The Determinant Factors of Automotive Industry Investment Decision in Indonesia
The Determinant Factors of Automotive Industry Investment Decision in Indonesia

Summary/Abstract: Automotive industry contributes directly and indirectly to economic growth in Indonesia. Investment inthis industry has increased after declining in the previous years. This paper examines some internaland external factors influencing the investment decision in this industry by using E-views for listedautomotive company in Indonesia Stock Exchange from 2013 to 2017. This study finds that both netcash flow from operation and investment opportunity set (IOS) as internal factors have a significantand positive relationship to the investment decision. The capital market pressure as an external factorhas a significant and negative relationship to the investment decision. The composition of theindependence commissioner as an external factor does not have a significant relationship to theinvestment decision. By comparing the coefficient of the significant variables, the net cash flow fromoperation is a dominant factor in the investment decision. This fact relates to the report published byBank Indonesia, as a central bank, that the increasing free cash flow of corporation enhances theinvestment in Indonesia. This study contributes as a reference to the free cash flow literatures and thecapital market authority especially in the developing country.

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