Abstract
Capital investment is one of the most important financial decisions of a firm, which effects the business survival. This paper investigates the impact of capital investments on firm performance to provide an insight for future capital investment decisions of companies. The study uses unbalance panel data gathered from 62 companies which covered 688 observations of listed food and agriculture sector in Vietnam stock exchange during the period 2009 – 2020. To control for unobserved individual effects, the random effect estimator was employed. Profit margin (PM) is used as a proxy for firm performance, while independent variables are capital investment rate in both short-term and long-term effect, equity to total assets ratio, firm size and tangible to fixed assets ratio. The results indicate that capital investments have statistically significant positive impact on long-term performance of the analyzed enterprises. This outcome is in accordant with many previous studies. Especially in the context of Vietnam listed food and agriculture companies have high level of capital investment, a portion increase in capital investment rate will increase the company profit margin. Other variables also have statistically significant relationship with profit margin, in details, equity ratio and size have positive effect while tangible assets ratio has negative effect on firm performance. Therefore, the research suggest firm managers should choose the appropriate capital investment strategies in long-term perspective, within the consideration of equity ratio, economics of scale and tangible assets investment ratio to get the most efficient performance.
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