Page 106 - Azerbaijan State University of Economics

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

THE EFFECT OF INVESTMENT DECISIONS ON FIRMS’
PROFITABILITY (EMPIRICAL STUDY ON LISTED

COMPANIES)

NAZRIN MAMMADOVA
Azerbaijan State University of Economics (UNEC)

E-mail:[email protected]

Received: February 24; accepted June 05, 2023; published online June 26, 2023

ABSTRACT
The association between investment decisions and the profitability of companies
listed on the New York Stock Exchange is investigated in this study. The paper
demonstrates a correlation between investment decisions, as indicated by asset
growth, financial leverage, liquidity and business profitability. In the first section of
the paper, comprehensive information and importance of them is given about
variables used in the research. After that previous studies related to the topic are
deeply analyzed and conclusions from those are indicated for further reference. In the
last section the paper econometric models are used to determine the relationship
between variables. In the data analysis part statistical findings pertaining to financial
leverage and profitability are displayed. The findings of this study have important
policy implications for firms. The study discovered that performance improved with
higher investment decision, and financial leverage. In order to maximize profitability,
the study advises corporate managers to allow for new opportunities in order to be
more innovative, which will lead to new investments and higher financial leverage -
in particular. In order to boost performance as indicated by return on equity,
management of listed companies is advised to pursue a conservative financing
strategy.

Keywords: investment, financial leverage, liquidity, performance, business
profitability

JEL Classification: G11, G31, G32

INTRODUCTION
Research will analyze how investment decisions influence the performance of the
firms listed on exchange. The primary goal of investing is to generate a profit or
return. In the modern world, businesses accomplish this through creating a new
product, researching a new market, or starting a new business. Making investing
decisions is a part of it. Investment choices are crucial for the company since they
often determine its worth through affecting profitability and risk.

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