The impact of financial leverage on a firm's investment decisions

Abstract

This paper studies the impact of leverage on a firm's investment. The impact is measured for both high and low growth firms. The evidence is provided by use of the listed companies in the Construction & Allied and Commercial & Services segments of the Nairobi Securities Exchange (NSE). The approach involves structural estimation and in particular the Simulated Method of Moments (SMM). It furthers the prior research that has been done. However, the results are not consistent with what was concluded. In this case the effect of leverage on investment is positive.