Non-linear relationships between growth opportunities and debt: Evidence from quoted Portuguese companies

Zelia Serrasqueiro () and Paulo Maçãs Nunes

Journal of Business Research, 2010, vol. 63, issue 8, 870-878

Abstract: This paper analyses the relationship between growth opportunities and debt of quoted Portuguese companies using various panel estimators. The results show a cubic relationship between growth opportunities and debt. When companies' growth opportunities are low and high, the relationship between growth opportunities and debt is positive. For intermediate levels of growth opportunities, the results show the existence of a negative relationship between growth opportunities and debt. These results suggest that the relationship between companies' growth opportunities and debt is influenced by complex aspects in companies' capital structure decisions. The empirical results suggest that creditors recognize high growth opportunities when such opportunities exist, and debt is a way to discipline managers' actions in the presence of low investment opportunities. For intermediate levels of growth opportunities, the subinvestment problems seem to be relevant in explaining the relationship between growth opportunities and debt.

Keywords: Debt; Dynamic; panel; estimators; Growth; opportunities (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0148-2963(09)00291-4
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:63:y:2010:i:8:p:870-878

Access Statistics for this article

Journal of Business Research is currently edited by A. G. Woodside

More articles in Journal of Business Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().