Firm Level Determinants of Private Investments in Albania

Abstract

Considering the great importance of Private Domestic Investment and the little empirical evidence at firm level data in Albania, there is a need to investigate the main determinants in order to further improve the investment climate and to further extend the actually studies. The aim of this paper is to identify and to analyze the main determinants of private investments in Elbasan region only (including Elbasan city, Librazhd, Gramsh and Peqin). The data used in this study has spanned over the period of 2010 till 2014 for 200 firms of different activities. Our findings indicate that private investments at the firm level are strongly affectet by debt and profits, as well as firm size and firm’s years of operating in the market. There is also evidence of sales and liquidity impact but even of their positive sign, they resulted statistically insignificant. We can conclude that the financial position of firms plays a critical role on the investment decision- making process. Firms are strongly encouraged to be profit maximization oriented and to better evaluate the debt level as it negatively impact their investments. On the other hand, public policies should be oriented to further stimulate the creation of new businesses and the growth of the existing ones.