Relationship between leverage and corporate profitability in Chile: The moderating effect of IFRS

This study investigates the relationship between leverage and corporate profitability in Chile, with a focus on the moderating effect of adopting International Financial Reporting Standards (IFRS) since 2013. We used a System-GMM approach to analyze 41 companies from the Selective Share Price Index (IPSA) over the period 2008-2023. We find that, prior to IFRS implementation, there was a negative relationship between leverage and profitability. However, following the adoption of these standards, the relationship became neutral. The findings suggest that the enhanced quality of financial information provided by IFRS can influence strategic decisions regarding corporate financing and management, underscoring the importance of transparency in an emerging economy. JEL Codes: G3, G32. Received: 15/08/2024. Accepted: 28/01/2025. Published: 03/05/2025.