Abstract
Relative to the recent performance of the Jordanian economy, it can be argued that the private sector must be encouraged to increase investment levels. Indeed, the central idea behind the establishment of the Jordanian capital market in 1978 was to promote savings by activating and encouraging investment in bonds and shares and to direct such savings to serve the development of the national economy. The fact that firm investment is an important indicator of the health of economies, this study investigates the investment behavior of listed Jordanian industrial firms during the period 2000-2013. Based on the financial statement of 52 listed industrial firms and panel data analysis, the empirical results indicate that firm investment does respond to stock market valuation (Tobin’s Q). On the other hand, firm’s leverage does not have a significant effects on firm investment. Based on these outcomes, one can argue that the pricing efficiency of the listed firms’ stock is extremely important.
Highlights
Economists, as well as others, have always been interested in what really determines economic growth and development
The empirical literature has examined the role of a myriad of factors including “financial development”
As far as stock market are concerned, it is so remarkable to note that in about the last decade, stock exchange markets had opened in some of the least likely countries from Azerbaijan to Zambia. This might be to a certain extent due to an leading body of theoretical and empirical literature which has recognized a positive relationship between the status of financial development and the growth of economy (Minier, 2009)
Summary
Economists, as well as others, have always been interested in what really determines economic growth and development. The empirical literature has examined the role of a myriad of factors including “financial development” (the establishment and expansion of institutions, instruments and markets) Based on this literature, one can argue that, on average, financial development does promote economic growth, industry growth, and firm growth (Levine, 2004; Demirguc-Kunt & Levine, 2008). As far as stock market are concerned, it is so remarkable to note that in about the last decade, stock exchange markets had opened in some of the least likely countries from Azerbaijan to Zambia This might be to a certain extent due to an leading body of theoretical and empirical literature which has recognized a positive relationship between the status of financial development and the growth of economy (Minier, 2009). When the liquidity of listed securities improves, stock markets raise the accessibility of funds to finance long term capital investments. The paper summarizes the main findings and presents some implications for future research
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