Impact of debt on the price of shares in Mexico in the period of crisis by Covid 19

Abstract

Purpose: Analyze the level of indebtedness of companies and the risk or volatility of their share prices over time in drastic scenarios such as the 2020 crisis generated by Covid 19.

Design/Methodology: The sample is made up of six companies listed on the Mexican Stock Exchange from different sectors that were affected at different levels by the Covid 19 crisis; An analysis was performed considering the debt to total assets ratio and the volatility of the share price, using a correlation analysis and a GARCH model.

Findings: Evidence was found that indebtedness behaves inversely with the price per share and volatility is more persistent if there is greater leverage.

Practical implications: Firms with debt-financed growth strategies experience higher volatility and risk, as well as lower shock resilience and stability in firm value.

Originality/Value: Demonstrate the resilience and value stability of companies with different debt strategies in a context of systemic risk such as the crisis generated by Covid 19 in 2020, with debt representing a greater risk for the value of the companies. companies when changing from a stable period to one of crisis.