Research has documented a significant relationship between financial leverage and investment decisions, however divergent views exist about whether this relationship is explained by the underinvestment hypothesis or the overinvestment hypothesis. This study examines the relationship between financial leverage and investment decisions for firms with different growth opportunities, it is based on a sample of 51 industrial sector firms listed on the Johannesburg Stock Exchange (JSE), South Africa, over the period from 2008 to 2014. Using panel data and after controlling for heterogeneity across firms, we report a negative relationship between leverage and investment. However, the relationship is significant for firms with high growth opportunities and insignificant for firms in the low growth category. The results support the underinvestment theory that debt overhang reduces the incentives of firms exploiting valuable opportunities.

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This study examines the impact of divestitures (spin offs and sell offs) on shareholder wealth for the parent firms listed on the Johannesburg Stock Exchange over the period 1995-2011. The study also makes a comparison of the wealth created by spin offs versus sells offs. We found significantly negative cumulative abnormal returns over the 250 and 500 days respectively, post-announcement date. This result persisted for the whole sample and for the two subsamples of spin offs and sell offs even after running the test excluding the data during and after the financial crisis of 2008. The results suggest that, in general, divestitures in South Africa destroy shareholder value in the long run and sell offs are a better choice of divestitures compared to spin offsю

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