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Determinants of Discretionary Investments

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  • K. S. Sujit
  • B. K. Rajesh

Abstract

Theoretical and empirical studies have focused on discretionary investments such as research and development (R&D) and advertisement as value-creating activities. This empirical research article examines the determinants of the discretionary investment policy of food sector firms in India. The study aims to analyze the impact of financial policies and firm characteristics on the discretionary investment strategy of the food industry firms. The article uses the partial least squares structural equation modeling (PLS-SEM) to understand the drivers of discretionary investment policy of food sector firms. The study finds that investment policy of firms is a major determinant of profitability of food sector firms. Higher investments in capital expenditures and working capital result in higher profitability. Management efficiency significantly influences firm profitability. The results suggest that riskier firms in food sector might focus on R&D investments as a strategy to generate more cash flows. Size of firm is negatively related to R&D intensity. Smaller firms in food sector tend to invest more in R&D. The study does not provide evidence to suggest that profitable firms invest more in R&D activities.

Suggested Citation

  • K. S. Sujit & B. K. Rajesh, 2016. "Determinants of Discretionary Investments," SAGE Open, , vol. 6(1), pages 21582440166, March.
    • Handle: RePEc:sae:sagope:v:6:y:2016:i:1:p:2158244016636429
    DOI: 10.1177/2158244016636429
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    2. Odilia Renaningtyas Manifesty & Junga Lee, 2022. "A Spatial Adaptation Strategy for Safe Campus Open Spaces during the COVID-19 Pandemic: The Case of Korea University," IJERPH, MDPI, vol. 19(15), pages 1-15, July.

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