Impact of Leverage on Firm Growth under High and Low Investment Opportunities
Author(s)
Zafar Iqbal , Irtaza Ishtiaq , Botchway Morrison , Ghulam Zia Ud Din Raza ,
Download Full PDF Pages: 98-109 | Views: 489 | Downloads: 154 | DOI: 10.5281/zenodo.5045357
Abstract
The effect of leverage on the growth of non-financial companies listed on the Pakistan stock exchange is examined in this report. The natural logarithm of total assets is used to calculate firm size, and earnings before interest and tax (EBIT) over total assets is used to calculate return on investment. Firm growth is calculated in two ways: first, in terms of high investment opportunities, and second, in terms of low investment opportunities. The median of Tobin's Q formulation market value of equity plus book value of total debt split by total assets is used to measure high and low investment opportunities. The appendix table shows that a high investment equals 1 and a low investment equals 0. From 2006 to 2015, panel data on 199 non-financial companies was collected. For study, a fixed effects paradigm rather than a random effect modal is used. The Hausman Specification test is used to determine which of these two versions the best is. The effect of leverage on company growth under higher and lower investment opportunities is also examined in this report. Under high investment opportunities, fixed impact modal clearly demonstrates that outcomes are important and have a negative relationship between leverage and firm growth, however control variables have the same results as mentioned above. However, under low investment opportunities, the results are different than high investment opportunities.
Keywords
Firm growth, Leverage, Firm size, Return on investment, High and Low Investment opportunities.
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