The Influence of Corporate Diversification on Investment Efficiency with an Emphasis on Agency Costs

The objective of this research is to investigate the influence of corporate diversification on investment efficiency with an emphasis on agency costs, for the companies that are listed on Tehran Stock Exchange. In this vain, 110 companies were selected for the period between 2014 and 2019. This is applied and after-the-fact research. The mixed data approach and statistical software “Eviews” were used in order to test the research hypotheses. Results showed that there is a significant and negative relationship between corporate diversification and investment efficiency. In other words, an increase in corporate diversification will lead to increased deviation from optimal investment and decreased investment efficiency. Moreover, results showed that agency costs affect the relationship between corporate diversification and investment efficiency. In fact, there is a negative relationship between corporate diversification and investment efficiency in companies with agency costs. Hence, agency costs intensify the negative relationship between corporate diversification and investment efficiency