Financial Flexibility and Investment Decisions: Evidence from Low-leverage Firms

@inproceedings{Roberto2007FinancialFA,
  title={Financial Flexibility and Investment Decisions: Evidence from Low-leverage Firms},
  author={Maria-Teresa Marchica Roberto},
  year={2007}
}
  • Maria-Teresa Marchica Roberto
  • Published 2007
We test the hypothesis that a conservative leverage policy directed at maintaining financial flexibility can enhance investment ability. Our analysis reveals that, following a period of low leverage, firms are able to make more capital expenditures and increase abnormal investment. The impact of the flexibility status is both statistically significant and economically sizeable. The new investments are financed through new issues of debt, which take companies closer to their predicted target… CONTINUE READING