To read the full version of this content please select one of the options below:

Financial leverage, debt maturity, future financing constraints and future investment

Ehsan Poursoleiman (Faculty of Economics and Management, Urmia University, Urmia, Iran)
Gholamreza Mansourfar (Faculty of Economics and Management, Urmia University, Urmia, Iran)
Sazali Abidin (Faculty of Agribusiness and Commerce, Lincoln University, Lincoln, New Zealand)

International Journal of Islamic and Middle Eastern Finance and Management

ISSN: 1753-8394

Article publication date: 9 July 2020

Issue publication date: 8 September 2020

648

Abstract

Purpose

This paper aims to investigate the impact of debt maturity on the relationship between financial leverage and future financing constraints. Moreover, it attempts to analyze the moderating role of short-term debt and the mediating role of future financing constraints in the relationship between financial leverage and future investment.

Design/methodology/approach

To test the moderating role of debt maturity, all the observations are divided into two groups based on short-term debt to total debt ratio. Moreover, Sobel, Aroian and Goodman tests are used to analyze the mediating role of future financing constraints. The sample used in this research includes firms listed on the Tehran Stock Exchange from 2006 to 2018.

Findings

It is shown that financial leverage is inversely (positively) related to future financing constraints for firms with higher (lower) use of short-term debt and, short-term debt moderates the relation between financial leverage and future investment. The findings also indicate that future financing constraints carry the influence of financial leverage to future investment.

Originality/value

In an imperfect market where financing is not independent of investment, it is highly required to carry out some studies on the role of different financing scenarios in firms and their impacts on future financing and investment; therefore, this paper is conducted to address one of the most important issues in the capital market, which is almost the pioneer study in this field.

Keywords

Acknowledgements

The authors are especially thankful for helpful comments from Mohammad Kabir Hassan (editor) and two anonymous reviewers. All authors acknowledged that the research received no financial support.

Citation

Poursoleiman, E., Mansourfar, G. and Abidin, S. (2020), "Financial leverage, debt maturity, future financing constraints and future investment", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 13 No. 4, pp. 613-634. https://doi.org/10.1108/IMEFM-10-2019-0430

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

Related articles