Analyzing the Relationship Between Investment and Financial Performance of Industrial Companies Listed on the Amman Financial Market During the Period 2005–2018

Abstract

The study aims to analyze the effect of long- and short-term investment on the financial performance (return on equity, return on assets, earning per share, and net profit after tax) for industrial companies listed on the Amman Financial Market during the period 2005–2018. The study relied on the combined financial data of industrial companies in the Amman Financial Market to test the hypotheses of the study and on the method of multiple regression analysis using the (E-views) program. The standard analysis showed a significant negative relationship between long-term investment and return on equity, return on assets, return per share, and net profit after tax for industrial companies in Jordan. The study also found a negative relationship between short-term investment and net profit and a weak negative relationship between short-term investment and return per share. However, no significant relationship is found between short-term investment and return on equity and return on assets.The study also analyzed the co-integration between the study variables using the Johansson test for co-integration, where the analysis showed the existence of a long-term equilibrium relationship between the study variables as these variables do not move away from each other so that they exhibit similar behavior in the long term. One of the most important recommendations of the study is that investment managers in industrial companies must consider feasibility studies for proposed investment projects.

Keywords: financial performance, return on equity, return on assets, earnings per share and net profit after tax, long-term investment, short-term investment

DOI: 10.7176/JEP/11-24-11

Publication date: December 31^st 2020