<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>The main objective of this paper is to demonstrate the importance of a tool, called in the specialized literature, financial leverage effect, in managerial decision-making process, regarding the way to finance the assets and finding an optimal indebtedness. The research context comes as a result of the recently increase in the inflation rate, at global, European and national level. This fact led the national central banks to revise their monetary policies, mainly through the monetary policy increases interest rate. As a consequence, the commercial banks (which borrow money from the Central or National Bank) grant more expensive loans to commercial companies. Theoretical research on the conceptual approach is complemented by the case study method, whose results show that an increase in the interest rate on loans contracted by the companies, can lead to a decrease in the financial leverage effect value, until reaching even negative values.</p>
</abstract>

The main objective of this paper is to demonstrate the importance of a tool, called in the specialized literature, financial leverage effect, in managerial decision-making process, regarding the way to finance the assets and finding an optimal indebtedness. The research context comes as a result of the recently increase in the inflation rate, at global, European and national level. This fact led the national central banks to revise their monetary policies, mainly through the monetary policy increases interest rate. As a consequence, the commercial banks (which borrow money from the Central or National Bank) grant more expensive loans to commercial companies. Theoretical research on the conceptual approach is complemented by the case study method, whose results show that an increase in the interest rate on loans contracted by the companies, can lead to a decrease in the financial leverage effect value, until reaching even negative values.

Analysis of the Financial Leverage Effect in the Context of Interest Rates Increase

Gaston Berger University of Saint-Louis, Senegal Franche-Comté University

Valahian Journal of Economic Studies

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

The main objective of this paper is to demonstrate the importance of a tool, called in the specialized literature, financial leverage effect, in managerial...

Analysis of the Financial Leverage Effect in the Context of Interest Rates Increase

Publicado en línea: 09 may 2022

Páginas: 15 - 24

DOI: https://doi.org/10.2478/vjes-2022-0002

Palabras clave
Return on Equity, Return on Assets, Interest Rate, Level of Indebtedness, Financial Leverage Effect

© 2022 Luiza Ionescu et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Analysis of the Financial Leverage Effect in the Context of Interest Rates Increase

Publicado en línea: 09 may 2022

Páginas: 15 - 24

DOI: https://doi.org/10.2478/vjes-2022-0002

Palabras claveReturn on Equity, Return on Assets, Interest Rate, Level of Indebtedness, Financial Leverage Effect

© 2022 Luiza Ionescu et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Palabras clave
Return on Equity, Return on Assets, Interest Rate, Level of Indebtedness, Financial Leverage Effect