Firms Size and the Effects of Investment on Equity Value

Abstract

The purpose of this study is to examine the relative influence of investment expenditure and equity value according to firm size. However, according to previous studies, there is a difference in management decision making and various management policies depending on the size of the company, and the response in the capital market also suggests that there is a difference in the size of the company. The larger the size of the firm and the higher the market dominance, the more likely it is to realize economies of scale, so it is clear that the market response to the investment of these large firms will be different from the market response to the investment of small firms. Therefore, this study focuses on the difference in the size of these companies and examines the relationship between investment and equity value by each size. In addition, it is divided into alternative investment and adaptive investment according to the attributes of investment, and it is intended to compare and examine how these investments affect equity value. Forecasts related to this study are expected to differ in the relationship between investment expenditure and equity value depending on the size of the company, and to differ depending on investment properties. In order to empirically analyze this, this study analyzed the large and small sized companies, and as a result of the analysis, there was a difference in the response of the market in both the large and small sized companies. In other words, investment expenditure, alternative investment, and adaptive investment of large companies showed positive effects on equity value, but small companies showed non－significant effects. The results of this study are expected to provide important implications for research on investment decisions and decision making.