9 2.2.1 Literatures relevant to the effect of COVID-19 on firm investment expenditure decisions...9 2.2.2 Literatures relevant to the effect of firm size on firm investment expenditure d
INTRODUCTION
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The year 2020 marked a tumultuous period in history, primarily due to the COVID-19 pandemic that originated in Wuhan, China, and was declared a pandemic by the World Health Organization (WHO) As of now, there have been over 671 million infections and 6.84 million deaths globally Vietnam faced significant challenges as well, reporting over 11.5 million infections and more than 43,000 deaths by February 2023, according to the Ministry of Health In response, authorities implemented preventive measures to lessen the pandemic's impact, but actions like social distancing and the suspension of non-essential activities, including tourism and luxury fashion, posed challenges for businesses, limiting their market access and growth opportunities.
A recent survey conducted by the Vietnam Chamber of Commerce and Industry (VCCI) in collaboration with the World Bank revealed that nearly 10,200 Vietnamese companies experienced significant negative impacts due to the COVID-19 pandemic Approximately 87.2% of these firms reported being "mostly" or "totally" affected, while only 11% indicated no impact at all Notably, nearly 2% of the surveyed enterprises experienced a "mostly" or "entirely positive" impact from the situation.
The COVID-19 pandemic has had profound and irreversible effects on businesses globally and in Vietnam, particularly impacting small enterprises and those classified as "non-essential" due to social distancing measures Production delays and challenges in international trade have led to stockpiled inventories and dwindling revenue for many companies As consumption activities stagnate, cash flow has sharply decreased, forcing businesses to focus solely on survival rather than growth Additionally, the extended receivables and payables cycle, influenced by the struggles of partners, further disrupts the internal capital chain of these enterprises.
The financial market experienced a significant downturn due to a sharp decline in stock market values, which hindered companies' ability to raise capital through new share issuances and affected their equity maintenance (Zeng, Fu, & Wei, 2011) Consequently, financial institutions are likely to adopt a more cautious approach to lending, resulting in heightened challenges for companies seeking loans and increasing external financial constraints (Arslan-Ay ay din, Florackis & Ozkan, 2014; Kaplan).
Despite government efforts to support businesses through reduced loan interest rates and preferential loans, the COVID-19 pandemic continues to significantly disrupt daily operations Many companies struggle to cover fixed costs like rent and production expenses, resulting in increased risks of liquidation and bankruptcy.
Experts suggest that firms with high liquidity flexibility are better equipped to navigate the pandemic's challenges, allowing them to reduce risks and seize investment opportunities In contrast, companies with limited cash reserves may struggle to fulfill loan obligations and face difficulties in obtaining external financing As a result, the COVID-19 crisis offers a unique opportunity for financially flexible enterprises to make strategic investments, while those with high financial leverage may miss out on these prospects.
In response to the challenges posed by the COVID-19 pandemic on investment decisions, the study "How do investment decisions of firms change before and after the COVID-19 pandemic? Empirical evidence in Vietnam" was initiated to explore the pandemic's effects on the financial metrics of enterprises This research aims to equip investors with valuable insights into companies' financial health, enabling more informed investment choices Additionally, it highlights the difficulties faced by businesses during this period and offers recommendations to mitigate negative impacts, promote recovery, attract investment, and ultimately enhance firm value in the ongoing crisis.
The research's objective
The general research goal is to understand the extent of the impact of the COVID-19 pandemic on the investment decisions of firms in Vietnam.
This research seeks to enhance empirical evidence in Vietnam about how the COVID-19 pandemic impacts firms' investment decisions, thereby increasing the practical significance of the theories discussed.
- Secondly, the research acknowledges that firms varying in factors like size and ownership structures may experience distinct impacts on their investment decisions during the COVID-19 pandemic.
- Lastly, the author seeks to examine whether high liquidity flexibility in firms alters the correlation between the COVID-19 pandemic and the investment decisions of those firms.
The research’s questions
- Does the CO VID-19 pandemic affect investment decisions of firms in Vietnam?
- How do firms with different owner structures and sizes have different levels of impact on investment decisions?
- Does liquidity flexibility affect the correlation between COVID-19 and investment decisions of firms?
The research’s scope
This article examines the effects of the COVID-19 pandemic on firms listed on the Vietnamese stock market, specifically targeting companies on the Ho Chi Minh Stock Exchange (HSX).
The author decided to divide the research into 2 time periods:
- Phase 01: from the first quarter of 2018 to the fourth quarter of 2019, when the COVID-19 pandemic had not yet appeared.
- Phase 02: from the first quarter of 2020 to the fourth quarter of 2021 when the COVID-19 pandemic began to appear and had complicated developments in Viet Nam.
The research methods
To address the research questions and objectives, the author gathered secondary data from financial statements, annual reports, and management reports of various companies, as well as reputable websites like Vielstock, CafeF, and Wichart To test the proposed hypotheses, the author employed least squares (OLS), fixed effects (FEM), and random effects (REM) methods for data analysis.
The author employs F-tests and Hausman tests to determine the most appropriate estimation method Additionally, Wald and Wooldridge tests are utilized to identify issues related to variable variance and autocorrelation within the model, with the GLS method applied to address these deficiencies effectively.
The research’s practical significance
The research provides valuable insights into the impact of the COVID-19 pandemic on firms' investment decisions, highlighting that different industries face varying effects This understanding is crucial for corporate managers as it helps them navigate the pandemic's challenges and adapt their investment strategies accordingly Additionally, the study reveals that factors like ownership structure and company size also influence investment decisions during the pandemic, emphasizing the need for businesses to strategize by potentially expanding their scale and restructuring ownership Ultimately, this study contributes significantly to future research in this area, laying the groundwork for further exploration and analysis.
THEORETICAL BASIS AND LITERATURE REVIEW
Theoretical basis
Agency theory, a key concept in economics, suggests that when ownership and management rights are separated, managers may prioritize their own interests over those of the owners This conflict of interest was first identified by Adam Smith in the eighteenth century, but a comprehensive analysis was provided by Jensen and Meckling in 1976.
Agency theory, first published in 1976, examines the dynamics between principals and agents, where agents hold specific rights granted by principals In 1997, Davis, Schoorman, and Donaldson emphasized the challenges arising from the separation of ownership and control within this framework Conflicts of interest can occur among various Board of Directors members—executive and non-executive, internal and external, independent, established, and dependent—as well as between shareholders, including majority and minority, controlling and non-controlling, individuals and entities (IFC, 2010).
In their 1976 research, "Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure," Jensen and Meckling examined the conflicts of interest that arise within organizations, focusing on the implications for finance and corporate control Their analysis highlights how managerial behavior and ownership structures can lead to agency costs, impacting overall firm performance.
- Between the firm's proprietor and manager
- Between the debtor and the owner
Agency costs refer to the expenses incurred in managing a firm where ownership and management are separated These costs arise from information asymmetry and conflicts of interest when agents prioritize their own goals over those of the owners According to Jensen and Meckling, agency expenses encompass various expenditures associated with this dynamic.
- Monitoring Expenses are costs incurred by the principal to keep an eye on the actions and conduct of the agent through operational monitoring restrictions, pay standards, operating guidelines, etc.
Investing in bonding expenditures by agents to establish a robust apparatus can mitigate adverse administrative behaviors This proactive approach helps prevent negative consequences arising from unethical managerial practices, such as the improper appointment of external members and corporate executives.
Residual loss, or welfare loss, occurs when managers prioritize their personal interests over those of shareholders, leading to detrimental outcomes This can manifest through agents misusing their privileges or excessively investing to enhance their own influence and stature, often at the expense of maximizing shareholder profits Essentially, it reflects the inefficiencies arising from inadequate control over agent activities.
Agency costs are significantly influenced by the amount of cash a firm holds, as large cash reserves can enhance a company's flexibility and enable quicker acquisitions and investment opportunities However, this abundance of cash may lead to agency costs, where top management could engage in unwise investments or extravagant purchases to benefit themselves In extreme cases, excessive cash reserves can relieve pressure on management to make prudent decisions, potentially harming the firm's performance compared to companies with limited cash Therefore, it is essential to consider agency costs when evaluating a firm's cash holdings.
2.1.2 Trade off theory 2.1.2.1 Modigliani-Miller theory
The Modigliani-Miller theory of capital structure, proposed by Modigliani and Miller in the 1950s, is based on the following assumptions:
- No transaction costs, issuance costs, bankruptcy costs;
- Investors and firms can both borrow or lend at the same interest rate;
- No floating costs, such as underwriting commissions, payments to commercial bankers, advertising costs, and more.
- Investor behavior is reasonable and they have uniform expectations of a company's profitability.
Modigliani and Miller's theory asserts that the value of a leveraged firm, which utilizes both debt and equity, is equivalent to that of an unleveraged firm, funded entirely by equity, provided their operating profits and future prospects are comparable Consequently, investors are willing to pay the same price for shares in both leveraged and unleveraged companies.
However, several of the MM theory's reasons are rejected by the later confirmation tables, as follows:
It is unrealistic to believe that taxes do not exist, as they significantly impact a company's value through financial leverage The Modigliani-Miller (MM) theorem acknowledges its limitations, particularly in the context of corporate income tax, highlighting that capital markets are not perfect.
No company opts for an excessively high level of debt in its capital structure, as various factors beyond debt influence the optimal capital structure for its specific needs Among these factors, agency costs and bankruptcy costs are the most significant considerations.
Building on the foundational research of Miller and Modigliani, several theories of capital structure have emerged, including the static trade-off theory, dynamic trade-off theory, and financing priority theory, which collectively aim to explain how companies structure their capital.
Miller & Modigliani (1963) expanded the traditional investment structure model by incorporating corporate income tax as a factor, allowing firms to establish a target debt-to-equity ratio and gradually work towards it The tax shield from debt can enhance a company's value while also mitigating conflicts of interest between shareholders and managers regarding free cash flow, ultimately improving firm performance However, increased debt also elevates financial risk and the potential for bankruptcy Consequently, managers must navigate a trade-off between the tax benefits of debt and the costs associated with financial distress, with the target capital structure influenced by tax rates, asset types, company risk, profitability, and bankruptcy expenses In practice, companies strive to balance the costs and benefits of their financing, asset holdings, and investment strategies.
The optimal capital structure of a firm is reached when the present value of interest-related tax savings equals the present value of financial distress costs, marking the point where the firm's value is maximized and its average cost of capital is minimized Beyond this threshold, increasing debt leads to financial distress costs that outweigh tax savings, resulting in a decline in the company's value Therefore, corporate financial managers must carefully assess the trade-off between the advantages and disadvantages of debt utilization to establish an optimal capital structure that enhances corporate value.
The dynamic trade-off theory, introduced by Fischer et al (1989), emphasizes that a firm's capital structure may not always align with its ideal capital structure, as it considers the cost of equity This model suggests that companies establish a debt ratio range and make financing decisions based on anticipated marginal financing Over time, a firm's capital structure is expected to converge with the optimal one Notably, more profitable firms benefit from tax shields by taking on additional debt, encouraging greater leverage While increased leverage raises the risk of financial distress and bankruptcy, research indicates that bankruptcy costs are minimal compared to the advantages of tax shields This theory elucidates the positive correlation between capital structure and firm performance, as supported by studies from Roden & Lewellen (1995), Hadlock & James (2002), and Berger & Bonaccorsi di Patti (2006).
The Financing Priority Theory, developed by Myers and Majluf (1984) and rooted in Donaldson's (1961) research, addresses the challenges of investment and financing decisions amid information asymmetry It posits that a firm's capital structure influences its value, as established by Myers & Majluf (1984) The theory incorporates the concept of adverse selection, where managers possess better knowledge of the company's true value and growth potential than investors Consequently, when financial managers opt for external financing through share issuance, investors may perceive this as a signal of overvaluation, leading them to sell their stocks and consequently driving down the stock price To mitigate this risk and maintain stock value, firms should prioritize financing in a specific order: first utilizing internal capital through retained earnings, followed by debt, and finally resorting to equity issuance.
8 proposes that the corporation won't have an ideal capital structure.
Literature review
2.2.1 Literatures relevant to the effect of COVID-19 on firms investment expenditure decisions
Money plays a crucial role in company markets and trade activities, serving as a key indicator of a corporation's wealth (Ferreira, Custodio, & Raposo, 2005; Opler, 1997) It enables firms to assess their financial health and stability, making it an essential foundation for business existence Beyond being a mere asset, money represents a company's internal strength and capacity for growth.
Companies rely on two primary sources of funding: external sources from customer sales and internal sources from shareholders and debt holders However, these funding sources expose firms to significant risks, particularly from unexpected market shocks, such as the COVID-19 pandemic Such disruptions can severely impact a company's operations, financial agreements, and investment strategies, leading to a substantial decline in revenue from sales or services For instance, during economic downturns, consumers often reduce spending on non-essential items, resulting in decreased external financial resources for businesses This situation is further exacerbated in economies like China's, where crises can create severe capital-raising challenges, jeopardizing the stability and longevity of firms (Xin, Dasgupta, Wong, & Yao, 2012).
The COVID-19 pandemic has created a catastrophic crisis for businesses worldwide, leading to widespread lockdowns and significant economic volatility The prolonged nature of the outbreak has instilled fear in companies, as signing contracts now entails higher transportation costs, distribution challenges, trade limitations, and port closures This ongoing situation has severely impacted companies' operations and their ability to recover debts Additionally, the global stock market has suffered due to diminished investor confidence Research by Vito and Gomez (2020) indicates that COVID-19 could potentially lead to the failure of 1 in 10 companies within just six months due to financial strains.
In a worst-case scenario, companies may deplete their financial resources within two years due to the unprecedented impact of COVID-19, as highlighted by Goodwell (2020) The pandemic has caused significant damage to financial performance and institutions, with lasting negative effects still anticipated Specifically, the crisis has restricted business activities and altered investment decisions and dividend distributions (Campello et al., 2010, 2011) However, amidst these challenges, strategic investment decisions can drive recovery and play a crucial role in fostering firm growth, particularly through long-term investments in fixed assets, which will be explored further in the next section.
In conclusion, investment has been a vital base to create progressive in money flow in
10 the future, profitability, reducing risk in firm activities and increasing developing prospects as well (Ferreira et al„ 2005; Myers & Majluf, 1984).
Hl: COVID -19 has tremendous negative effect on investment decisions of firms
2.2.2 Literatures relevant to the effect of firm size on firm investment expenditure decisions
The size of a firm significantly influences its vulnerability to external environmental factors, with larger firms exhibiting greater resilience to crises compared to small and medium-sized enterprises, which typically have a diminished capacity to withstand risks Larger corporations bear heightened responsibilities toward their social and employee commitments, whether for economic or non-economic objectives (Xu & Zou, 2011) Additionally, these firms face increased risks and impacts from events such as epidemics Official policies have recognized three crucial elements—environment, employees, and customers—that are vital to large firms (Carroll, 1991) Consequently, when confronted with challenges, these companies often find it necessary to reduce investments in projects related to their operations and overall development.
H2: Firm size reduces the negative impact of COVID-19 on investment decisions
2.2.3 Literatures relevant to the effect of ownership structure on firm investment expenditure decisions
Numerous studies over the years have explored the impact of ownership structures on corporate overinvestment Research by Chen et al (2011) reveals that investment expenditures at Chinese firms are notably lower for state-owned enterprises compared to their non-state-owned counterparts, indicating that political connections adversely affect investment efficiency.
On the other side, Shen et al (2016) find that government intervention can affect corporate investment by providing a better credit market Similar results for Dung et al
A study from 2016 highlights that overinvestment is prevalent in China's non-state sector, with corporate investment demonstrating significant efficiency between 2000 and 2007 This finding is further supported by the free cash flow hypothesis, which explains the phenomenon of overinvestment in these non-state sectors.
Lemmon and Lin (2003) highlight that ownership structure plays a crucial role in corporate governance, particularly during downturns in investment opportunities, as it can enhance development incentives Additionally, research indicates that the ownership structure in East Asia is more widely distributed among individuals, allowing managers to implement more effective management strategies compared to scenarios with limited ownership (Porta, Lopez-de-Silanes, & Shleifer, 1999; Claessens, Djankov).
Concentrated ownership can lead to the expropriation of minority shareholders, diminishing their protection (Shleifer & Vishny, 1986; Gomes, 2000; Lins, 2003) Skilled managers excel in identifying investment opportunities, facilitating efficient investment (Habib & Hasan, 2017) This study investigates whether shareholder structure or concentration influences the investment decisions of companies with access to stock market financing.
H3: In aspects of corporation ownership structure, government intervention has negative effects on firms investment expenditure decisions during COVID-19 crisis
2.2.4 Literature relevant to the effect of financial flexibility on firm investment expenditure decisions
Financial flexibility is a crucial indicator of a company's internal capabilities, enabling it to effectively allocate resources over the long term This adaptability not only enhances a firm's ability to manage financial risks but also improves its resilience and overall performance By fostering financial flexibility, companies can better navigate challenges and seize opportunities, ultimately contributing to sustained growth and success.
Firms exhibit two primary types of financial flexibility: liquidity flexibility and debt flexibility Liquidity flexibility refers to a company's capacity to maintain excess cash, which is often regarded as essential capital (Arslan-Ayaydin et al., 2014; Bonaime, Hankins & Haford, 2014; Byoun, 2011) This flexibility is particularly crucial in navigating the unpredictable global economic landscape.
This paper explores the impact of financial flexibility during the COVID-19 pandemic, highlighting how companies are grappling with environmental uncertainties.
Holding cash during times of crisis can mitigate the adverse effects of unexpected events and government policy uncertainties on corporate activities (Duong, Nguyen & Rhee, 2020) Companies are inclined to maintain higher cash reserves to safeguard against negative impacts on investment decisions and future planning Furthermore, research indicates that, in addition to precautionary savings, speculative investments can enhance non-cash assets (Huang, Luo, & Peng, 2019) Consequently, when cash becomes scarce, internal cash reserves become vital resources for firms.
12 situation of a downturn firm effectively due to shortage of financial independence (Kaplan
Research by Zeng (2011) highlighted that firms with high liquidity flexibility and robust cash reserves were better equipped to navigate the 2008 economic crisis, allowing them to invest strategically post-crisis Similarly, Qianxi (2016) found that larger cash reserves reduced limitations on investment activities Yung, Li, and Jian (2015) examined 33 emerging countries and concluded that liquidity flexibility enhances investment capacity, lowers the sensitivity of investment accounts to cash flow, reduces equity payments, and increases firm value Overall, during the 2008 economic crisis, liquidity flexibility not only bolstered firm value but also minimized the negative impact of external shocks, leading to smaller declines in equity investment and spending.
H4: High liquidity flexibility can reduce bad effects on investment activities during crisis
Table 2.1 Summary of relevant research paper
COVID-19 has tremendous negative effect OH investment decisions affirms
Gomez 10: The model has high multicollinearity;
- VIF coefficient = 1: The model does not have multicollinearity.
Autocorrelation, also referred to as Autoconelation in econometrics, occurs when the error term at time t is correlated with the error term at previous time periods, such as t-1 This phenomenon is commonly found in panel data and time-series data While the Ordinary Least Squares (OLS) estimates remain unbiased and consistent under a normal distribution, the presence of autocorrelation leads to inefficiency in these estimates Consequently, the standard error values of the OLS model may be affected.
The estimated t values can be inflated, leading to an underestimation of the true values, which raises concerns about the reliability of hypothesis tests As a result, the validity of t and F tests may be compromised, and the model could experience issues related to spurious regression.
The hypothesis of the autocorrelation test is as follows:
HO: No autocorrelation HI: There is a coiTelation phenomenon
- If P-value < significance level: reject hypothesis HO, accept hypothesis HI, The model has no autocorrelation phenomenon.
- If P-value > significance level: accept hypothesis HO, reject hypothesis Hl, The model has autocorrelation phenomenon.
Variance verification is a crucial aspect of statistical data analysis, as it addresses the common issue of non-uniform error variances in models While this defect does not introduce bias or instability in Ordinary Least Squares (OLS) estimates, it undermines the reliability of coefficients and t, F statistics, rendering the model inefficient To rectify variable variance issues, techniques such as Generalized Least Squares (GLS), Weighted Least Squares (WLS), Feasible Generalized Least Squares (FGLS), variable logging, or Robust methods can be employed Various tests, including the White test, Wald test, Breusch-Pagan-Godfrey test, and LM test, are available to assess the presence of variance defects in models.
HO: Variance is constant Hl: Variance change
- If P-value < significance level: reject hypothesis HO, accept hypothesis Hl, model has constant variance.
- If P-value > significance level: accept hypothesis HO, reject hypothesis HI, model has variable variance.
RESEARCH RESULT
Descriptive statistics
The author has collected data of companies in the period from QI-2018 to Q4-2021 with
3280 observations The author verified, coded, and entered the data into Stata 16.0 The author displays statistical findings in charts with the following precise details:
Investment expenditure analysis reveals a mean value of 1.00501 and a standard deviation of 1.933679, indicating significant fluctuations in firms' investment activities over the years Notably, Vinasun recorded its lowest investment in Q4 2021, amounting to -17.0362, reflecting challenges faced by the transportation and warehousing sectors.
30 industries in general faced consecutive losses and severely reduced investment costs since the COVID-19 pandemic led most cars to stop functioning as a result of the State’s anti epidemic legislation.
Tobin's Q ratio has an average value of 1.17483, with a standard deviation of 0.7157, and reached a peak of 8.5948 for Vinamilk in Q1 2018, indicating that the stock is overvalued by eight times in the market This overvaluation is primarily attributed to the company's strong growth potential, driven by strategic adjustments in the proportion and structure of its product offerings, focusing on high-value-added and more productive groupings.
The statistical analysis shows that the average firm size in the sample is 28.446, with a low variation rate of 1.3869, suggesting that the firms are relatively large and exhibit minimal fluctuations around the mean size.
The analysis of 3,280 observations reveals that the average cash flow (Cflow) is 0.840735, while the standard deviation is notably high at 8.994619 This indicates that the company with the highest cash flow experiences amounts nearly double that of the average.
The company experienced eight instances of the lowest cash flow, with values fluctuating from a minimum of -121.5237 to a maximum of 129.2672 The negative cash flow of -121.5237 was recorded by VIN in Q3-2019, attributed to a significant decline in net revenue of nearly 32 trillion VND during the first nine months of 2019, largely due to the impact of the COVID-19 pandemic.
The COVID-19 pandemic severely impacted the gross profit margins of sectors like hospitality and manufacturing Notably, VINGROUP recorded its highest cash flow of 129.2672 in Q1 2018 This period marked a significant milestone for VINFAST, a subsidiary of VINGROUP, as it successfully signed cooperation agreements to export various car models internationally, generating substantial cash flow for the company.
The return on assets (ROA) analysis of 3,075 observations reveals a mean value of 0.0153 and a standard deviation of 0.0194 among the companies studied The ROA values range from a minimum of -0.0871, recorded by Taseco Aviation Services JSC (HOSE: AST) in Q3-2021, to a maximum of 0.1599 at Duyen Hai Multimodal Transport Joint Stock Company (HOSE: TCO) in Q2-2021 The significant drop in Taseco's ROA during the recovery period following the COVID-19 pandemic highlights the challenges faced by the aviation industry, which was heavily impacted in 2020 Conversely, Duyen Hai's performance, while high, remains modest compared to industry averages as the shipping sector aimed to balance pandemic prevention with the delivery of essential goods in early 2021.
The Return on Equity (ROE) analysis reveals that, across 3,075 observations, the mean return on total assets is 0.0285, with a low standard deviation of 0.0334 among the companies studied This metric fluctuated significantly, with FLC Group recording a minimum value of -0.1883 in Q1-2021, following a peak of 0.2084 in Q4-2020 The decline in ROE was attributed to the adverse effects of the pandemic and the cessation of financial consolidation with Tre Viet Aviation Joint Stock Company (Bamboo Airways), which adversely impacted the company's service segment revenue.
A recent analysis of 3,280 observations reveals that the average debt ratio among companies is 0.467994, with a standard deviation of 0.199003 indicating minimal variation in debt levels The lowest debt ratio recorded was 0.0027 at Saigon Vien Dong Technology Joint Stock Company (HOSE: SVT) in Q4-2019, while the highest was 0.9498 at Phuong Nam Culture Joint Stock Company (PNC) in Q1/2018 Saigon Vien Dong's consistently low debt ratio is attributed to its business model, which focuses on trading paper products and investing in education, allowing it to operate without bank loans or supplier payables, thus ensuring profitability and dividend payments to shareholders However, this conservative approach to debt limits the company's potential for profit growth.
The cash reinvestment (REIN) variable has a mean value of 0.019992 and a standard deviation of 2.214211, indicating significant sample dispersion with a minimum value of -27.6841 and a maximum of 24 This high variability can be attributed to differences across industries, which contribute to the observed volatility in the data.
The descriptive statistics derived from 3,280 observations reveal that the mean value of the INDE binary variable is 0.243597, with a standard deviation of 0.161294, highlighting a significant disparity in the proportion of independent members within the panel This indicates notable differences in corporate governance across companies, varying by period and industry.
The DUAL binary variable has a mean of 0.132622 and a standard deviation of 0.339217, reflecting a 33% variation in its price from the mean This variation arises because it is uncommon for firms to have both a General Director and a Chairman of the Board of Directors, as management often believes that having both roles filled by one individual can compromise the objectivity of policy and strategic decisions for the firm's operations.
The correlation coefficient matrix
INVEST POST TOBIN’S Q SIZE CFLOW
Note: *, ** *** correspond to the significance level of 10%; 5% and I %
ROA ROE DEBT REIN INDE DUAL
Note: *, **, *** correspond to the significance level of 10%; 5% and I %
Table 4.2 reveals a significant negative relationship between the COVID-19 Pandemic (POST) and the firm's investment decision (INVEST), aligning with the author's initial predictions and providing preliminary support for hypothesis H1 To strengthen this argument, further tests and regression analysis are necessary Additionally, while the independent variables demonstrate strong statistical significance, their correlation coefficients remain below 0.7, indicating the absence of major multicollinearity issues within the model (Hair, 2010) Thus, it can be concluded that multicollinearity is not a concern among the independent variables.
Method comparison test results
Table 4.3 Method comparison test results Test 0)(2)(3)(4)
Conclusion Reject HO Reject HO Reject HO Reject HO
Fit method FEM FEM FEM FEM
Hausman test FEM and REM
Conclusion Reject HO Reject HO Reject HO Reject HO
Fit method FEM FEM FEM FEM
The best fit method FEM FEM FEM FEM
Table 4.3 presents the results of the F-test and Hausman test to determine the most appropriate method for analysis To choose between the Ordinary Least Squares (OLS) and Fixed Effects Model (FEM), the author employs the F-test within the FEM framework, testing the hypothesis that the fitting method is OLS With a statistical significance level set at 5%, the findings from models (1) and (2) are reported.
(3) have a dependent variable with p-value = 0.000 (