Firm leverage and investment decisions in an emerging market

Firm leverage and investment decisions in an emerging market

In this study, the effect of leverage on investment is analyzed by employing panel data methods for the Turkish non-financial firms that are quoted on İstanbul Stock Exchange. For one-way error component models, it is shown that there is a negative impact of leverage on investment for only firms wit...

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Veröffentlicht in:Quality & quantity 2010-08, Vol.44 (5), p.1005-1013
1. Verfasser: Umutlu, Mehmet
Format: Artikel
Sprache:eng
Schlagworte:
Balance sheets
Bankruptcy
Book value
Capital structure
Conformity
Corporate finance
Costs
Decisions
Emerging markets
Enterprises
Equity
Factoring companies
Finance
Industrialized nations
Investment
Investments
Markets
Methodology of the Social Sciences
Panel data
Research Note
Social Sciences
Stock exchanges
Stockholders
Turkey
Variables
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Beschreibung
Zusammenfassung:In this study, the effect of leverage on investment is analyzed by employing panel data methods for the Turkish non-financial firms that are quoted on İstanbul Stock Exchange. For one-way error component models, it is shown that there is a negative impact of leverage on investment for only firms with low Tobin’s Q. These results are in conformity with the previous literature and agency theories of corporate finance stating that leverage has a disciplining role for firms with low growth opportunities. However, when the model is extended to include the time effects in a two-way error component model, the relation between leverage and investment disappears.
ISSN:0033-5177
1573-7845
DOI:10.1007/s11135-009-9250-y