Empirical Evidence of the Non-Linear Relationship Between Growth Opportunities and Debt

Resumo / Abstract:

Using dynamic panel estimators, we show there is a cubic relationship between the growth opportunities of Portuguese companies and their level of debt. This result shows that the relationship between companies’ growth opportunities and debt is influenced by complex questions in companies’ capital structure. When companies’ growth opportunities are low and high, we find a positive relationship between growth opportunities and debt. On the other hand, for intermediate levels of growth opportunities, there is a negative relationship between growth opportunities and debt. The other results allow us to conclude also that transaction costs, resulting from the relationship between creditors and owners, are relevant, and Portuguese companies quoted on the Stock Exchange which are less profitable, larger in size, and with a higher level of collateral security, turn more to debt.

Palavras-Chave / Keywords: Debt, Dynamic Panel Estimators, Growth Opportunities

Outros seminários / Other seminars: Programa completo / Full programme.