Investment Committee Characteristics and Investment Efficiency

Posted: 17 Feb 2018

See all articles by Ahmed Al-Hadi

Ahmed Al-Hadi

Curtin University - School of Accounting; CBFS

Baban Eulaiwi

Curtin University - School of Accounting

Grantley Taylor

Curtin University - School of Accounting

Khamis Al-Yahyaee

Sultan Qaboos University; Economic Research Forum

Date Written: Nov 10, 2017

Abstract

This study investigates the association between existence of a board investment committee and that committee’s characteristics and corporate investment efficiency. Using a sample of industrial firms from six Gulf Cooperation Council (GCC) countries over the 2005–2013 period, we find that the existence of an investment committee reduces both under- and over-investment by these firms. We also find that financial expertise of committee members positively affects firms’ investment efficiency. These findings are consistent with the assertion that a board investment committee assists with the monitoring and control of firms’ investments. We also find that the existence of an investment committee is likely to reduce over- and under-investment in firms with high levels of foreign ownership concentration. The tenets of agency theory suggest that the existence of an investment committee aligns a firm’s investment activities with the objective of shareholder wealth maximization. These results are robust to a battery of additional tests that use alternative measures of investment efficiency and tests relating to self-selection bias and endogeneity.

Keywords: Investment Committee, Investment Efficiency, Experience, Foreign Investors, GCC

Suggested Citation

Al-Hadi, Ahmed and Eulaiwi, Baban and Taylor, Grantley and Al-Yahyaee, Khamis, Investment Committee Characteristics and Investment Efficiency (Nov 10, 2017). Available at SSRN: https://ssrn.com/abstract=3125265

Ahmed Al-Hadi (Contact Author)

Curtin University - School of Accounting ( email )

Australia

CBFS ( email )

Ruwi, 112
Oman
98999651 (Phone)

Baban Eulaiwi

Curtin University - School of Accounting ( email )

Australia

Grantley Taylor

Curtin University - School of Accounting ( email )

Australia

Khamis Al-Yahyaee

Sultan Qaboos University ( email )

P.O.Box 20
Al Khoudh, Muscat, 123
Oman
+(968)24141833 (Phone)
+(968)24414043 (Fax)

Economic Research Forum ( email )

21 Al-Sad Al-Aaly St.
(P.O. Box: 12311)
Dokki, Cairo
Egypt
+202 333 18 600 (Phone)

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