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The Effect of Financial Leverage on Investment Decisions: The Evidence from Emerging Markets

Akca, Tuuba and Karan, Mehmet Baha and Yildiz, Y. (2021) The Effect of Financial Leverage on Investment Decisions: The Evidence from Emerging Markets. In: Dinçer, Hasan and Yüksel, Serhat, eds. Financial Strategies in Competitive Markets: Multidimensional Approaches to Financial Policies for Local Companies. Contributions to Finance and Accounting . Springer, Cham, Switzerland, pp. 137-150. ISBN 978-3-030-68611-6. E-ISBN 978-3-030-68612-3. (doi:10.1007/978-3-030-68612-3_10) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided) (KAR id:100065)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided. (Contact us about this Publication)
Official URL:
https://doi.org/10.1007/978-3-030-68612-3_10

Abstract

The paper aims to investigate the effect of financial leverage on companies' investment decisions in the selected emerging countries. To understand the investment/borrowing relationship, in the post-2000 period, when borrowing rates increased throughout the world, we investigated the relationship between investment and borrowing by considering the underinvestment hypothesis of Myers (J Financ Econom. 5: 147--175, 1977). This study covers 15,400 observations in the period 2005--2015 examines firms of developing countries in different economic dynamics. The study results show that leverage has a significant negative effect on investment and that this connection is found reliable and valid with the panel regression and two-stage least squares models. Although the findings differ from country to country, the evidence supports Myers' underinvestment theory that borrowing has a controlling role for companies with low enlargement opportunities in the emerged countries.

Item Type: Book section
DOI/Identification number: 10.1007/978-3-030-68612-3_10
Subjects: H Social Sciences
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Funders: University of Huddersfield (https://ror.org/05t1h8f27)
Depositing User: Yilmaz Yildiz
Date Deposited: 17 Feb 2023 12:09 UTC
Last Modified: 20 Feb 2023 14:42 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/100065 (The current URI for this page, for reference purposes)

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