Investment Opportunities and Corporate Debt Policy: New Economy Firms Versus Old Economy Firms

Posted: 17 Feb 2011 Last revised: 28 May 2013

See all articles by Hasna Chaibi

Hasna Chaibi

University of Tunis - Institut Supérieur de Gestion (ISG), Tunis

Abdelwahed Omri

University of Tunis - Department of Statistics

Samir Trabelsi

Brock University - Accounting

Date Written: November 30, 2010

Abstract

This paper examines the impact of the New Economy on the relationship between corporate debt policy and firm investment opportunities. One distinctive feature of new economy firms is their high level of investment opportunities. We study whether the impact of investment opportunities on corporate debt policy is different in new economy firms, compared to traditional ones. Our empirical analysis covers U.S. industrial companies listed on NYSE, AMEX and NASDAQ in the period of 1950-2008. We find that firms with high investment opportunities have significantly less debt ratios than firms with low investment opportunities. Nevertheless, this link is weaker in new economy industry. The results complement other studies that have found significant relationship between investment opportunities and corporate debt policy by confirming the prominent role played by the New Economy in determining this association.

Keywords: New economy firms, debt policy, investment opportunities

JEL Classification: G11, G32, M13, O51

Suggested Citation

Chaibi, Hasna and Omri, Abdelwahed and Trabelsi, Samir, Investment Opportunities and Corporate Debt Policy: New Economy Firms Versus Old Economy Firms (November 30, 2010). Available at SSRN: https://ssrn.com/abstract=1762813 or http://dx.doi.org/10.2139/ssrn.1762813

Hasna Chaibi

University of Tunis - Institut Supérieur de Gestion (ISG), Tunis ( email )

45 Rue de la Liberte, Cite Bouchoucha
Bardo, Tunis 2000
Tunisia

Abdelwahed Omri

University of Tunis - Department of Statistics ( email )

Bardo, 2000
Tunisia

Samir Trabelsi (Contact Author)

Brock University - Accounting ( email )

St. Catharines, Ontario L2S 3A1
Canada

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