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The Impact of Market Sentiment on Business Fixed Investment in Malaysia

In: Contemporary Issues in Finance, Investment and Banking in Malaysia

Author

Listed:
  • Zulkefly Abdul Karim

    (Universiti Kebangsaan Malaysia)

  • Ahmad Yusmadi Yusoff

    (Ministry of Finance Malaysia)

  • Bakri Abdul Karim

    (Universiti Malaysia Sarawak)

  • Norlin Khalid

    (Universiti Kebangsaan Malaysia)

Abstract

Understanding how market sentiment reflects the firm investment decision (capital expenditure) is crucial for businesses to make a proper investment strategy. This is because investor sentiment and firms’ investment decision-making lie behind the reasoning that a firm’s investment selection forms the most crucial part of its overall business decisions. Thus, this study examines how market sentiment, measured by Business Condition Index (BCI) and Consumer Sentiment Index (CSI), reflects Malaysian firms’ investment from 2000 to 2018. This study applies a system generalised method of moment (GMM) technique with 673 firms’ unbalanced panel data. Due to global uncertainty and market downturn, an investor’s confidence level can change from optimism to infectious pessimism. When the market is pessimistic, investors’ confidence becomes negative, leading to a decline in capital expenditure (CAPEX). The findings show that both market sentiment indicators significantly influence private firms’ investment. Higher market sentiment indices create optimism for firms and increase business fixed investment.

Suggested Citation

  • Zulkefly Abdul Karim & Ahmad Yusmadi Yusoff & Bakri Abdul Karim & Norlin Khalid, 2024. "The Impact of Market Sentiment on Business Fixed Investment in Malaysia," Springer Books, in: Zulkefly Abdul Karim & Ruzita Abdul Rahim & Wai Yan Wong & Siti Farah Dilla Zakaria (ed.), Contemporary Issues in Finance, Investment and Banking in Malaysia, pages 15-35, Springer.
    • Handle: RePEc:spr:sprchp:978-981-99-5447-6_2
    DOI: 10.1007/978-981-99-5447-6_2
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