How Important is Financial Risk?

@article{Bartram2013HowII,
  title={How Important is Financial Risk?},
  author={S{\"o}hnke M. Bartram and Gregory W. Brown and William T. Waller},
  journal={University of North Carolina Kenan-Flagler Business School Research Paper Series},
  year={2013}
}
We explore the determinants of equity price risk for a large sample of non-financial corporations. By estimating both cross-sectional and time-series models, we show that operating and asset characteristics are by far the most important determinants of equity price risk. In contrast, for the average (median) firm, financial risk accounts for less than a third (15%) of observed stock price volatility. This explains why financial distress (as opposed to economic distress) was surprisingly… 

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