Managerial Ability,Marketization Process And Investment Efficiency

In the context of the implement of manufacturing power and supply-side structural reform,how to enhance the firm investment efficiency has become a hot topic.As managers are often regarded as the makers and implementers of investment decisions,managerial ability will undoubtedly have a significant impact on investment efficiency.In addition,in the context of China's vigorous promotion of marketization,with the development of marketization,the external governance supervision mechanism has become more and more perfect,which will undoubtedly have an impact on managerial ability and firm investment efficiency.Based on this,this paper examines the relation between managerial ability and firm investment efficiency,using a sample of Chinese A-share listed firms from 2008-2017.More specifically,residual efficiency capturing managerial ability is based on the measure presented by Demerjian et al.(2012),and residual presented by Richardson's(2006)is used as proxy for investment efficiency,and the whole sample is divided into overinvestment subsample and underinvestment subsample according to the sign of residual.This paper investigates whether managerial ability has significant and distinctive impacts on firm investment efficiency under different degrees of marketization process.In addition,this paper further investigates the impacts of information transparency,external governance,and internal control on the relation between managerial ability and investment efficiency,respectively.The findings are as follows:(1)Whether in the whole sample,overinvestment subsample or underinvestment subsample,managerial ability is significantly and positively related with firm investment efficiency.That is,with the improvement of managerial ability,the firms' inefficient investment is suppressed,thus investment efficiency is enhanced.Then this paper reruns the analysis after remeasuring managerial ability or investment efficiency,the findings remain robust.(2)The positive relation between managerial ability and investment efficiency is more significant in higher marketization process district,which means the higher marketization process plays an enhanced role.In addition,this paper reruns the analysis after adopting three different measures of marketization process,and the findings remain qualitatively similar.(3)The results demonstrate that the positive relation between managerial ability and investment efficiency is more significant in better external governance district or firms with higher information transparency or firms with better internal control.The research findings of this paper not only provide new empirical evidence for the relevant research on the economic consequences of managerial ability,but also complement the existing literature on the factors affecting the investment efficiency.In addition,this research also has certain practical significance,providing suggestions for firms to enhance investment efficiency,and also providing decision support for the Chinese government to further promote the marketization process.