The impact of market competitiveness on investment efficiency: the role of ownership and regulatory structures

Abstract

Purpose This study aims to investigate the impact of market competitiveness on investment efficiency, and the moderating role of ownership and regulatory structures. Design/methodology/approach In this study, the Herfindahl–Hirschman Index (HHI), Lerner Index (LI) and industry-adjusted Lerner Index (LIIA) were used to measure market competitiveness. The research population consisted of companies listed on Tehran Stock Exchange (TSE). Using a systematic elimination, 199 companies were selected within eight years during 2014–2021. Findings The results showed that market competitiveness (based on the LI, LIIA and HHI) positively affected investment efficiency. Moreover, institutional ownership and managerial ownership affected the relationship between market competitiveness (based on all proxies of market competitiveness) and investment efficiency. Blockholders’ ownership also moderated the relationship between market competitiveness (based on LIIA and HHI) and investment efficiency. The hypothesis testing had robustness based on additional analyses. Originality/value In recent years, competitive environment and the ownership structure of companies have changed to a certain degree, paving the way for the private sector to enter many areas of activity especially in emerging Asian markets. Moreover, investment drivers and investment efficiency in developed markets may not be generalized to emerging Asian markets. Therefore, the present findings can show the significance of this research to fill the existing gap in the literature and provide insights into ownership and regulatory structures as a governance mechanism in market competitiveness and investment efficiency.