Abstract:
This study finds the determinants of firm’s investment by classifying firms on the basic of number of employees (small and large firms) in case of Pakistan over the period of 2005-2015. We have created three panels, investment function for firms without classification of size, investment function for small firms and investment function for large firms. We have applied fixed effect and random effect models to check the impact of underlying variables on investment for all three panels. Our results predict that sales and cash flow have positive and significant impact on investment without classification. However, interest expenses have negative and significant relationship with investment for firms without size classification. Similarly, sales are directly but interest expenses are inversely and significantly related to investment in case of small firms. Moreover, we found all variables having expected and significant relationship with investment for large firms.
