Investigating the Performance Effects of Financial and Investment Policies: Empirical Analyses of the Pharmaceutical Software and Automotive Industries

Paulina Aleksandra Paczkowska

Student thesis: Master thesis


The thesis investigates the industries' specificity impact on corporate strategy and their implications for firm performance, with distinction to three different manufacturing groups of companies chosen by the level of technological and demand uncertainty. The strategy is understood here as various combinations of investment and financial policies, which include research and development and capital expenditures as well as debt ratio and cash holdings, of which two latter ones constitute financial slack measures. The investigated industries are pharmaceuticals, software and automotive, commonly perceived as more innovative than others, and which also deal with certain environmental dynamism. Building on these two characteristics, the relevant hypotheses are generated and then tested using panels of U.S. firms drawn from the COMPUSTAT balance sheet database. The hypotheses focus on relationship between Tobin's Q and four different strategies, each combining one investment and one financial policy. The results of the empirical analyses show that interactions between chosen variables and both their strength and relevance differ among three selected industries quite significantly. Among others, the study demonstrates the relevance of agency theory for software and pharmaceutical companies in terms of maintained cash holdings as well as points out the differences between all industries with regard to the strategic role of the financial leverage moderated by the investments.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2017
Number of pages96
SupervisorsTorben Juul Andersen