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<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd"> <html xmlns="http://www.w3.org/1999/xhtml"> <head> </head> <body> <div style="font-family:Verdana, Geneva, sans-serif; font-size:12px; text-align:justify"> <table width="800" border="0" style="border:1px solid #ccc;padding:5px;" align="center" cellpadding="6" cellspacing="0"> <tr> <td align="left" valign="top"> <br /> Reserve Bank of India <br /><br /> RBI Working Paper No. 07/2020: Impact of Leverage on Firms' Investment: Decoding the Indian Experience<br /><br /> MANU/RPRL/0104/2020 - (01 Jul 2020)<br /><br /> </td> </tr> <tr> <td align="left" valign="top"></td> </tr> <tr> <td align="left" valign="top" style="background-color:#FDEDCE"><strong>The Reserve Bank of India today placed on its website a Working Paper titled "Impact of Leverage on Firms' Investment: Decoding the Indian Experience" under the Reserve Bank of India Working Paper Series*. The paper is authored by Avdhesh Kumar Shukla & Tara Shankar Shaw. <br><br> The paper focuses on the relationship between firms' leverage and their investment behavior in India. The empirical results suggest that firm-level leverage could provide early signals about the movements in investment cycle. Furthermore, the paper finds that firm's leverage adversely affects its investment activity in a non-linear manner i.e., firm's leverage at lower level has a positive impact on its investment while at higher level it affects investment negatively. The paper concludes that the initiatives to clean up balance sheets of banks and deleveraging by non-financial corporates should help in revival of the investment cycle. The results are consistent with the agency cost of debt and trade-off theory of capital structure, where firms set target for leverage by balancing costs and benefits of debt.</strong></td> </tr> <tr> <td align="left" valign="top" ><strong></strong></td> </tr> <tr> <td align="left" valign="top" ><strong>Tags : Impact, Leverage, Firms' Investment</strong></td> </tr> <tr> <td align="left" valign="top"> </td> </tr> <tr> <!--<td><strong>Source : <a target="_new" href="http://www.manupatrafast.com/">newsroom.manupatra.com</a></strong></td>--> <td align="left" valign="top"><strong>Source : newsroom.manupatra.com</strong></td> </tr> <tr> <td align="left" valign="top"> </td> </tr> <tr> <td align="left" valign="top">Regards</td> </tr> <tr> <td align="left" valign="top">Team Manupatra</td> </tr> <tr> <td align="left" valign="top"> </td> </tr> </table> </div> </body> </html>