Ownership-Control Disparity and Investment Efficiency

While much research has continued to concentrate on finding the determinants of investment efficiency, it has been neglected that investment efficiency may depend on agency problems between controlling shareholders and external stakeholders caused by ownership-control disparity. The purpose of this study is to provide stakeholders with evidence that information asymmetries caused by ownership-control disparity can depreciate investment efficiency by analyzing the relationship between ownership-control disparity and investment efficiency. From analyses, there is a significant negative relationship between ownership-control disparity and investment efficiency, with this relationship remained unchanged after controlling endogeneity between them. These results show that as ownership-control disparity increases, agency costs produced by deepened information asymmetries lower investment efficiency. Moreover, as ownership-control disparity increases, over investment is not asymmetry to under investment and that is more dominant than under investment. On the other hand, at the low and high levels of ownership-control disparity, although the relationship between ownership-control disparity and investment efficiency are insignificant statistically, this relationship is negative. At the middle level of ownership-control disparity, it appears a significant positive relationship between them, suggesting that there is potential non-linear relationship between them.