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Leverage and firm investment - the role of information asymmetry and growth.pdf (667.95 kB)

Leverage and firm investment: the role of information asymmetry and growth

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posted on 2023-06-10, 03:29 authored by Albert Danso, Theophilus Lartey, Samuel FosuSamuel Fosu, Samuel Owusu-Agyei, Moshfique Uddin
Purpose This paper aims to demonstrate how financial leverage impacts firm investment and the extent to which this relationship is conditional on the level of information asymmetry as well as growth. Design/methodology/approach The paper relies on data from 2,403 Indian firms during the period 1995-2014, generating a total of 19,544 firm-year observations. Analysis is conducted by using various panel econometric techniques. Findings Drawing insights from agency theories, the paper uncovers that financial leverage is negatively and significantly related to firm investment. It is also observed that the impact of financial leverage on firm investment is significant for high information asymmetric firms. Finally, the paper shows that the relationship between leverage and firm investment is significant for low-growth firms. However, no significant relationship is found between leverage and investment for high-growth firms. Originality/value This paper provides fresh evidence on the leverage–investment nexus and, to the authors’ knowledge, it the first paper to examine the extent to which this leverage–investment relationship is driven by the level of information asymmetry.

History

Publication status

  • Published

File Version

  • Accepted version

Journal

International Journal of Accounting and Information Management

ISSN

1834-7649

Publisher

Emerald

Issue

1

Volume

27

Page range

56-73

Department affiliated with

  • Accounting and Finance Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2022-05-11

First Open Access (FOA) Date

2022-05-11

First Compliant Deposit (FCD) Date

2022-05-11

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