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Operating Cost Flexibility and Implications for Stock Returns

Authors :
Roi D. Taussig
Source :
Risks, Vol 12, Iss 10, p 161 (2024)
Publication Year :
2024
Publisher :
MDPI AG, 2024.

Abstract

This study suggests a new measure for a firm’s operating cost flexibility. Flexible firms are less risky and, therefore, require lower stock returns. This analysis of 126,202 firm-year observations from the U.S. cross-section of stock returns finds that the new measure explains a negative significant rate of return. The new measure’s impact extends beyond that of operating leverage. In addition, the new measure’s impact is both statistically and economically significant, and it is sustainable for a variety of in-sample and out-of-sample robustness tests. The new findings are beneficial to researchers and practitioners alike.

Details

Language :
English
ISSN :
12100161 and 22279091
Volume :
12
Issue :
10
Database :
Directory of Open Access Journals
Journal :
Risks
Publication Type :
Academic Journal
Accession number :
edsdoj.7c8792fcfa304a2fba12e995a822b90e
Document Type :
article
Full Text :
https://doi.org/10.3390/risks12100161