This paper examines the relation between abnormal stock returns and leverage. Expanding on Modigliani and Miller's (1958) Proposition II, abnormal returns are estimated using the asset pricing models of Sharpe and Lintner (the traditional Capital Asset Pricing Model, CAPM), of Fama and French...

We build on agency and strategy literature to investigate and explain whether and how changes in stock returns are related to key managerial decisions by firms that are consistent and supportive of the firm’s strategy in different industry concentrations. Unlike previous work, our study...