 Does uncertainty influence the leverage-investment association in Chinese firms?Muhammad Arif Khan, Xuezhi Qin and Khalil Jebran Research in International Business and Finance, 2019, vol. 50, issue C, 134-152 Abstract: This study investigates the effects of firm-specific, market-based, CAPM-based, and economic policy uncertainty on the relationship between leverage and investment for firms of different nature, i.e., state-owned enterprises (SOEs) and non-state-owned enterprises (non-SOEs). The study uses a panel of Chinese listed firms covering the period 1999–2016 and applies a robust two-step system Generalized Method of Moments technique to cope with the endogeneity problem. The findings show that leverage has a significant and adverse impact on non-SOEs investment behavior. The results further show that firm-specific and market uncertainties exacerbate the negative effect of leverage on investment for non-SOEs. However, economic policy uncertainty and CAPM-based uncertainty attenuate the association between leverage and investment for SOEs and non-SOEs, respectively. Overall the results suggest that the impact of leverage on investment can be mitigating or exacerbating depending on the underlying uncertainty and the nature of the enterprise. Keywords: Investment; Uncertainty; Leverage; State-owned enterprises; Non-state-owned enterprises; China (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:riibaf:v:50:y:2019:i:c:p:134-152 DOI: 10.1016/j.ribaf.2019.04.006 Access Statistics for this article Research in International Business and Finance is currently edited by T. Lagoarde Segot More articles in Research in International Business and Finance from Elsevier |
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