To invest or not to invest? the factors that solve the question - across All Sectors And Agriculture Sector

Abstract

We examine macroeconomic and microeconomic factors that influence investment decisions taken by Portuguese SMEs. We find from a macroeconomic perspective, the EPU index, interest rate and inflation to be statistically significant and to drive down the investment rate, whereas the GDP growth rate has a positive impact. From a microeconomic perspective, we find lagged investment, EBITDA margin, lagged retention ratio, long-term debt, tangible collateralizable assets and firm size to be statistically significant factors positively influencing investment, whereas lagged effective tax rate and financing costs have a negative effect. In addition, motivated by the statistical relevance of collateralizable assets in explaining investments, we explore how bank financing can evolve within the context of a digital economy. Finally, a sectorial analysis on the agriculture sector s performed. We find that different factors affect investment in this sectors.