The main goal of this study was to examine the effects of capital investments on firm performance, using panel-data analysis. For this purpose, financial data were gathered for 60 manufacturing firms based in Serbia, in the period from 2004 to 2016. The main research hypotheses were developed in accordance with the definition, nature, and time aspect of capital investments. Therefore, empirical expectation of this study was that the relationship between capital investments and firm performance should be positive—they probably bring losses to the firm in the short term, but they should increase firm performance in the long term. Finally, the results have indeed shown that capital investments have statistically significant negative effect on the short-term performance, but positive effect on the long-term performance of the analyzed firms, while controlling for time-fixed effects and certain internal factors.

Evaluation of investment projects is a crucial part of the investment decision-making process. Although dynamic evaluation techniques are precise and theoretically correct, they can still lead to the wrong investment decision. The main goal of this study was to identify the key drivers of investment projects’ profitability from the point of view of the company, municipality and society. Data on 26 investment projects were gathered and analyzed. The results of the principal component analysis (PCA) showed that the net present value, when compared to the internal rate of return and discounted payback period, represents the key indicator of the profitability of investment projects. Also, PCA showed that the total sales and total costs, when compared to the initial investment and discount rate, represent the key factors that affect the profitability of investment projects. Regression analysis (OLS) confirmed these results since the total sales and total costs have the highest and statistically significant effect on the net present value of investment projects.