Do investment opportunities influence private firms’ performance? International evidence from developing countries

Purpose This study examines the association between investment opportunities and private firms’ performance. While the existing literature predominantly focuses on public firms, mainly from advanced economies, our study delves into private firms in developing countries worldwide. Furthermore, we explore the moderating effects of both female ownership and concentrated ownership, aiming to uncover the role of investment opportunities on firm performance in the relatively understudied context of developing countries and private firms. Design/methodology/approach We use 36,185 observations from firms in 114 countries across the world, sourced from the World Bank Enterprise Surveys (WBES) from 2006 to 2018. We estimate the regression models using ordinary least squares (OLS) regression method. We also employ an advanced supervised machine learning approach to provide additional insights into the role of investment opportunities in predicting private firms’ performance. Findings We find a positive association between private firms’ investment opportunities and their performance. Furthermore, our study demonstrates that female ownership positively, while concentrated ownership negatively, moderates this association. Originality/value Our study’s findings provide critical insights for the literature investigating the dynamics of the relationship with, and the impact of, investment opportunities on private firms’ performance. The roles of female ownership and concentrated ownership in moderating this relationship have important policy implications for enhancing private firms’ performance.