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Determinants of capital expenditure spending in Malaysian palm oil industries: A dynamic panel data analysis

Author

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  • Afza Asyura Mohd Hisham
  • Zulkefly Abdul Karim
  • Norlin Khalid

    (Center of Sustainable and Inclusive Development (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia, Malaysia
    Center of Sustainable and Inclusive Development (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia, Malaysia
    Center of Sustainable and Inclusive Development (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia, Malaysia)

Abstract

This study aims to investigate the determinants of capital expenditure (capex) for Malaysian palm oil companies listed at Bursa Malaysia. The study uses the dynamic panel data analysis (generalized method of moment) estimation for the sample of 40 palm oil-oriented firms that spanning from year 2000 until 2016. Findings/Originality: The empirical findings revealed that, in the short run and the long run, the capex spending is significantly affected by the cash flow, sale growth, and world crude palm oil price. However, Average Q significantly influences the capex decision in the long run only. Thus, the policy implication from this study suggests that palm oil-oriented firms should take into account the movement of world crude palm oil (CPO) price in designing their capital expenditure strategy. In addition, proper planning for managing firms’ cash flow and sale growth are also important for expanding their capex in future.

Suggested Citation

  • Afza Asyura Mohd Hisham & Zulkefly Abdul Karim & Norlin Khalid, 2019. "Determinants of capital expenditure spending in Malaysian palm oil industries: A dynamic panel data analysis," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 11(2), pages 223-233, October.
    • Handle: RePEc:uii:journl:v:11:y:2019:i:2:p:223-233
    DOI: 10.20885/ejem.vol11.iss2.art9
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    Cited by:

    1. Kuantan, Dhaha Praviandi & Siregar, Hermanto & Ratnawati, Anny & Juhro, Solikin M., 2021. "Corporate Investment Behavior and Level of Participation in the Global Value Chain: A Dynamic Panel Data Approach," MPRA Paper 115417, University Library of Munich, Germany, revised 23 Oct 2021.

    More about this item

    Keywords

    Malaysia; capex; dynamic panel data; GMM; Palm oil;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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