Investment Decisions in the Energy Industry: The Role of Industrial Competition and Size


Bacha Sımöes E.

JOURNAL OF ASIAN FINANCE ECONOMICS AND BUSINESS, vol.9, no.9, pp.20-37, 2022 (Peer-Reviewed Journal)

  • Publication Type: Article / Article
  • Volume: 9 Issue: 9
  • Publication Date: 2022
  • Journal Name: JOURNAL OF ASIAN FINANCE ECONOMICS AND BUSINESS
  • Journal Indexes: Emerging Sources Citation Index
  • Page Numbers: pp.20-37

Abstract

Investment decisions are one of the most fundamental issues in financial management. This study aims to determine the factors that affect investment decisions in the energy industry and to contribute to the companies in this industry to develop strategic policies. The System GMM analyzes were carried out using the data of companies registered on the stock exchange for the period 2000-2015. The findings showed that industrial competition and firm size were important factors influencing the investment decisions of firms in the energy industry. The findings indicated a nonlinear relationship between industrial competition and the rate of investment in the energy sector. Depending on the firm's size, the effect of industrial competitiveness on investment varies. Smaller businesses are more impacted by the level of competition than larger ones. The investment rate decreases depending on the increase in cash holding level and firm risk. When the sub-groups in the energy industry are examined, it is determined that they reveal some differences in terms of financial structure. A higher investment rate results from a higher retained earnings ratio. The investment rate of firms falls as a company's risk level and sales revenue variability increase.