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VOL. 11, ISSUE 8 (2025)
Influence of financial leverage on firms' investment choice - An empirical study of select BSE-listed Indian steel companies
Authors
Rabindra Shil, Amalendu Bhunia
Abstract
This research investigates the influence of financial leverage on
firms’ investment choices, focusing on a sample of select BSE-listed Indian
steel companies over the period 2015 to 2024. Given the capital-intensive
nature and cyclical characteristics of the steel industry, understanding the
relationship between financial structure and investment behavior is crucial.
Drawing upon theoretical foundations such as the pecking order theory and the
debt overhang hypothesis, this study employs panel data regression techniques,
including fixed effects and system GMM models, to control for firm-specific
heterogeneity and endogeneity. The empirical findings reveal a significant
negative relationship between leverage and investment, supporting the view that
higher debt levels restrict investment due to financial constraints and agency
costs. Additionally, profitability, firm size, and growth opportunities
positively influence investment, while liquidity shows mixed effects. The
results emphasize the importance of maintaining an optimal capital structure to
ensure sustainable investment capacity.
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Pages:34-40
How to cite this article:
Rabindra Shil, Amalendu Bhunia "Influence of financial leverage on firms' investment choice - An empirical study of select BSE-listed Indian steel companies". International Journal of Commerce and Management Research, Vol 11, Issue 8, 2025, Pages 34-40
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