Strive towards investment efficiency among Egyptian companies: Do board characteristics and information asymmetry matter?

2021 ◽  
Author(s):  
Ibrahim M. Menshawy ◽  
Rohaida Basiruddin ◽  
Nor‐Aiza Mohd‐Zamil ◽  
Khaled Hussainey
Keyword(s):  
Information Asymmetry ◽  
Investment Efficiency ◽  
Board Characteristics

The impact of board characteristics on corporate investment decisions: an empirical study

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ben Kwame Agyei-Mensah
Keyword(s):  
Regression Analysis ◽  
Board Of Directors ◽  
Investment Decisions ◽  
Corporate Investment ◽  
Independent Directors ◽  
Investment Efficiency ◽  
Content Type ◽  
Board Characteristics ◽  
The Board Of Directors ◽  
The Impact

Purpose The purpose of this study is to investigate the influence of board characteristics on firms’ investment decisions. Design Methodology Approach The study used data sourced from annual reports of firms listed on the Ghana Stock Exchange from 2014 to 2018. Descriptive analysis was performed to provide the background statistics of the variables examined. This was followed by a regression analysis which forms the main data analysis. Findings The multiple regression analysis results indicated that the proportion of independent directors and financial experts on the board are negatively related to firm investment. These findings imply that independent directors and financial experts on the board can help firms reduce overinvestment and improve investment efficiency. Originality Value The extant literature shows that the board of directors are an effective mechanism to reduce agency problems in firm decisions and operating performance. However, there has been little research on the role of the board of directors in corporate investment policy.

scholarly journals The Investment Efficiency Of Private And Public Firms: Evidence From Korea

2015 ◽  
Vol 31 (4) ◽  
pp. 1387 ◽  
Author(s):  
Keehwan Kim ◽  
Ohjin Kwon
Keyword(s):  
Information Asymmetry ◽  
Financial Reporting ◽  
Agency Problem ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Private Firms ◽  
Investment Efficiency ◽  
Public Firms ◽  
Private And Public ◽  
The Difference

<p class="s0">This study examines the investment efficiency of private and public firms in Korea. Prior studies suggest that the investment efficiency of firms can change according to the companies' agency problem caused by the existence of information asymmetry. Moreover, they argue that there is less information asymmetry in private firms than in public firms, because the major investors of private firms have access to the internal information of the companies. We extend these studies by comparing the investment efficiency of private and public firms using an extended audited financial dataset of Korean firms. Our results show that the investment efficiency of private firms is higher than that of public firms, because the agency problem of the former is lower than that of the latter. Additionally, private firms invest more efficiently in R&amp;D and capital expenditures than public firms. Further, when we use alternative exogenous firm-specific proxies to measure the likelihood of over or under-investment, the results are substantially consistent with the main results. Finally, we re-test our hypotheses by including financial reporting quality proxies as control variables in the main regression model. These investigations further support our main results. Our study contributes to emerging literature on the difference between private and public firms by showing that the investment efficiency of the former is different from that of the latter. In addition, this study provides additional evidence on the agency problem that affects firms' investment decisions.</p>

The impact of corporate governance performance on the association between information asymmetry and opportunities' optimal levels: evidence from developed markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ehsan Poursoleyman ◽  
Samira Joudi ◽  
Gholamreza Mansourfar ◽  
Saeid Homayoun
Keyword(s):  
Corporate Governance ◽  
Information Asymmetry ◽  
Developed Countries ◽  
Ordinary Least Squares ◽  
Investment Efficiency ◽  
Method Of Moment ◽  
Content Type ◽  
Bid Ask Spread ◽  
The Impact

PurposePrevious literature posits that corporate governance and information asymmetry are the main factors in making efficient investments. Meanwhile, a growing body of studies is of the opinion that corporate governance can also mitigate the problem of information asymmetry and consequently exerts significant impacts on the association between information asymmetry and investment efficiency. This study aims to analyze the impact of corporate governance and information asymmetry on investment efficiency. It also tests the moderating role of corporate governance in the relationship between information asymmetry and investment efficiency.Design/methodology/approachThe sample consists of 4,082 firms domiciled in 20 developed countries over the years from 2003 to 2019, including 33,812 firm-year observations. The bid–ask spread is used as a proxy for information asymmetry. To measure corporate governance performance, a proxy provided by ASSET4 is employed, and to determine the optimal levels of investments, we relied on the growth opportunity. To estimate the models, ordinary least squares and generalized method of moment are used.FindingsThe results reveal that information asymmetry is inversely related to investment efficiency, and, corporate governance mitigates this negative association.Originality/valueThis paper sheds light on the role of corporate governance in firms as a lever for mitigating information asymmetry and tries out information asymmetry and agency theories in relation to the impact of information asymmetry on investment efficiency. It also confirms the theory stating that corporate governance can be considered as a determinant of investment efficiency.

scholarly journals Accounting Quality and Firm-Level Capital Investment

2006 ◽  
Vol 81 (5) ◽  
pp. 963-982 ◽  
Author(s):  
Gary C. Biddle ◽  
Gilles Hilary
Keyword(s):  
Information Asymmetry ◽  
Cash Flow ◽  
Capital Investment ◽  
Investment Efficiency ◽  
Accounting Quality ◽  
Control Variables ◽  
Firm Level ◽  
Flow Sensitivity ◽  
Cash Flow Sensitivity

This study examines how accounting quality relates to firm-level capital investment efficiency. Our first hypothesis is that higher quality accounting enhances investment efficiency by reducing information asymmetry between managers and outside suppliers of capital. Our second hypothesis is that this effect should be stronger in economies where financing is largely provided through arm's-length transactions compared with countries where creditors supply more capital. Our results are consistent with these hypotheses both across and within countries. They are robust to alternative econometric specifications, different measures of accounting quality and investment-cash flow sensitivity, and numerous control variables.

scholarly journals Does Zero-leverage Policy Increase Inefficient Investment? - From The Perspective Of Lack Of Bank Creditors

2015 ◽  
Vol 31 (6) ◽  
pp. 2237 ◽  
Author(s):  
Zhen Huang ◽  
Wanli Li ◽  
Weiwei Gao
Keyword(s):  
Information Asymmetry ◽  
Agency Problems ◽  
Investment Efficiency ◽  
Empirical Results ◽  
External Monitoring

Using a sample of up to 12023 firm-year observations across 2358 individual firms from 2007 to 2013, this paper examines whether zero-leverage policy increases firms’ inefficient investment from the perspective of lack of bank creditors. Due to the lack of bank creditor monitoring, zero-leverage policy leads to more serious information asymmetry and agency problems, which are the two types of frictions that affect investment efficiency. The empirical results show that zero-leverage policy indeed increases inefficient investment. Furthermore, we test whether external monitoring helps to mitigate the effects of zero-leverage policy on inefficient investment. Our findings suggest that the sensitivity between zero-leverage policy and inefficient investment will be lower in firms with strong external monitoring. Overall, the zero-leverage policy seems to be a key determinant of inefficient investment.

Do corporate social responsibility disclosures influence investment efficiency in the emerging markets of Asia?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Farah Zamir ◽  
Greg Shailer ◽  
Abubakr Saeed
Keyword(s):  
Economic Development ◽  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Emerging Markets ◽  
Information Asymmetry ◽  
Investment Efficiency ◽  
Content Type ◽  
External Finance ◽  
Asian Emerging Markets ◽  
Corporate Social

PurposeCorporate investment efficiency ultimately influences economic development but is largely at the discretion of managers. Information asymmetries are problematic in emerging markets, but it is widely believed that corporate social responsibility (CSR) disclosures can reduce information asymmetries. This paper examines whether CSR disclosures influence corporate capital investment efficiency in emerging Asian markets.Design/methodology/approachInvestment inefficiency is measured as the residuals from an investment model that is constructed by combining variables from prior studies to obtain a more detailed specification. A CSR disclosure index (CSRDI) is constructed from manually collected CSR disclosures for the largest corporations in each of the nine Asian emerging markets, as categorised by the MSCI Emerging Market Index, during 2015–2017. Underinvestments and overinvestments are regressed against the CSRDI, using a two-stage model to address the potential self-selection of CSR report issuers.FindingsThe results indicate that CSR disclosures reduce underinvestment for large firms but do not constrain overinvestment. These results are consistent with the propositions that, by increasing transparency or reducing information asymmetry, CSR disclosures can improve firm access to external finance needed to invest in profitable projects but cannot constrain entrenched managers who are not reliant on external finance.Originality/valueThis study extends the literature by analysing the impact of CSR disclosures on both underinvestments and overinvestments and by examining the CSR-investment efficiency across the nine emerging Asian markets. This enhances generalisability compared to single market studies. More generally, this study enhances the understanding of the role of non-financial disclosures in the Asian emerging markets, where corporate investment efficiency is important for economic development but where severe information asymmetry and agency conflicts between insiders and external investors are prevalent. Both the investment community and policymakers should benefit from enhanced understanding of factors that influence investment efficiency in those markets.

scholarly journals The Impact of Political Connection and Information Asymmetry on Investment Efficiency: Evidence from China

2020 ◽  
Vol 12 (14) ◽  
pp. 5607
Author(s):  
Hui-Fun Yu ◽  
Tsui-Jung Lin ◽  
Hai-Yen Chang ◽  
Yu-Huai Wang
Keyword(s):  
Regression Analysis ◽  
Information Asymmetry ◽  
Interactive Effect ◽  
Investment Decisions ◽  
Optimal Investment ◽  
Investment Efficiency ◽  
Political Connection ◽  
Panel Data Regression ◽  
Data Regression ◽  
The Impact

This study investigates the impact of political connection and information asymmetry on the investment efficiency of firms in China. This paper employs a panel data regression analysis on a dataset comprising 4307 observations for listed companies from 2008 to 2015. The results indicate that if taken alone, neither political connection nor information asymmetry affects firms’ investment efficiency. However, the interactive effect of both political connection and information asymmetry significantly reduces firms’ investment efficiency. The results of this study help investors understand the forces that lead the Chinese firms to deviate from optimal investment decisions.

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