The impact of financial factors on investment decision with moderating role of firm size: Evidence from textile-based firms in Pakistan

Abstract

The study examines the moderating role of firm size in the relationship between financial factors and investment decision in textile sector of Pakistan stock exchange (PSX). Descriptive statistics, correlation and fixed effect regression analysis was applied on a sample of 20 textile firms for a period of 10 years (2009-2018).The study results a significant positive effect of financial leverage (FL), cash flow (CF), firm size (FZ) and Tobin’s Q on Investment Decision (D) whereas profitability has an insignificant effect on Investment Decision. It was also found that firm size positively moderates the relationship between financial leverage, Tobin’s Q and investment decision and negatively moderates the relationship between profitability and investment decision. However Firm Size does not moderate the relationship between cash flow and investment decision. The contribution is rare with inclusion of Firms Size as moderator in association between FL, profitability, CF, and Tobin’s Q and investment decision of listed textile firms in PSX.