Page 108 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.80, # 1, 2023, pp. 106-118

This research will also contribute to knowledge in the academic community, in
research institutions, in educational institutions, and among individuals, enabling
people to make informed personal investments of any size. Academically, this study
aims to provide a greater understanding of the many sorts of investment decisions and
their effects, as well as recommending more questions and points for further research.
When conducting investigation this study has limitation only to use certain limited
indicators as variables in which case effect of other unused variables can stay out of
sight of mine as researcher because of which even it is less chance I can come to
wrong conclusion which I think is not the case here despite.

Literature Review
A lot of research papers related to the concept of investment and its effects on
profitability have been presented till now. For example, Fama and Eugene (1978)
suggested that one of the things that might raise the value of a company is investment
decisions. Over the past few decades, studies on the impact of investment choices on
business value have generated a lot of discussion in both emerging market and non-
emerging market nations. Research undertaken in the 1990s revealed a trend that
investment choices can raise business value (Emanuele, Bigelli and Sandri, 1998;
Santos, Dos, Peffers and Mauer, 1993). Additionally, study patterns from the 2000s
showed that investment choices frequently inhibit improvements in business value
(Brio, Del, Miguel and Pindado, 2003; Lin and Kulatilaka, 2007). A trend was
discovered in the 2010s demonstrating how investment choices contributed to
improvements in firm value (Efni and Yulia, 2017; Soumaya and Hechmi, 2015;
Susanti, Neneng, Affandi and Herwany, 2019). We came into conclusion that
investment choices can raise a firm's value in light of these observed tendencies. The
idea that underpins investment choices is called signaling theory (Alghifari et al,
2022). According to this hypothesis, investment spending is a sign that a firm will
grow in the future, which will affect profits and raise its value (Sun, Lin and Chen,
2017). According to Maulana (2016), choosing an investment is a long-term capital
investment decision that intends to attain expected future business profit results.
Cahyono and Sulistyawati (2017) demonstrated how investment choices can have a
favorable impact on a company's value. The outcome demonstrates the company's
capacity to maximize investment in an effort to produce earnings in accordance with
the amount of funds committed. Rafika and Santoso (2018) discovered that a funding
decision can affect the value of a company. In this study, the debt to equity ratio
(DER), which measures the proportion of a company's overall debt—either current
debt or long-term debt—to its own capital (equity), was utilized as a funding decision
indicator. Due to the fact that debt can aid management in keeping a company
operational, PBV will therefore rise as DER does. So investors believe that rising debt
will improve company performance like many banks do.

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