Impact of Managerial Discretion “Stranglehold” on Enterprises Investment Efficiency: Based on Heterogeneous Stochastic Frontier Model

ABSTRACT

This study examined how managerial discretion “stranglehold” influences enterprise investment efficiency (IE) using a heterogeneous stochastic frontier model of 2010–2019 data of listed companies in the Shanghai and Shenzhen A-share markets. CEO’s salary and stockholding can improve IE, but cannot reduce investment risk (IR). CEO duality and redundant resources neither improve IE nor reduce IR. Organizational inertia can reduce IR but not IE. Capital intensity increases IR whereas environmental richness reduces it; both cannot improve IE. Constrained managerial discretion brings investment expenditures to 15–25% below optimal. Relatively, large, non-state-owned, and manufacturing enterprises have higher IE and lower IR.

KEYWORDS:

• Investment efficiency
• managerial discretion
• stochastic frontier model

JEL:

• C93

Acknowledgments

We would like to thank editors and reviewers for their comments and suggestions that greatly improved our studying.

Disclosure Statement

No potential conflict of interest was reported by the author(s).