Managerial Ability and Investment Inefficiency in Tehran Stock Exchange Listed Companies

In the present paper the relationship between managerial ability and investment inefficiency has been investigated using financial information of 76 Tehran stock exchange listed companies for a six year from the beginning of 1387 to the end of 1392. Managerial ability is defined as talent of individual or individuals who have undertaken the management of a certain organization, and investment inefficiency as renouncing investment on positive net present value projects or choosing negative net present value ones. In order to measure the managerial ability the model developed by Demirjian et al.(2012) and to measure investment inefficiency the Chen et al.’s expanded version (2011) of the model developed by Biddle et al. (2009) was used. The results of this investigation shows that, according to the review of literature, there is an inverse relationship between managerial ability and investment inefficiency; however, this relationship is not statistically significant