Investment Efficiency: A Review of Concepts and Models

Conceptually, Capital efficiency is achieved when the company invests in projects with positive net present value. Even though, shareholders expect investment efficient and optimal return by choosing capable executives, but in terms of the Neoclassical economy, despite an agent economic rationale, their decisions are based on Private benefit, moreover they have complete control over information of their activities. On the other hand, access to that information will cost shareholders. consequently, under uncertainty, owners cannot directly view representative efforts. Therefore, their attention is limited to the signals from some performance indicators. Investment efficiency models attempt to identify inefficiencies based on indicators such as sales or cash flows, in this article, we review the theoretical foundations of models in measuring investment efficiency so that researchers will become more familiar with the evolution of these models, taking into account their assumptions. Choose the one appropriate to your research.