Debt and Investment: A Firm Level Evidence

descriptionPublicationkeyboard_double_arrow_right Article 01 Jan 2018Publisher:Scientific Research Publishing, Inc.Journal:Journal of Mathematical Finance, volume 8, pages 119-126 (issn: 2162-2434, eissn: 2162-2442,

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Authors: Fangping Peng; Richard Cebula; Maggie Foley; Xinming Hu; Zhetan Zhang;

doi: 10.4236/jmf.2018.81010

Debt and Investment: A Firm Level Evidence

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Abstract

In this study, the panel smooth transition model will be used to analyze the nonlinear relationship between debt and investment. It can be inferred from the results that debt drives investment when the debt level is relatively low. However, a rise in debt reaching the “threshold” level diminishes the chances of an increase in investments. The results above indicate: the current economic downturn being experienced will not be resolved by further leverage.

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