Investment efficiency: A conceptual review of measurement models
DOI:
https://doi.org/10.33003/jocaf-2026.v1i1.2.1-14Keywords:
Investment efficiency, Underinvestment, Overinvestment, Agency problem, Cost of capitalAbstract
The purpose of this paper is to review the measurement models of investment efficiency that have been employed in previous relevant empirical research works. Also, it aimed to review the benefits, limitations, and suitability of the models, including the relevant theories that explain corporate investment efficiency in an imperfect setting. The paper adopted a conceptual review approach and used relevant empirical research articles published in various Accounting and Finance journals from 2006 to 2025 as the main data for the study. There is no generally accepted measurement model of investment efficiency, and the majority of the measurement models used in previous relevant studies are suitable for listed firms; their applicability to non-listed firms depends on data availability. Also, the models offer different specific benefits, and none of them is without shortcomings. Practically, the findings imply that the choice and application of measurement models by corporate managers, investors, financial analysts and researchers will be highly influenced by the nature of firms and data availability.
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