 Do asymmetric information and leverage affect investment decisions?Muhammad Munir Ahmad, Ahmed Hunjra () and Dilvin Taskin The Quarterly Review of Economics and Finance, 2023, vol. 87, issue C, 337-345 Abstract: We investigate the impact of asymmetric information on the investment decisions of firms and analyze the effect of asymmetric information on the over-investment and under-investment of firms. Further, we examine the effect of leverage on the investment behavior of firms and check this association in the presence of asymmetric information. We extract data from DataStream of 280 non-financial firms listed at Pakistan Stock Exchange over the period of 2000 to 2018. We apply the Fixed Effect Model to analyze the data and System Generalized Method of Moments to check the robustness of the results. We find that asymmetric information negatively affects the investment decisions of firms. Due to asymmetric information investment decreases rapidly as compared to increase in investment. Further, leverage is an important determinant of investment decisions and the presence of asymmetric information increases the adverse effect of leverage on the investment of firms. Keywords: Asymmetric information; Investment; Overinvestment; Underinvestment; Leverage; Non-financial firms (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:87:y:2023:i:c:p:337-345 DOI: 10.1016/j.qref.2021.05.001 Access Statistics for this article The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty More articles in The Quarterly Review of Economics and Finance from Elsevier |
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