ABSTRACT ................................................................................................................................... iii
ACKNOWLEDGMENTS ............................................................................................................. iv
DEDICATION ................................................................................................................................ v
LIST OF TABLES ....................................................................................................................... viii
LIST OF FIGURES ........................................................................................................................ x
1. INTRODUCTION ...................................................................................................................... 1
1.1. Background .......................................................................................................................... 1
1.2. Objectives ............................................................................................................................. 3
1.2.1. Objective 1..................................................................................................................... 3
1.2.2. Objective 2..................................................................................................................... 3
1.2.3. Objective 3..................................................................................................................... 4
1.2.4. Objective 4..................................................................................................................... 4
2. LITERATURE REVIEW ........................................................................................................... 5
3. METHODOLOGY ................................................................................................................... 16
3.1. Theoretical Framework ...................................................................................................... 16
3.2. Data .................................................................................................................................... 24
3.2.1. Data Source ................................................................................................................. 24
3.2.2. Variable Definition ...................................................................................................... 25
3.3. Estimation Model ............................................................................................................... 29
4. EMPIRICAL RESULTS ........................................................................................................... 33
4.1. Summary Statistics ............................................................................................................. 33
4.2. Empirical Estimation .......................................................................................................... 39
4.2.1. Current Ratio on Business Risk ................................................................................... 40
4.2.2. Current Ratio on Mean Returns ................................................................................... 49
vii
4.2.3. Financial Risk on Business Risk ................................................................................. 55
4.2.4. Financial Risk on One-year Lagged Business Risk .................................................... 61
5. SUMMARY AND CONCLUSIONS ....................................................................................... 67
REFERENCES ............................................................................................................................. 71
