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International Journal of Scientific and Engineering Research
ISSN Online 2229-5518
ISSN Print: 2229-5518 4    
Website: http://www.ijser.org
scirp IJSER >> Volume 2, Issue 4, April 2011 Edition
Impact Of Leverage On Firms Investment Decision
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Author(s)
Franklin John. S, Muthusamy. K
KEYWORDS
Investment, Tobin’s Q, Cash flow, Liquidity, ROA, Size and Retained Earnings.
ABSTRACT
The present paper is aimed at analyzing the impact of leverage on firm's investment decision of Indian pharmaceutical companies during the period from 1998 to 2009. To measure the impact of leverage on firm's investment decision, pooling regression, random and fixed effect models are used by taking, leverage, sales, cash flow, Return on Asset, Tobin's Q, liquidity and retained earnings as independent variable and investment as dependent variable. In addition , we demarcate between three types of firms (i) Small firms, (ii) Medium firms and (iii)Large firms. The results reveal that a significant positive relationship between leverage and investment, while we found a negative relationship between leverage investment for medium firms and positive relationship between leverage and investment in large firms. Our econometric results reveal an insignificant relationship between the two variables for medium and large firms.
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