The Relationship between Some Corporate Governance Mechanisms and Investment Efficiency in Life Cycle Stages

Abstract

Because of rising the information asymmetry and agency problems between managers and investors, the role of corporate governance mechanisms has become increasingly important. Because the increase of information asymmetry and agency problems has consequences such as over-investment and under-investment, and by considering this subject that the level of information asymmetry and agency problems are different in corporate life cycle stages. This study aims to investigate the relationship between corporate governance mechanisms and investment efficiency in the firm's life cycle stages. This study is applied and its research method is correlation and post facto. By deletion sampling method and considering criteria for samples, finally 100 firms were selected as samples of research for the period 2006-2011. We measure corporate governance with mechanisms such as, board independence, institutional shareholders, ownership concentration and managerial ownership. Also, we used Richardson (2006) model for measuring investment efficiency. Firms divided based on park and Chen (2000) model into the growth, maturity and decline stages. The results show that there is a significant positive relationship between the corporate governance mechanisms and investment efficiency in growth, maturity and decline cycle stages. Also, the findings of paternoster statistical tests showed that there is a significant difference between board independence, institutional shareholders and managerial ownership in life cycle stages

Keywords

• corporate governance
• investment efficiency
• growth stage
• maturity stage
• decline stage