Testing the Effect of ICFS and Financial Constraints on Investment using Control Variables in Manufacturing Companies

Abstract

This study examines how Internal Capital Financial Structure (ICFS) and financial constraints affect investment decisions in manufacturing companies listed on the Indonesia Stock Exchange between 2019 and 2024. Using a panel data methodology with a fixed effects model, the research applies cross-sectional weights, standard errors, and covariances to ensure robust results. The research findings show that the greater the sensitivity of cash flow to investment, the greater the decline in investment levels. This research contributes original value by including variables such as cash flow, long-term debt, working capital investment, leverage, and asset turnover, all of which are analyzed for their impact on investment decisions. The managerial implications derived from the results of this study are useful for company managers, potential investors, and other stakeholders in understanding how internal financial factors affect investment behavior.