Abstract

Based on the model of performance-aspiration, this study examines the effect of positive and negative performance feedback on the investment decision. Using 1601 public offering firms as data set from Taiwanese electronics manufacturing industry in 1998, 2002 and 2006, we test the impact of both performances relative to social-aspiration and historicalaspiration level on increasing growth rates of assets. Empirical analysis results show manager taking less risk on investment decision when performance exceeds their goals, which indicating the negative relationship between the performance above the aspiration level and increasing growth rates of assets. In contrast, there is a positive relationship between the performance below the aspiration level and increasing growth rates of assets. Furthermore, it also shows there is probability that manager can take advantage of slack resource to investment activities when the performance below the aspiration level.