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Managerial ability, internal control and investment efficiency

Authors :
Chen, Suyun
Li, Zongze
Han, Binbin
Ma, Hengyun
Source :
Journal of Behavioral and Experimental Finance; September 2021, Vol. 31 Issue: 1
Publication Year :
2021

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.

Details

Language :
English
ISSN :
22146350
Volume :
31
Issue :
1
Database :
Supplemental Index
Journal :
Journal of Behavioral and Experimental Finance
Publication Type :
Periodical
Accession number :
ejs56613977
Full Text :
https://doi.org/10.1016/j.jbef.2021.100523