Influencing Factors of Investment for Companies

Abstract

Companies always try to make the best investment decision to maximize profits. This article summarized the latest research progress in corporate investment. External and internal factors that influence enterprise investment decisions were analyzed. External factors include government policy and environmental factors. Government policies such as macroeconomic policies and globalization policies will affect enterprises' stock return rate and thus influence their investment decision. Furthermore, environment factors such as the development of science and technology, culture, society and COVID-19 will also have impacts on investment decisions. Internal factors include behavioral factors, company's performance and the risk in investment decisions. Influenced by behavioral factors such as disposition effect, mental accounting and diversification heuristic bias, enterprises have a tendency to reduce investment in projects. However, overconfidence will encourage the investment department of the company to invest. The relationship between corporation's current performance, historical performance and social performance will change the allocation of resources within the company and thus affect the enterprise investment. Also, attitudes to risk and uncertainty of the company are main issues that company should consider when they make investment decisions. In order to make a better investment decision, companies need to recognize different variables from the costs to the profits of an investment project.