Firm Investment Decisions
The main purpose of the study is to identify the factors that influence firm investment decisions. The study examined four countries, a sample of 170 firms in each one. It found that profitability significantly influences firm investment in Moldova, Romania, Russia, and Serbia. The size of the firm also had a positive effect, as did the proportion of cash held by firms. The results of the study suggest that the larger the firm, the more likely it is for the managers to increase investments in order to increase the profits.
Financial leverage, or the extent to which a firm uses debt, is a factor that affects firm investment. This is true for both publicly traded and privately held firms. The relationship between financial leverage and the level of firm investment is negative for publicly traded firms and positive for privately held firms. In the latter case, however, financial leverage is not significant. Nevertheless, the degree of firm investment is negatively related to the amount of debt a firm has.
Financial leverage is another important factor that affects firm investment. High financial leverage increases the probability of a firm failing. For firms with high levels of debt, the relationship is negative. For firms that are privately held, however, the relationship is positive. In the case of public companies, higher debt levels lower the likelihood of a firm’s bankruptcy. This in turn impacts the allocation of resources within the firm. The authors suggest that the use of financial leverage is a key factor affecting firm investment.
In the current study, financial leverage is a negative factor for firm investment. This is also true for privately held firms. This relationship is strong for firms with high information asymmetry, but is not significant for firms with low information asymmetry. Thus, the relationship between financial leverage and firm investment is not significant for high growth firms. But the relationship between debt and firm investment is positive for many large companies. So, how do we assess the financial and human capital of a company?
A firm’s level of financial leverage affects the firm’s return on investment. Its value increases in proportion to the amount of capital invested. Moreover, a firm’s level of capital stock determines its return on investment. The more money a firm has, the more money it will invest in training and research. The higher the risk, the lower the returns. So, financial leverage is a negative factor for firm investment.
Financial leverage has a negative impact on firm investment. For high-information asymmetric firms, financial leverage increases returns on investment. For low-growth firms, it is the opposite. In addition, firms with higher financial leverage have higher returns than low-information-asymmetric firms. But, the negative effect on firm investment is stronger for private firms. If a firm has a high degree of risk, it is more likely to invest heavily in research.