Presentation of Firm's Investment Efficiency Measurement Model inTehran Stock Exchange

Document Type : Research Paper

Authors

1 PhD., Department of Accounting, Tabriz Branch, Islamic Azad University, Tabriz, Ira

2 Associate Prof., Department of Accounting,Tabriz Branch, Islamic Azad University, Tabriz, Iran.

3 Assistant Prof., Department of Accounting, Tabriz Branch, Islamic Azad University, Tabriz, Iran

4 Prof., Department of Management, Tabriz Branch, Islamic Azad University, Tabriz, Iran

Abstract

Objective: Efficient investment is one of the company's most important responsibilities, consequently making investment decisions is an incentive for future cash flows and the ultimate evaluation of the company. Thus, if a firm’s investment is inefficient, it will result in the lack of optimal allocation of the company’s resources and will have adverse effects on the shareholders' interests. Therefore, this research aims at studying the various aspects of the economic consequences of inefficient investment decisions and provides a model for measuring the investment efficiency in Iranian firms. Methods: In this research, the factors affecting investment are extracted based on previous theories and researches. Each of these factors, which are closely related to investment, is investigated to measure investment efficiency. The output of the primary models is firstly tested in terms of accurate detection of under and over-investment in firms. Secondly, the model is validated through the sources and compared to the consequences of inefficiency and investment efficiency based on previous theories and research. This process continues until an optimal model for investment efficiency is acquired .
 Results: The results showed that among the 18 variables studied, only sales growth, growth opportunities, annual returns, dividends, and investments in the past year were able to express the current year's investment changes and were used for measuring investment efficiency. The native model of investment efficiency has a power of 88.14% and 92.89%, respectively, for an accurate detection of prone companies of over and underinvestment. Also, based on the findings, agency costs lead to an increase in over-investment and on the other hand financial constraints lead to increase under-investment, as well as the investment efficiency which has a positive impact on economic value-added and firm value .  Conclusion: According to the results, investments in Iran, in addition to common factors with foreign economic environments, are influenced by multiple factors that can be useful in explaining investment efficiency. 
 

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References

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Financial Research Journal
Volume 21, Issue 2
2019
Pages 237-264

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