Debt Origin and Investment Efficiency from Korea

Heung Joo Jeon and Hyun Min Oh
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Heung Joo Jeon: Department of Business Administration, DanKook University, 119 Dandae-ro, Dongnam-gu, Cheonan-si, Chungcheongnam-do 31116, Korea
Hyun Min Oh: Department of Accounting, College of Social Sciences, National Sunchon University, 255 Jungang-ro, Suncheon, Jeonnam 57922, Korea

IJFS, 2020, vol. 8, issue 3, 1-27

Abstract: This study empirically analyzes the effect of debt origin on investment efficiency. According to previous studies that report that the quality of financial reporting may vary depending on the origin of the debt, the empirical analysis predicted that the effects of the origin of the debt on investment efficiency would be differential. Debt origin was divided into private and public debt. The analysis results of this study are as follows. First, there is a significant negative relationship between the private debt and investment efficiency, while there is a significant positive relationship between public debt and investment efficiency. This means that capital gains under public debt may be more profitable to managers by improving the quality of their accounting information than those under private debt. This is in line with the previous research which found that, when financing with public debt, the earnings management is reduced and accounting transparency is high. This study focuses on the origin of debt as a determinant of investment efficiency and analyzes the level of investment efficiency according to the origin of debt. We examine the sustainability of firms from the perspective of investment efficiency, such as raising capital and selecting optimal investment options. The results of this study suggest that the level of incentives and investment efficiency of managers may be differentiated depending on the origin of the debt.

Keywords: debt origin; public debt; private debt; investment efficiency; sustainability (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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