The Effect Of Investment Irreversibility On Investment Value

Investment irreversibility refers to the characteristics of someinvestment which can’t be recovered by reselling or changing the usage ofcertain equipment. Traditional investment theory tended to ignore theimpact of investment irreversibility on investment decisions. Later, insome studies, many scholars began to study the impact of investmentirreversibility on internal managers’ investment decisions. In this paper, Iinspect the impact of investment irreversibility on the investment value oflisted companies from the point of view of the outside investors.Investment irreversibility is divided into two categories according to theirsources, and corresponding metrics are established based on publicfinancial information. Then, these metrics are verified through regressionbased on actual data. Use the appreciate metrics as well as some traditionalexplanatory variables to do regression, to exam impact of the investmentirreversibility on companies’ investment value in four specific industries.Finally, focusing on the irreversibility caused by the proprietary of assets,research the impact of investment irreversibility on company’s investmentvalue in some certain industries which share some common characters.And research the impact of a high irreversibility on company performancein the steel industry.