Impact of leverage and debt maturity on investment decisions of Vietnam’s enterprises

Abstract

The research aims to analyze the impact of financing decisions on investment ones and examine the relationships between leverage, debt maturity structure, investment and growth opportunities. A system-based model is employed, including three structural equations in which leverage, debt maturity and investment are adopted as endogenous variables. The research data consist of 100 enterprises listed on HOSE and HNX in the period 2007-2012. The results indicate that financial leverage negatively correlates with investment decisions, whereas no correlation is revealed between debt maturity and corporate investment, which is compliant with findings by Dang (2011) and Aivazian et al. (2005). Accordingly, for Vietnamese enterprises, there exists an interaction among leverage, debt maturity and investment. Financial leverage and debt maturity are used as alternative strategies to control corporate liquidity.