The Impact of Leverage on the Investment of Korean Firms
This paper examines the impact of leverage on Korean firms’ investment behavior. In order to analyze the impact, it uses data from listed Korean companies in the manufacturing industry. Furthermore, this paper takes advantage of a dynamic panel threshold model to identify the threshold point of the factors that affect the firm's investment. This paper utilizes first-differenced GMM, allowing regressors and threshold variable to be endogenous. This leads to the empirical results in the divided regimes based on the thresholds. The empirical results show that firm leverage has a negative relation to investment. It implies that the high debt induces firms’ underinvestment.