Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/270108 
Year of Publication: 
2021
Citation: 
[Journal:] Cogent Economics & Finance [ISSN:] 2332-2039 [Volume:] 9 [Issue:] 1 [Article No.:] 1936369 [Year:] 2021 [Pages:] 1-21
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
This study examines the impact of debt financing on the productivity of capital invested and the mediating role of corporate investment using data from manufacturing firms in China, Japan and the United States. We find that firms that use more debt capital are less likely to make overinvestment. It is found that overinvestment is more likely in firms that have high cash flow but low level of financial leverage. Our study also shows that companies with high debt and low cash flow have more probability of underinvestment. This is consistent with the view that financially constrained firms are more exposed to underinvestment problem. Furthermore, we documented that the use of debt financing has a positive impact on the productivity of the capital invested and that this effect is partly mediated by the investment of the manufacturing firms. This paper shades light into the present understanding of how companies use debt financing decisions to boost their investment efficiencies. The study has important management implications for corporate financial decisions as it identifies the links among corporate debt financing, investment and capital productivity.
Subjects: 
Agency Cost Theory
Capital Efficiency
Corporate Financing
Corporate Investment
Manufacturing Industry
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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