Abstract:
This research paper primarily focuses on the impact of financial leverage
on investment decisions of firms and it is an attempt to look at the impact of financial
leverage on investment levels using firm-level panel data in Sri Lanka, researcher
expect to contribute to the existing literature by bringing evidence from a plate data set,
which comprises 20firms, all listed on the Colombo Stock exchange sampled over a
l0 year-period (that is (i.e. from 2000-2009). In addition, researcher distinguishes
between two types of firms, namely: (i) high-augmentation firms; and (ii) low augmentation
firms. The results reveal a significant negative relationship between
leverage and investment More interestingly, while researcher found a negative
relationship between leverage and investment for low augmentation firm, our
econometric results reveal an insignificant relationship between the two variables for
high augmentation firm.
