Does Financing Decisions Influence Investment Decisions? Empirical Evidence from Sri Lanka

Abstract

This study investigates the impact of financing decision on investment decision of 198 non-financial companies listed on the Colombo Stock Exchange of Sri Lanka, eight years period from 2011 to 2018. This study employed the Generalized Method of Moments (GMM) model to estimate the regression models on panel data study. The major contribution of this study shows that the impact of financing on investment decisions of listed companies. The results of the study revealed that, the impact of total debt on changes in total asset and Tobin’s Q was insignificant negative and significant negative respectively. However, the impact of long term debt on changes in total asset and Tobin’s Q was significant negative and insignificant negative respectively. Therefore, the impact of financing decision is significantly negative on investment decision.