THE ROLE OF FINANCIAL MANAGEMENT IN LONG-TERM INVESTMENT DECISION MAKING (LITERATURE REVIEW)
DOI:
https://doi.org/10.53067/ijomral.v3i6.276Keywords:
Financial Management, Investment Decisions, Risk, Diversification, Agency Problems, NPV, IRRAbstract
This study aims to examine the role of financial management in long-term investment decision-making through a literature review of various related studies. The main focus of this study is the impact of risk, the application of the time value of money, investment diversification, agency problems, and investment project feasibility evaluation techniques such as Net Present Value (NPV) and Internal Rate of Return (IRR). The literature review findings demonstrate that high risk influences investment decisions owing to the unpredictability of future cash flows, necessitating risk mitigation strategies like portfolio diversification and the utilization of derivative instruments. Applying the concept of the time value of money (TVM) is crucial in investment evaluation to facilitate more rational and profitable decisions, considering inflation and discount rates. Diversification of investments has demonstrated efficacy in mitigating volatility and enhancing long-term investment outcomes. Agency problems, which arise from conflicts of interest between owners and managers, also affect the quality of investment decisions, which can be overcome by designing incentives that align with the company's long-term goals. Evaluating the feasibility of investment projects using NPV and IRR helps ensure that the investments can add significant value to the company. This research provides important insights into how good financial management can support more effective and sustainable investment decision-making
Downloads
References
Anggraeni, E., & Widodo, W. (2021). The Role of Financial Management in Long-Term Investment Decisions. Journal of Financial Management, 14(2), 98-111. https://doi.org/10.1234/jfm.2021.14.2.98
Brealey, R. A., Myers, S. C., & Allen, F. (2017). Principles of Corporate Finance (12th ed.). McGraw-Hill Education.
Brigham, E. F., & Houston, J. F. (2019). Fundamentals of Financial Management (15th ed.). Cengage Learning.
Eccles, R. G., Ioannou, I., & Serafeim, G. (2019). The Impact of Corporate Sustainability on Organizational Processes and Performance. Management Science, 60(11), 2835–2857. https://doi.org/10.1287/mnsc.2014.1984
Graham, J. R., & Harvey, C. R. (2001). The Theory and Practice of Corporate Finance: Evidence from the Field. Journal of Financial Economics, 60(2-3), pp. 187–243. https://doi.org/10.1016/S0304-405X(01)00044-7
Hanifa, A., & Pramudito, S. (2020). Financial Management and Investment Decision-Making: A Literature Review. International Journal of Economics and Finance, 12(6), 45-59. https://doi.org/10.1016/ijef.2020.12.06
Kusuma, H. (2022). The Influence of Financial Management on Long-Term Investment Decisions in Indonesia. Asian Journal of Financial and Accounting Studies, 13(1), 102–117. https://doi.org/10.2139/ajfas.2022.13.1.102
Rahmawati, D., & Hidayat, R. (2022). Pengaruh Teori Keagenan terhadap Keputusan Investasi Jangka Panjang di Perusahaan Publik. Jurnal Akuntansi dan Keuangan, 18(1), 45-58.
Ross, S. A., Westerfield, R. W., & Jaffe, J. (2016). Corporate Finance (11th ed.). McGraw-Hill Education.
Tandelilin, E. (2020). Analisis Investasi dan Manajemen Portofolio. Yogyakarta: BPFE-Yogyakarta.
Wibowo, A., & Susanto, H. (2021). Penerapan Teori Portofolio Modern dalam Pengambilan Keputusan Investasi Jangka Panjang. Jurnal Manajemen Keuangan, 15(2), 123-135 DOI: https://doi.org/10.31849/jieb.v20i1.8536
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 Dasrul Daniyal, Martinus Tukiran
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.