Debt financing, corporate investment and the productivity of capital invested: Evidence from biggest manufacturing countries

Artikel

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Cogent Economics & Finance ; ISSN: 2332-2039 ; Volume: 9 ; Year: 2021 ; Issue: 1 ; Pages: 1-21

Classification and Topics

• Classification: Wirtschaft
• Subject: Agency Cost Theory ; Capital Efficiency ; Corporate Financing ; Corporate Investment ; Manufacturing Industry

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Legesse, Tenkir Seifu ; Tang, Jiqiang ; Wu, Zhen ; Guo, Haifeng
• Event: Veröffentlichung
• (who): Taylor & Francis
• (where): Abingdon
• (when): 2021

Further information

• DOI: doi:10.1080/23322039.2021.1936369
• Handle: http://hdl.handle.net/10419/270108
• Last update: 10.03.2025, 11:42 AM CET