Capital Structure, Macroeconomic Variables & Stock Returns. Evidence from Greece‪.‬

Abstract This paper aims to investigate the impact that the capital structure of a firm has on its stock price performance. We apply regression analysis at a sample consisting of Greek listed non-financial companies over the period 1998-2009, both at the full sample level and at four leverage deciles. In doing so, we test if leverage is priced as a risk factor by constructing a leverage factor. The main contribution of our work is that we diversify capital structure studies by broadening the limited work that has been accomplished on the base of leverage as an explanatory variable of returns. Our findings show that the leverage risk factor contains significant information content and that it adds a considerable portion in the explanation of stock returns. Keywords Asset pricing * Fama-French * Leverage * Beta * Price earnings ratio * Book-to-market ratio * Size * Momentum * Market risk premium * Athens stock exchange