An Examination of the Empirical Relationship between Investment Decision and Financing Decision: The Case Study on Pakistani Banks

Abstract

This study investigates empirically the effect of investment decision on financing decision. To obtain the objectives, the data required, ranging from 2004 through 2013 were collected from the financial statements of all the banking firms listed in Karachi Stock exchange. Investment opportunity and actual investment were used as proxies of investment decision. Profitability and firm size were used as control variables. Multiple regression models were used to estimate the variables of interest. It was concluded that investment opportunity had significant effect on financing decision; however, the effects have no particular pattern. Furthermore, actual investment had no impact on financing decision.

JEL Classification: G31; G32

Keywords: Banking Sector, Investment Decision, Financing Decision, Multiple Regression Model