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DOI 10.35609/jber.2018.3.3(2)

Reference to this paper should be made as follows: Novita, S; Tjahjadi, B; Irwanto, A. (2018). Industry and Financial Crises in Fragile and Zombie Firms: Does Leverage Matter?, J. Bus. Econ. Review, 3 (3): 51 – 58. https://doi.org/10.35609/jber.2018.3.3(2)

Received: June 21, 2018 | Accepted: September 30, 2018

Industry and Financial Crises in Fragile and Zombie Firms: Does Leverage Matter?
Santi Novita, Bambang Tjahjadi, Andry Irwanto
Department of Accounting, Faculty of Economics and Business,
Airlangga University, Jalan Airlangga 4 60286, Surabaya, Indonesia Abstract

Objective - This paper shows how leverage affects firm's fragility and financial soundness during financial and industry crises.

Methodology/Technique - Long term inefficient and zombie firms are explored through the effects of leverage in additional tests.

Findings - There are two main results obtained from the sample of Indonesian non-financial firms from 2007 to 2016. First, leverage has a statistically significant correlation with firm's fragility. Second, leverage has an effect on firm's financial soundness during industry crisis.

Novelty - Unlike the previous paper, this paper demonstrates a significant implication on the need to differentiate fragile firms and firms that are persistently inefficient, such as zombie firms.

Type of Paper: Empirical.

Keywords: Fragility; Zombie; Financial Soundness; Leverage; Industry Crisis; Financial Crisis.

JEL Classification: M20, M41.

Price: USD 25