The impact of leverage on firm investment : evidence from Dutch listed firms

This paper analyses the impact of leverage on a firm’s investment decisions. Information on Dutch listed firms is used. This paper makes a distinction between firms with high and low growth opportunities and uses a pooled regression to estimate the relationship between leverage and investment. The results show that leverage is negatively related to investment, regardless of growth opportunities. The difference for the relationship between leverage and investment is small for firms classified as high and low growth firms. Overall, the results are consistent with the expectations based on the underinvestment and overinvestment theory.