How to measure capital investment efficiency: a literature synthesis

This article reviews and integrates the empirical literature on the measurement of investment efficiency in the areas of accounting and finance. We identify the theories behind the measures and provide a framework which organises the measures of investment efficiency into three groups: those based on neoclassical theories, agency theory and real options theory. Furthermore, the advantages and disadvantages of each type of measure are discussed, allowing researchers to compare and then ascertain the most appropriate measure for their research purpose and research context.