Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Firm leverage and investment decisions in an emerging market
AU - Umutlu, Mehmet
PY - 2010/8
Y1 - 2010/8
N2 - 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.
AB - 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.
KW - Leverage
KW - Investment
KW - Panel data
KW - Emerging markets
U2 - 10.1007/s11135-009-9250-y
DO - 10.1007/s11135-009-9250-y
M3 - Journal article
VL - 44
SP - 1005
EP - 1013
JO - Quality and Quantity
JF - Quality and Quantity
SN - 0033-5177
IS - 5
ER -