Managerial ability, internal control and investment efficiency

Suyun Chen, Zongze Li, Binbin Han and Hengyun Ma

Journal of Behavioral and Experimental Finance, 2021, vol. 31, issue C

Abstract: This paper discusses the relationship between managerial ability]and inefficient investment, as well as the impacts of internal control on them by using information asymmetry and agency theory based on data of Shanghai and Shenzhen A-share listed companies over 2012–2016. (i) Managerial ability alleviates the under-investment caused by information asymmetry but aggravates the over-investment caused by agency problem; (ii) Internal control restrains the relationship between managerial ability and over-investment but promotes the relationship between managerial ability and under-investment. (iii) There is a significant positive correlation between managerial ability and over-investment and internal control has a significant suppressed effect for state-owned firms. (iv) There is a significant negative correlation between managerial ability and under-investment and internal control has a significant promote effect for private-owned firms. (v) Where the firm’s chairman and the general manager are the same person, internal control has little effect on the relationship of managerial ability and over-investment. This study contributes to establish comprehensive analysis framework of inefficient investment and has some implications for corporate investment decision-making behavior.

Keywords: Managerial ability; Information asymmetry; Agency theory; Internal control; Inefficient investment (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:31:y:2021:i:c:s2214635021000678

DOI: 10.1016/j.jbef.2021.100523

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