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Underinvestment Problem: Romanian Evidence

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  • Claudiu BoÅ£oc
  • Cosmin Enache

Abstract

This paper aims to provide Romanian firm-level evidence concerning the investment decisions - financial leverage - growth opportunities relation. Using traditional panel data techniques on a sample of 67 companies listed at Bucharest Stock Exchange, we found that increasing debt and firm size have a negative impact on investment decisions, while the sales growth is a catalyst for further investments.Our results confirm agency theories of corporate leverage and could offer guidance for portfolio investors, which should target small(er) listed companies which are growing and have low(er) levels of debt.

Suggested Citation

  • Claudiu BoÅ£oc & Cosmin Enache, 2013. "Underinvestment Problem: Romanian Evidence," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(15), pages 1-20.
    • Handle: RePEc:alu:journl:v:2:y:2013:i:15:p:20
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    References listed on IDEAS

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    Cited by:

    1. Sorin Gabriel ANTON, 2016. "The Impact Of Leverage On Firm Growth. Empirical Evidence From Romanian Listed Firms," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 18, pages 147-158, December.
    2. Surabhi Somya & Madhuri Saripalle, 2023. "The Determinants of Firm’s Growth in the Telecommunication Services Industry: Empirical Evidence from India," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 21(1), pages 193-211, March.

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    More about this item

    Keywords

    Investment Rate; Financial Leverage; Growth Opportunities; Endogeneity;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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