Impact of strategic corporate investments on companies’ performance: a case of Slovenia

In this article, the author investigates the role of strategic corporate investments, positioning them as the primary mechanism through which firms create shareholder value and enhance owner wealth. The study focuses on their influence on corporate growth, company valuation, productivity, and overall business performance. Its central objective is to present and empirically validate three research hypotheses related to these relationships.The theoretical contribution of the article lies in the formulation of a conceptual framework, termed the strategic corporate investment cycle. The model is inherently circular: it originates with strategic corporate investments and ultimately returns to them. Strategic investments stimulate corporate expansion; when investment decisions are rational and effectively implemented, companies optimize asset utilization, increase revenues, contain operating costs, and mitigate risks. Under such conditions, strategic corporate investments generate profit. Retained earnings, if not distributed, strengthen equity capital, thereby raising company value and augmenting shareholder wealth. At the same time, accumulated profits provide an endogenous source of financing for subsequent strategic investments – thus completing the cycle. Building on an extensive review of the relevant literature, the author explicates the constructs embedded within this conceptual model and positions them within the broader discourse on corporate finance and strategic management. The empirical analysis constitutes the core of the study. Using a combination of primary data from a representative survey of large and medium-sized Slovenian companies and secondary data spanning the period 2000–2017, the author applies rigorous statistical methods to test the proposed hypotheses. The results provide robust empirical support, leading to the full confirmation of all three hypotheses.The article concludes that strategic corporate investment decisions represent fundamental financial choices with enduring consequences. When accompanied by effective risk management, they not only secure sustainable long-term growth but also foster a continuous cycle of reinvestment, particularly in innovation. Within this dynamic, technological and managerial knowledge function as the spiritus agens that propels the perpetuation of the strategic corporate investment cycle.