Author : Diana Gustafsson
Publisher : LAP Lambert Academic Publishing
ISBN 13 : 9783845402154
Total Pages : 112 pages
Book Rating : 4.4/5 (21 download)
Book Synopsis Leverage Effect on Investment Efficiency by : Diana Gustafsson
Download or read book Leverage Effect on Investment Efficiency written by Diana Gustafsson and published by LAP Lambert Academic Publishing. This book was released on 2012-04 with total page 112 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book studies the effects of leverage on investment efficiency in Swedish listed firms 1997-2005. The effects are studied separately for over- and underinvesting firms. To measure investment efficiency we employ three different measures: marginal q, absolute investments (defined as capital expenditures plus research and development expenditures) and Tobin s Q. The application of three different investment efficiency measures is one of the main contributions of this study. The investment efficiency of overinvesting firms was hypothesized to be improved by higher leverage. The results based on marginal q accepted this hypothesis. The absolute investments and Tobin s Q results could not accept nor reject the hypothesis, but indicated an improvement of investment efficiency for overinvesting firms as a result of increased leverage. For underinvesting firms, investment efficiency was hypothesized to decrease with leverage. The marginal q and Tobin s Q results rejected this hypothesis. The absolute investments results could only accept this hypothesis on the 10% significance level. Thus, the results indicate that investment efficiency increases with leverage for both groups of firms.