the contrary, the high (low) financial leverage cans result in the high (low) beta. That means this hypothesis 4a is supported. Nevertheless, the conditioning variables (operating leverage and size) do not significantly influence the causal relations Between the beta and financial leverage.
Key words: Beta (systematic risk), the Financial Leverage, Operating Leverage, Size, Cross-sectional, inter-temporal, bidirectional, interaction model.
I. Background Problem
This research is intended to analyze the cross-sectional and temporal relationship between financial leverage and systematic risk or beta. Financial leverage is usually considered a proxy for risk based financial data company that is usually considered a single domain that has a separate determinant; while on the one hand, that is considered a proxy beta risk sourced from the market which also has its own determinants. But, unfortunately, some researchers have not tried to connect the two proxies of risk by entering a few variables that affect human relations in a more intense both in cross-sectional and temporal.
The first domain of research, namely the determinant of financial leverage analysis, among others, carried out by Gupta (1969), Ferry and Jones (1979), Kale, Noe, and Ramirez (1991) and others. In its findings, issued financial leverage as the dependent variable which is influenced by various independent variables such as size, growth, industry, business risks and others. While research related to determinants of systematic risk and both are trying to connect between the two domains can look back on the findings of Hamada (1972), Ben-Zion and Shalit (1975), Mandelker and Rhee (1984), Bowman (1979, 1981 ), Robichek and Cohn (1974), Melicher and Rush (1974), etc. or financial literature as in Foster (1986).