Investigating the Effects of Firm-Specific Factors on Businesses' Investment Financing Decisions

Purpose - In this paper, how firm size, firm profitability, and firm growth opportunities affect the investment financing decisions of firms is examined with the dynamic multi-equation system method. Methodology –In the paper, investment financing decisions of 22,694 different firms operating in 76 different countries over 1994 - 2019 were investigated using the seemingly unrelated regression method. Findings –Findings show that: (1) As firm size increases, the use of long-term financial debt in financing capital expenditures and working capital investments increases. (2) As firm profitability increases, the use of long-term financial debt and cash reserves in financing investments increases, while the equity issuance decreases (3) Firms with high growth opportunities decrease their equity issuances in financing their capital expenditures, while increase their long-term debt uses. Conclusions –Investment financing decisions vary with the characteristics of the firms.