Impact of leverage on investment decision : Evidence from firmlisted in Ho Chi Minh stock exchange
Abstract
The purpose of this research is to test the impact of leverage on investment
decision. The sample comprises 286 non-financial firms listed in Ho Chi Minh Stock
Exchange (HOSE) from 2009 to 2012. Moreover, to investigate the effect of leverage
on different levels of growth firms, then the sample is divided into two groups,
namely: high growth and low growth firms. Following previous researches, the study
uses unbalanced panel data to consider the heterogeneity among individual firms.
Fixed and random effect models are applied to analyze the regression model. After
conducting the Hausman test to choose fixed effect or random effect model, it is
realized that the fixed effect model is more appreciated for panel data in this study.
The result of fixed effect regression models show three important findings.
First, the leverage is statistically significant and negatively related to the investment
decision for non-financial firms listed in HOSE in the period 2009 to 2012. In other
words, firms tend to reduce the investment when their debt borrowing increases.
Second, leverage has negative and statistically significant relationship with
investment for both high and low growth firms. Third, the negative relationship
between leverage and investment is stronger for low growth firms and weaker for
high growth firms.