Factors Affecting Corporate Investment Decision: Evidence from Vietnamese Economic Groups

Abstract

This paper analyzes factors affecting corporate investment decisions in economic groups listed on the Vietnam stock market. The panel data of the research sample includes 39 economic groups listed on the Vietnam stock market from 2009 to 2019. The Generalized Least Square (GLS) is employed to address econometric issues and to improve the accuracy of the regression coefficients. In this research, the investment rate is a dependent variable. Cash-flow (CF), Investment opportunities (ROA), Fixed capital intensity (FCI), Leverage (LEV), Sales growth (GR), Size (SZ), Business risk (RISK) are independent variables in the study. The model results show that cash flow and sales growth have the same impact on investment decisions of economic groups in Vietnam. In addition, investment opportunities have a negative impact on the capital investment decisions of economic groups. The remaining factors include fixed capital intensity, leverage, firm size, and business risks that have a weak and insignificant impact on capital investment decisions of economic groups in Vietnam. The findings of this article are useful for business administrators, and helping business managers make the right financial decisions. Besides, the research results are also meaningful to money management agencies. The authors recommend that the State Bank of Vietnam should maintain a sustainable monetary policy.

Corporate Investment in Bank-Dependent Companies in Crisis Time

“…The size variable is used quite often in research on corporate investment, for example, that by Adelegan and Ariyo (2008), Jangili and Kumar (2010), Ruiz-Porras and Lopez-Mateo (2011) and Phan and Nguyen (2020). Existing research shows that size might have negative relations (e.g., Borensztein & Ye, 2018;Cevik & Miryugin, 2020;Kalemli-Özcan et al, 2018) or positive, but that which is not statistically significant.…”

Financial Ratio Analysis and Investment Decision Makings in Listed Companies in Rwanda; A Case Study of Listed Companies

“…The current ratio is calculated by dividing current liabilities by current assets. However, this ratio, according to Phan and Nguyen (2020), does not account for the liquidity of any component of current assets. In other words, a company's current assets would be far more liquid if they were mostly made up of cash rather than inventory.…”

“…This ratio can be raised through a rise in long-term debt, an increase in stock sales, or the sale of inefficient fixed assets with the proceeds kept. Current commitments may also be reduced by keeping a larger portion of the intended savings (decreasing the cash portion) (Phan & Nguyen, 2020). A high current ratio, according to Anwar (2020), indicates that current liabilities may be serviced by cash earned from current assets, which is positive for the financial system.…”

“…As a result, long-term investors might find its shares interesting. They can be used, in accordance with Phan and Nguyen (2020), to contrast a company's financial performance with that of its rivals in the same industry. The authors contend that if a company's financial ratios are superior to those of its peers, it may be outperforming its competitors and offering a better investment opportunity.…”

“…The research suggests that financial ratios analysis can influence selling shares on the stock market in a variety of ways, much like the prior section on buying shares did. A company's financial ratio analysis may boost investor confidence in the company's future prospects if it produces favorable results, such as high profitability or liquidity, claim Phan and Nguyen (2020). This increased confidence may make the company's shares more desirable to investors, which could increase demand and drive up the stock price.…”