The relation of investment with profitability and tangibility an empirical analysis

This paper is about finding out the trend of relationship of investment-profitability and investment tangibility in market of Pakistan. Purpose of this study is to determine the three variables of companies which are listed in Karachi stock exchange that variables are investment, profitability, and tangibility and most importantly finding the relationship plus dependability among these three variables. The hypothesis of research is that there is a positive significant relationship between investment and profitability or in other words investment is associated positively with profitability. Second hypothesis is investment is positively correlated with tangibility; there is direct positive connection between these two variables. In Pakistan not any research been published considering these two hypothesis so far. This research will provide the investors and managers an analytical view of investments which will eventually guide their decisions. For evaluating these variables and their relation data is collected from BSA (balance sheet analysis) then relevant proxies are applied. The data is representing the companies from every industry of Pakistan and is for three years. In this research panel data set testing is used. Investment is independent variable; profitability and tangibility are depending upon it. For deep analysis in this paper random and fixed effect is incorporated. The results suggested that there is a significant positive relation between investment and profitability so that we can infer that as investment increases profitability also increases. As far as second hypothesis is concerned results of tests concluded that it is also accepted. Thus we can say that as investment increases as a result tangibility also increases because whenever a company is investing a major portion of its fixed assets is also increased.