Xuan Quynh Pham

Type of the article: Research Article

Abstract
This study investigates how investment influences firm performance, taking into account the moderating role of agency costs in an emerging market context. Using a balanced panel of 269 non-financial firms listed on the Ho Chi Minh City Stock Exchange from 2013 to 2022, the study applies the System Generalized Method of Moments (SGMM) to address potential endogeneity. The results reveal a nonlinear, inverted U-shaped relationship between investment and operational efficiency, indicating the existence of an optimal investment threshold. Beyond this level, further investment reduces performance due to overinvestment behavior. Moreover, agency costs are found to negatively affect both performance and the efficiency of investment decisions. Firms facing higher agency problems experience weaker performance improvements from increased investment, confirming the moderating effect of agency costs. The findings provide new evidence from a transitional market characterized by information asymmetry and weak governance structures, contributing to the literature on investment efficiency and agency theory. Policy implications highlight the need for governance transparency and effective monitoring mechanisms to mitigate agency-induced overinvestment.