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Investment Decisions of Energy Sector Companies on the Indonesia Stock Exchange: Theory and Evidence

Author

Listed:
  • Erik Syawal Alghifari

    (Faculty of Economics and Business, Univesitas Pasundan, Bandung, Indonesia.)

  • Ardi Gunardi

    (Faculty of Economics and Business, Univesitas Pasundan, Bandung, Indonesia.)

  • Jaja Suteja

    (Faculty of Economics and Business, Univesitas Pasundan, Bandung, Indonesia.)

  • Indah Khoerun Nisa

    (Faculty of Economics and Business, Univesitas Pasundan, Bandung, Indonesia.)

  • Zalfa Amarananda

    (Faculty of Economics and Business, Univesitas Pasundan, Bandung, Indonesia.)

Abstract

This paper focused on strategic corporate financial decisions regarding investments to increase firm value moderated by profitability in emerging markets. The analytical method used was panel data analysis, with a total number of observations of 260 energy sector companies on the Indonesia Stock Exchange in 2019-2021. The results of the Chow Test, Hausman Test, and Lagrange Multiplier Test show the selected random effect model. The model shows that there is an effect of investment decisions on firm value in a positive direction and the moderating role of profitability strengthens this effect. The results of the robustness check show that the research model is still consistent with previous findings. Investment decisions have an effect on firm value, and profitability moderates this effect, both in the assumption of changes in control variables or model estimation using quantile regression. Our findings are in line with the idea of ??signaling theory that information on the company s investment decisions is a positive signal that the company has good growth opportunities or prospects so that it will increase the firm value and ultimately have an impact on the prosperity of shareholders. Furthermore, profitability strengthens the positive signal of the company s reputation in the eyes of investors.

Suggested Citation

  • Erik Syawal Alghifari & Ardi Gunardi & Jaja Suteja & Indah Khoerun Nisa & Zalfa Amarananda, 2022. "Investment Decisions of Energy Sector Companies on the Indonesia Stock Exchange: Theory and Evidence," International Journal of Energy Economics and Policy, Econjournals, vol. 12(6), pages 73-79, November.
    • Handle: RePEc:eco:journ2:2022-06-10
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    References listed on IDEAS

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    More about this item

    Keywords

    emerging market; firm value; investment decision; profitability; signaling theory;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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