THE IMPACT OF FINANCIAL FACTORS ON CORPORATE INVESTMENT

Malik Muhammad, Khurram Shehzad

Abstract


This study investigates the impact of various financial factors
on the investment behavior of manufacturing firms in Pakistan using
data for 209 firms listed on the Karachi Stock Exchange the period
2002-2008. We find evidence in favor of the proposition that financial
factors, including Tobin’s Q , cash flow, stock of debt, stock of liquid
assets and sales, are important determinants of investment. Moreover,
the degree of sensitivity of investment to these factors is not the same
for all types of firms. Firms with lesser investment opportunities are
more responsive to changes in financial factors as compared to those
with more investment opportunities.


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