Sensitivity analysis for the determinants of investment appraisal
Author:
Muhammad Asif KHAN, Shujahat Haider HASHMI, Munawar HUSSAIN,
Raja Muhammad Ahsan ILYAS
JEL:
M41, G31, G12.
DOI:
10.20869/AUDITF/2017/148/686
Keywords:
Capital expenditure, investment appraisal,
sensitivity analysis, munificence, HHI
Abstract:
This study empirically conducts the sensitivity analysis
for the determinants of investment appraisal of Pakistani
non-financial firms listed at Pakistan Stock Exchange
(PSX) across sectors. We employed OLS regression
along with common effect and fixed effect model on
panel data pertaining to 60 non-listed firms at Pakistan
Stock Exchange (PSX) over the period from 2003 to
2015. Empirical results document that leverage, growth,
dynamism and inflation have strong positive
associations with investment appraisal, however,
munificence and GDP influence the process conversely.
The study provides useful framework for potential
investors to evaluate all these vital factors besides
conventional mechanism, prior to making investment
decision. Policy makers for non-financial sectors may
get benefit by apply this diagnostic model to evaluate
prospective investment projects for the most optimistic
outcome. Corporate finance literature reveals that there
is no formal evidence of determinants of capital
expenditure at different levels of economic recessions;
therefore, the study is pioneer effort to identify the
significant determinants of investment appraisal of
Pakistani listed non-financial firms across sectors,
eventually, a useful contribution in existing literature.
Abstract(166KB)
Article(459KB)