Has aggressive investing strategy performed? An insight from Malaysia listed companies

Maria Kontesa, Emily Jia Chee Lim, Rayenda Khresna Brahmana

Abstract


This study examines the role of aggressive investing strategy on firm performance for a sample of 514 listed firms in Malaysia from 2010 to 2017. In our first objective, we investigate the investing activism effect on firm performance by simultaneously controlling the firm characteristics and industry in our model. Our second objective is to test whether aggressive investing activism affects firm performance. Lastly, we want to investigate whether this aggressive investing may produce different results with different measures of performance. Our findings show that investment has significant effects on firm performance. Our research further indicates that companies with aggressive investing strategies had a better firm performance than compared to its peers. We test this theory using three different measures of aggressive investing strategies and substantiate this conclusion. Our research confirms the resource-based view theory and empirically proves that aggressive investments would result in better firm performance.

JEL Classification: C23, D21, G31, L25

DOI: https://doi.org/10.26905/jkdp.v23i3.3069


Keywords


Aggressive investing; Performance; Resource based view; Strategy

References


Alcock, J., Baum, A., Colley, N., & Steiner, A. (2013). The role of financial leverage in the performance of private equity real estate funds. The Journal of Private Equity 17(1), 80-91. https://doi.org/10.3905/jpe.2013.17.1.080

Alderson, M. J., & Betker, B. L. (2012). Managerial incentives, net debt and investment activity in all-equity firms. Studies in Economics and Finance, 29(4). 232-246. https://doi.org/10.1108/10867371211266892

Alon, B., Jiang, W., Partnoy, F., & Thomas, R. (2008). Hedge fund activism, corporate governance, and firm performance. The Journal of Finance, 63(4), 1729-1775. https://doi.org/10.1111/j.1540-6261.2008.01373.x

Baum, A. J., Fear, N., & Colley. (2012). Have property funds performed? A ULI Europe Policy & Practice Committee Report. Urban Land Institute.

Benitez-Amado, J., & Walczuch, R. M. (2012). Information technology, the organizational capability of proactive corporate environmental strategy and firm performance: A resource-based analysis. European Journal of Information Systems, 21(6), 664-679. https://doi.org/10.1057/ejis.2012.14

Berger, P. G., & Ofek, E. (1995). Diversification's effect on firm value. Journal of Financial Economics, 37(1), 39-65. https://doi.org/10.1016/0304-405X(94)00798-6

Bose, R., & Luo, X. (2011). Integrative framework for assessing firms’ potential to undertake Green IT initiatives via virtualization – A theoretical perspective. The Journal of Strategic Information Systems, 20(1), 38-54. https://doi.org/10.1016/j.jsis.2011.01.003

Brav, A., Jiang, W., Ma, S., & Tian, X. (2018). How does hedge fund activism reshape corporate innovation? Journal of Financial Economics, 130(2), 237-264. https://doi.org/10.1016/j.jfineco.2018.06.012

Chae, H.-C., Koh, C. E., & Prybutok, V. R. (2014). Information technology capability and firm performance: Contradictory findings and their possible causes. MIS Quarterly, 38(1), 305-326. https://doi.org/10.25300/misq/2014/38.1.14

Cheng, M‐Y., Lin, J‐Y, Hsiao, T‐Y., Lin, T. W. (2010). Invested resources, competitive intellectual capital, and corporate performance. Journal of Intellectual Capital, 11(4), 433-450. https://doi.org/10.1108/14691931011085623

Collins, O. S., Filibus, I. E., & Clement, A. A. (2012). Corporate capital structure and corporate market value: Empirical evidence from Nigeria. International Journal of Economics and Finance, 4(12), 193–201. http://dx.doi.org/10.5539/ijef.v4n12p193

Dawar, V. (2014). Agency theory, capital structure and firm performance: Some Indian evidence. Managerial Finance, 40(12), 1190-1206. http://dx.doi.org/10.1108/MF-10-2013-0275

Edmans, A., Fang, V. W., & Lewellen, K. A. (2017). Equity vesting and investment. The Review of Financial Studies, 30(7), 2229-2271. http://dx.doi.org/10.1093/rfs/hhx018

Fischer, G., & Karlan, D. (2015). The catch-22 of external validity in the context of constraints to firm growth. American Economic Review, 105(5), 295-99. http://dx.doi.org/10.1257/aer.p20151078

Fosu, S. (2013). Capital structure, product market competition and firm performance: Evidence from South Africa. The Quarterly Review of Economics and Finance, 53(2), 140-151. https://doi.org/10.1016/j.qref.2013.02.004

Goh, S. K., & Wong, K. N. (2011). Malaysia's outward FDI: The effects of market size and government policy. Journal of Policy Modeling, 33(3), 497-510. https://doi.org/10.1016/j.jpolmod.2010.12.008

Hitt, M. A., Xu, K., & Carnes, C. M. (2016). Resource-based theory in operations management research. Journal of Operations Management, 41(1), 77-94. https://doi.org/10.1016/j.jom.2015.11.002

Holmes, M. J., & Maghrebi, N. (2015). Reconsidering the role of Tobin’s Q: Nonlinearities and the adjustment of investment expenditure. Studies in Economics and Finance, 32(2). 222-234. https://doi.org/10.1108/sef-08-2014-0151

Hsu, W. C., Wang, C., & Clegg, J. (2015). The effects of outward foreign direct investment on fixed-capital formation at home: The roles of host location and industry characteristics. Global Economic Review, 44(3), 353-368. https://doi.org/10.1080/1226508X.2015.1077720

Hussain, M. M., & Hoque, Z. (2002). Understanding non‐financial performance measurement practices in Japanese banks. Accounting, Auditing & Accountability Journal, 15(2), 162-183. https://doi.org/10.1108/09513570210425583

Lamont, O. (1997). Cash flow and investment: Evidence from internal capital markets. The Journal of Finance, 52(1), 83-109. https://doi.org/10.1111/j.1540-6261.1997.tb03809.x

Mithas, S., Ramasubbu, N., & Sambamurthy, V. (2011). How information management capability influences firm performance. MIS Quarterly. 35(1), 237-256. https://doi.org/10.2307/23043496

Ngoc, D. B. (2015). Sovereign wealth fund investments and firm value. International Journal of Economics and Finance, 7(10), 100-111. https://doi.org/10.5539/ijef.v7n10p100

Penrose, E. T. (1959). The theory of the growth of the firm. John Wiley: Cambridge, U.K.

Pérez-López, S., & Alegre, J. (2012). Information technology competency, knowledge processes, and firm performance. Industrial Management & Data Systems, 112(4), 644–662. http://dx.doi.org/10.1108/02635571211225521

Rosenbusch, N., Brinckmann, J., & Müller, V. (2013). Does acquiring venture capital pay off for the funded firms? A meta-analysis on the relationship between venture capital investment and funded firm financial performance. Journal of Business Venturing, 28(3), 335-353. https://doi.org/10.1016/j.jbusvent.2012.04.002

Safarova, Y. (2010). Factors that determine firm performance of New Zealand listed companies. Dissertation. Master of Business at Auckland University of Technology.

Selçuk, E. A. (2015). Corporate diversification and firm value: evidence from emerging markets. International Journal of Emerging Markets, 10(3), 294-310.

https://doi.org/10.1108/IJoEM-12-2012-0180

Smirlock, M., Gilligan, T., & Marshall, W. (1984). Tobin's Q and the structure performance relationship. American Economic Review, 74(5), 1051-1060.

Wang, Y. (2016). The impact on firm performance: CEO selection and product market competition. Banking and Finance Review, 8(2).

Wernerfelt, B. (1995). The resource-based view of the firm: Ten years after. Strategic Management Journal, 16(3), 171-174. https://doi.org/10.1002/smj.4250160303


Full Text: PDF

Refbacks

  • There are currently no refbacks.





WhatsApp Image 2019-11-11 at 20.13.38.jpegWhatsApp Image 2019-06-12 at 16.37.31

>


Journal of Finance and Banking

Diploma Program of Banking and Finance
Faculty of Economics and Business University of Merdeka Malang

Mailing Address:

2nd-floor Banking and  Finance Building, Terusan Raya Dieng Street No.57 Malang, 65146, East Java, Indonesia
Phone/WhatsApp: +628123321664; Fax. +62 341 580511
Email: jkpunmermlg@yahoo.com


Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.