Study On The Primary Driving Factor Of Business Investment

Cash flow and growth opportunities both play a positive role in promoting firm's investment.This conclusion has been confirmed in many studies.It can be said that cash flow and growth opportunities have been widely considered as the driving factors of investment.However,when we focus further on,among the two,which one is the most important to drive investment?The question got little discussion.This paper aims to find the main driving factor of investment in order to understand the investment decision-making mechanism of enterprises.This paper is meaningful to intangible asset investment decisions such as innovation investment,and tangible asset investment decisions.We should also notice that different types of investment must correspond to different decision-making mechanisms.And the study has confirmed this.Based on the sample of the listed ones of national innovative enterprise during 2006-2014,this paper investigates the primary driving factor of intangible and tangible asset investment separately,and gets a meaningful conclusion that the growth opportunities sensitivity to intangible asset investment is almost equal,even bigger,compared with cash flow.However,tangible asset investment is more sensitive to cash flow,rather than growth opportunities.The first driving factor of total asset investment is cash flow as well,which is consistent with the current situation that most business investments are tangible asset investments in China.In addition,making the company's investment decisions,operators should consider their firms' own condition,and should also consider the external environment enterprises are facing.This paper uses macroeconomic conditions and market investors' sentiment to characterize the external environment,and puts them in the model,in order to study more accurately.When considering about external environment,we find that investor sentiment strengthens the effect of growth opportunities on intangible asset investments.While,expansive macroeconomic condition makes tangible asset investments more sensitive to cash flow.Furthermore,in view of the differences between SOEs and non-SOEs may also have an impact on the investment decision-making mechanism of the enterprise,this paper studies whether the nature of property rights have an impact on investment primary driving factor and the dependence of investment on the factor or not,and what the impact is.According to the nature of property rights,sample enterprises are divided into state-owned enterprises and non-state-owned enterprises two groups,and are also analyzed from investments in intangible assets,in tangible assets,and in total assets three approach.Comparing the regression results,this paper find that,when making investment decisions,the state-owned enterprises pay more attention to internal cash flow than non-state-owned enterprises.Without considering the external environment,the primary driving factor of intangible investment is cash flow,and growth opportunities even have nothing to do with investment in tangible assets and total assets.While non-state-owned enterprises investments pay more attention to growth opportunities than state-owned ones.The first driving factor of intangible investment is always growth opportunity.And the primary driving factor of their investment in tangible assets and total assets is cash flow,but at the same time growth opportunities are still important,and get consideration.