Does Management Quality Affect Firms’Investment Efficiency?

• Main Authors: Lin Yu Ting, 林裕庭
• Other Authors: C. L. Liu
• Format: Others
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/70457516200198727349

碩士 === 長庚大學 === 企業管理研究所 === 99 === Firm investment efficiency has been an important issue in recent years. Despite the numerous studies documenting the relationship between financial statements and investment efficiency, a relationship between management quality and investment decision has so far received little attention in the academic literature. This thesis empirically examines the relationship between management quality and investment inefficiency. The data were hand-collected from the public listed companies in Taiwan for the periods from 2003 through 2008. Empirical results find that the size of management team, managers’ pervious working experience and CEO dominance are significantly and negatively related to investment inefficiency. These results imply that the large size of management team consisting of managers from different backgrounds with diverse viewpoints may help the firm to make the optimal investment decisions. Additionally, managers’ previous working experience may help the firms to make the right investment decision under volatile and complex environment. Third, a dominating CEO may improve and enhance the cohesion in the team. As the proportion of CEO’s share ownership increase, the agency cost between managers and shareholders decrease. This prevents managers from empire building or perquisite consumption, which causes overinvestment. Overall, all the above factors of management quality can reduce investment inefficiency.