Interactive effect of financing and investment decisions among listed companies in Sri Lanka

Document Type : Primary Research paper


Faculty of Management and Commerce, South Eastern University of Sri Lanka Oluvil, Sri Lanka.


This study investigates the interdependent between financing and investment decision of 198 non-financial companies listed on the Colombo Stock Exchange of Sri Lanka, over the period from 2009 to 2016. 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 financing and investment decisions are determined simultaneously. The results of this study revealed that net increase in total asset was negatively significantly influenced on long term debt. Tobin’s Q negatively significantly effect on total debt. Therefore, there was a marginal influenced by investment over financing decision. Furthermore, the impact of total debt on changes in total asset was insignificant and negatively significant on Tobin’s Q. However, the impact of long term debt on changes in total asset was negatively significant and insignificant on Tobin’s Q. Therefore, the impact of financing decision is significantly negative on investment decision.