Abstract
This research examines the relationship between firm investment and market competition, market position and market position as market leader. This study analyzes agency problems in manufacturing companies’ investment decisions by considering market competition, since market competition is considered as one of essential factor that affect the firm investment. Further, high competition signals company’s increased investment, that leads to business efficiency. Investment decisions are important for companies to survive, and more competitive companies are likely to conduct more risky activities, especially regarding capital expenditures for investments. This study uses the dynamic panel data method, which includes annual financial report of 100 listed manufacturing companies on IDX from 2007 to 2016. The companies were selected after sorting using several criteria, such as completeness of financial report and being registered on IDX during the period. Results suggest that leverage improves management control functions, and competition increases a company’s investments to maintain its position in the market. Competition is not strengthened or weakened by sales growth and there are indications of herding behavior following market leaders.
Highlights
Corporate investment decisions affect a company’s performance; investment can enhance company performance because the profit from investment increases can increase profitability (Fama & French, 1998; Chen et al, 2014)
The HLeaderit-1 variable interacts with HHIit-1 to assess whether the position of a company as a market leader strengthens or weakens the influence of product market competition (HHIit-1) on investment decisions (I)
Agency problems occur in Indonesian manufacturing companies through cash flow variables, credits, sales, and company capital structures
Summary
Corporate investment decisions affect a company’s performance; investment can enhance company performance because the profit from investment increases can increase profitability (Fama & French, 1998; Chen et al, 2014). Market competition, corporate governance, and capital structure are essential factors that influence company investment decisions (Nugroho et al, 2018). The problem of information asymmetry between managers and financial institutions, and agency conflicts between managers and shareholders, in manufacturing companies affect a company’s investment decisions are empirically in many studies. The negative uncertainty sensitivity of investment is increased by industry concentration but decreased by market share The latter finding supports the view of the strategic investment behavior of rival firms under uncertainty (Shima, 2016). Ment is increased by industry concentration but decreased by market share H3 : Market position as a market leader has a negative effect on firm investment
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
