Investment Committee Characteristics and Investment Efficiency
Eulaiwi, B., Al-Hadi, A., Al-Yahyaee, K. H., & Taylor, G. (2021). Investment Board Committee and Investment Efficiency in a Unique Environment. Emerging Markets Finance and Trade, 57(15), 4408-4423.
Eulaiwi, B., Al-Hadi, A., Al-Yahyaee, K. H., & Taylor, G. (2021). Investment Board Committee and Investment Efficiency in a Unique Environment. Emerging Markets Finance and Trade, 57(15), 4408-4423.
Eulaiwi, B., Al-Hadi, A., Al-Yahyaee, K. H., & Taylor, G. (2021). Investment Board Committee and Investment Efficiency in a Unique Environment. Emerging Markets Finance and Trade, 57(15), 4408-4423.
Posted: 17 Feb 2018 Last revised: 5 Oct 2022
Date Written: November 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
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