University of Westminster

Literature Review 

 

Expenditure on fixed assets 

Many empirical papers were dedicated to study the determinants of firm`s sales growth. In the study conducted 

by Rosandy and Mita (2018) the relationship between capital expenditure and company profits was analyzed. 

The study included the data for 8 years (2009-2016) and covered 10 regions of Indonesia, which resulted in 80 

observations. The research was conducted among Indonesian telecommunication companies and the panel data 

fixed effect regression model was used to demonstrate that, the capital expenditure has positive impact on 

company profit.  The study also identified the relationship between market share and company profits. 

According to the study conducted by Rosandy and Mita (2018) the capital expenditure variable was proxy for 

entire expenditure incurred in terms of asset acquisition. It was found out that capital expenditure has no 

influence on profit in the initial years of operation t-1, t-2, but in later periods starting from t-3, it had 

significant and positive impact on company profit and sales. (Rosandy and Mita, 2018)  

Nguyen et.al., (2019) analyzed the company expenses on firm’s growth in a sample of 255 Vietnamese 

enterprises, that operate in three different areas over the four-year period (2015-2018). The author used three 

dependent variables, which measures firm`s growths, such as profit growth ratio (PGR), revenue growth ratio 

(RGR), size growth ratio (SGR) and 5 independent variables such as labor expenses, materials and tools 

expenses, depreciation expenses, outsourcing expenses and other expenses. Panel random effect model was 

used for regression analysis. It was found out that materials and tools expenses has no impact on revenue 

growth ratio, but negatively impacts other two: PGR (profit growth ratio) and SGR (size growth ratio). (Nguyen 

et al., 2019). 

Eisner (1964) studied the relationship between capital expenditure and firm`s sales in a sample of 700 firms 

over 5 years (1954-1958). The capital expenditure was the dependent variable and other 5 were explanatory 

variables, such as sales, gross fixed assets, profits, expected percentage sales change. Pooled OLS method of 

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