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The Impact of Leverage on Firma's Investment

Author Affiliations

  • 1 Foundation University Institute of Engineering and Management Sciences, New Lalazar, Rawalpindi Cantt. PAKISTAN

Res. J. Recent Sci., Volume 4, Issue (5), Pages 67-70, May,2 (2015)

Abstract

This paper examines the impact of financial leverage on the firmís investment decision by using information on Pakistani publicly traded companies. In this paper, researcher has find out the negative relationship between leverage and investment, but the negative relationship between leverage and investment is significantly stronger for those firms which have low growth opportunities as compared to high growth opportunities. Growth opportunities play a vital role in investment decision of firm with leverage to avoid under or over investment. This research analyzes the results by using empirical model and measures the significance of endogeniety problem in implication of model. The paper supports to agency theory of corporate leverage and it shows the major impact of leverage especially when growth opportunities are low for firm.

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