Determinants of Corporate Investment Decision: Evidence from Pakistan

Abstract

This paper analyzed the trends in corporate finance in Pakistan and uses a panel data model for empirically identifying the factors which influence corporate investment decisions, during the period 2014-18. The findings revealed that firm-level factors such as cash flow, fixed capital intensity, leverage, and firm size are significant in determining corporate investment decisions. At the macro level, the cost of borrowing and the effective tax rate is significant in influencing corporate investment decisions negatively. The results of the study generally contribute to the existing literature on the impact of macroeconomic variables and certain firm-level factors on corporate investment decisions. The main value of this paper is to consider a broad-based approach to analyzing the determinants of corporate investment decisions from developing market context.

Keywords: corporate investment, corporate governance, cash-flow, financial leverage, Pakistan