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How to measure capital investment efficiency: a literature synthesis

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  • Ru Gao
  • Xin Yu

Abstract

This article reviews and integrates the empirical literature on the measurement of investment efficiency in the areas of accounting and finance. We identify the theories behind the measures and provide a framework which organises the measures of investment efficiency into three groups: those based on neoclassical theories, agency theory and real options theory. Furthermore, the advantages and disadvantages of each type of measure are discussed, allowing researchers to compare and then ascertain the most appropriate measure for their research purpose and research context.

Suggested Citation

  • Ru Gao & Xin Yu, 2020. "How to measure capital investment efficiency: a literature synthesis," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(1), pages 299-334, March.
    • Handle: RePEc:bla:acctfi:v:60:y:2020:i:1:p:299-334
    DOI: 10.1111/acfi.12343
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    Cited by:

    1. Philip Sinnadurai & Ravichandran Subramaniam & Susela Devi, 2021. "The Influence of Government Shareholding on Dividend Policy in Malaysia," IJFS, MDPI, vol. 9(3), pages 1-29, September.
    2. Braun, Matías & Marcet, Francisco & Raddatz, Claudio, 2024. "The good, the bad, and the not-so-ugly of credit booms?: capital allocation and financial constraints," Journal of Banking & Finance, Elsevier, vol. 161(C).
    3. Yu, Chang, 2023. "Board gender diversity and investment inefficiency," Journal of Economics and Business, Elsevier, vol. 124(C).
    4. Mary S. Hill & Gary K. Taylor, 2023. "Default risk and earnings expectations: The role of contract maturity in the credit default swap market," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(4), pages 4275-4298, December.
    5. Zhao, Qian & Qin, Chuan & Ding, Longfei & Cheng, Ying-Yue & Vătavu, Sorana, 2023. "Can green bond improve the investment efficiency of renewable energy?," Energy Economics, Elsevier, vol. 127(PB).
    6. D’Angelo, Valentino & Amore, Mario Daniele & Minichilli, Alessandro & Chen, Kelly Xing & Solarino, Angelo Maria, 2023. "Family agents," Journal of Family Business Strategy, Elsevier, vol. 14(2).
    7. Noha Elberry & Khaled Hussainey, 2021. "Governance Vis-à-Vis Investment Efficiency: Substitutes or Complementary in Their Effects on Disclosure Practice," JRFM, MDPI, vol. 14(1), pages 1-16, January.

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