The aim of this study was to investigate the effect of irrational investment on the performance of
non-financial firms in Vietnam. A panel data of 184 non-financial companies listed on Ho Chi
Minh Stock Exchange was collected over the period from the year 2013 to the year 2017. With
the aim of assessing irrational investment status, Richardson's theoretical model of investment
was adopted to separate irrational investment into over-investment and under-investment. This
study employed panel data regression with the fixed effects model to test the proposed
hypothesis. The estimated results showed that over-investment negatively affected firm
performance while proper investment had a positive influence on firm performance. Meanwhile,
the impact of under-investment on the performance of enterprises was different according to
industry. Based on the empirical findings, the study provided some policy implications for the
corporate governance.