Page 109 - Azerbaijan State University of Economics

Nazrin Mammadova: The Effect of Investment Decisions on Firms’ Profitability (Empirical
Study on Listed Companies)

According to research by Dewi and Wirajaya (2013) and Mahendra, Artini and Suarjaya,
(2012), Return on Equity (ROE) can be used as a measuring instrument to quantify
profitability. Utilizing resources that the company owns, profitability ratios are used to
gauge a company's capacity to turn them into profit. The reason ROE can be used as an
indicator for profitability is that a greater ROE implies that a company is using its own
capital to create investment profits from the funds invested in the company more
effectively (Sudana, 2015). According to Murniati and others (2019) when investment
decisions rise, the level of profitability gained by shareholders will likewise increase
because investment decisions have a positive and significant impact on profitability.

The basic investment decision is the decision to allocate funding sources. Company’s
liquidity, or an organization's capacity to generate cash that can cover both short-term
and long-term demands, is a factor that influences the investment decisions made by
an organization. Companies must retain liquidity to prevent disruptions in the smooth
operation of their investment activities and to keep the trust of third parties (Hidayat,
2010). Sunariyah (2006) asserts that the development of the firm's investment may be
gauged by the increase of the total asset of the relevant company from year to year.
Emphasis on the effects of capital investment on business profitability has been made
in lots of earlier research both in developed (Kim, 2001; Kumar and Li, 2013) and
developing countries (Jiang, Chen and Huang, 2006).
Methodology and Data

A descriptive research design will be used for the investigation. It was decided to
utilize a descriptive research design since it enables the generalization of research
findings. Besides inferential statistics, panel data regression analysis, and hypothesis
testing will be employed in this study's data analysis in order to draw conclusions
about the study's findings. The SPSS program will be used to process the data and test
the hypotheses with a specified significance value (α) of 5%. The panel data approach
is the proper regression technique to utilize in this study since the data will be panel
data, which is a combination of time series data and cross-sectional data. In order to
adress the target population the 3 periods of financial statements of 15 publicly traded
companies that have some level of exposure to crypto, either through investments,
partnerships, or side ventures and 15 top companies listed on the NYSE as of March
31, 2022. The database for the study is completely based on secondary data.
Profitability, leverage, liquidity and asset growth ratios are the variables that will be
used in the analysis. All of the study's variables' data came from published annual
reports and financial statements of the NYSE-listed companies. The income
statement, statement of financial position, statement of cash flows and notes to the
accounts were among the data that were retrieved from the NYSE handbooks.

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