A Study On Corporation Investment Behavior Character Of Chinese Listed Companies Under Large Shareholder Control

From M-M theorem which was put forward by Modigliani and Miller(1958), basing on the neo-classical paradigm, many western scholars began to relax the Neo-classical assumption of M-M theorem gradually, and modify the application scope of"irrelevancy"proposition, in realistic condition, to enrich and develop modern corporate finance theory continually. Jensen & Meckling(1976), Myers & Majluf(1984) revised the proposition that corporate financing selection is irrelevant to investment efficiency, from the agent problem and information asymmetry respectively, it expanded the corporate investment theory. In recent 20 years, with lucubrating on corporate governance worldwide and springing up of behavioral corporate finance theory, it not only remodeled and developed the theoretic hypothesis of traditional corporate financing, but also shown up a new viewpoint of research on mechanism of the acts of corporate investment, in frame of the combination of governance mechanism and behavior character of financial decision-making body.In recent years, domestic scholars more and more focused on the study of corporate investment. Due to the start late, it either constrained in the traditional hypothesis of neo-classical corporate financing theory, or followed the"traditional"clue of agent, and according as the research frame of adverse selection and manager's moral risk to analyze the problem of corporate investment, under the condition of agent conflict between large and small shareholders. In detail, in one hand the existing researches did not give enough attention to influence on corporate investment decision-making by profit seeking motivation and behavior character of large shareholder and his agent in governance framework during the transition period, so that there is an obvious disparity between existing research achievement and investment behavior under the statue of domination distribution of listed companies, in other hand the research field of financing in domestic, it is almost not to treat of the marketing financing condition facing by financing preference of large shareholder, and its influence on corporate investment.Therefore, this paper uses the newly research achievements of corporate governance theory and behavioral corporate financing theory for reference adequately, based on share arrangement system and statue quo of domination structure which are unique by listed companies in China, and make behavior character of large shareholder and his agent as the cut-in point, according to related theory of Investment and financing, put the financing preference of listed companies and its financing condition, both of which have effect on the decision-making of corporate Investment, into the analysis frame. Based on the combination of corporate governance theory and behavioral corporate financing theory, this project probes the investment behavior and its efficiency of listed companies deeply and systematically. In order to make a criterion to behavior model of investment under the statue quo of governance in listed companies, improve transmission mechanism of financing condition in stock market to investment behavior, support empirical proof and referenced basis which are much more systemic and more close to the corporate character in transition period.Chapter 1 is Introduction,which firstly gives the theoretical value and practical significance of the topic。Then it summarizes the main content ,logical thinking , and research methods of the paper。Also the definition of key concepts involved in the paper is given。Lastly it comes up with a number of innovations。Chapter 2 introduces related theory of enterprise investment study and gives a detailed review on it.Based on Neo-classical theory that investment and financing are independent,it illustrates the inevitability of integration of research in corporate governance and corporate finance .After sorting out the literature on corporate finance, it outlines the theoretical framework of the paper from the management structure, the company's financial information asymmetry and behavioral corporate finance aspects ,taking corporation investment problem as main logic line. And it provides a theoretical basis and guidance for the latter part of the paper.Chapter 3 analyzes listed companies'background of governance structure and its market condition of financing preference. In this part, features of listed companies'governance structure are anatomized, analyzed and extracted. As well as market conditions of large shareholders equity financing ,which provide the latter chapters of the paper with a realistic background. The first part of this chapter gives a description of ownership structure and control right structure. The study of this part illustrates :In transitional economy system, due to the essential absence of the state-owned shares'ultimate owner, it's the high degree of overlap and mutual reliance between large shareholder control and insider control that make large shareholder and insider conspired to seek for lease . The second part of this chapter describes the overvaluation of stocks and incomplete marketization in china's stock market, then discusses market financing conditions under the binary share structure and the motivation of wealth distribution for large share holder preferring stock-right financing from the point of rationing shares and new issuance.Chapter 4 analyzes rent-seeking of insiders and corporate investment behavior under the control of large share holder. The paper studies the influence of large share holder and insider's same interest upon firm's investment behavior, from the perspective of the corporate internal control interest group formed by large shareholders and agents. Based on the causation of insider control and rent-seeking leading to the capital arranging inefficacy in the state listed companies, this paper constructs the overinvestment behavior model leaded by the insider rent-seeking activity under a uniform two-tiered analysis frame. Through expanding the model, the investigative result is gained. The mutual effect of the rent-seeking and compensating behavior causes the distortization of capital collocating between the efficient branch and the inefficient branch, and result in the vicious circle in which the more inefficient the departmental operation is the more severe the rent-seeking degree is ;the more severe the rent-seeking degree is the more excessive the investment is ; the more excessive the investment is the more inefficient the departmental operation is.Chapter 5 analyzes self-interest motivation and corporate investment when large share holder control. Based on the theory of the control benefit driving capital allocation and the control arrangement under the special equity structure in Chinese listed company, this paper empirically studies the capital allocation resulting in control benefit firstly from fixed asset investment and equity merge. the capital allocation resulting in control benefit is not increase the public benefit of control through improving corporation achievement , so the capital allocation decision is more likely to be the self- benefit behavior of the control shareholder.Chapter 6 analyzes agent's overconfidence and firm's investment under the control of large share holder. The dissertation investigates irrational characteristics of agents and firm's investment behavior when large share holder controls, from the perspective of overconfidence, which is the typical irrational characteristic of general manager. Based on the stock-right inspire mode and stockholding change of agents in Chinese listed companies, this chapter studies the relationship between the general manager's overconfidence in Chinese listed company and the corporation investment decision with theoretical and empirical analysis under the special governance structure in Chinese listed company. The results show that compared with moderate-confidence general manager, the overconfident general managers are more lead to inefficient overinvestment under the special control-right structure of Chinese listed companies.Chapter 7 analyzes stock-right financing preference and corporate investment when large share holder control. Based on theory of market timing and combined with market condition of overvalued stock price and refinancing policy. The dissertation systemic investigates the market qualification needed to realize stock-right financing preference of large share holder. Then set refinancing policy and stock price, which are the main factor of market financing condition, into a uniform study design framework. And empirically testes conductive effect of financing condition in stock market upon corporation investment behavior, which is achieved by the actual result of stock-right financing preference belong to large shareholder. The results show that less quantity of stock-right finance, higher sensitive between investment level and stock price; more quantity of stock-right finance, level of investment tends to expanding under large stockholder and insider control.Chapter 8 gives some suggestion, from the perspective of controlling power countervails mechanism, design of organization restrain for irrational investment behavior, improving stock market's conductive mechanism and so on.Chapter 9 comes up with conclusion. The paper sum up conclusions of preceding chapters and sections, also points out limit of the study. At the same time, gives some advice for future research.This paper start with the aspect of the coexist and combination of corporate governance and behavioral corporate financing in modern enterprise theory, based on the combination of theory development above and character of listed companies in China in transition period, make up the shortage that research on corporate investment are much more constrained in traditional frame of the neo-classical paradigm. To some extent, it enriches and develops the investment theory and empirical system of listed companies in China. In following, there are its amelioration and innovation points:The recent studies on the ineffective investment caused by governance structure are not analyzing the agent actuality of large shareholder an insider control and the study contents are not evolving under the background .Based on the causation of insider control and rent-seeking leading to the capital arranging inefficacy in the state listed companies, this paper constructs the overinvestment behavior model leaded by the insider rent-seeking activity under a uniform two-tiered analysis frame. Through expanding the model, the investigative result is gained.The recent studies on the effect of governance structure to the investment behavior are almost lag behind on the effect of stock-right structure to the investment behavior, but the study on the effect of control right to the investment behavior is not lucubrated .Based on the theory of the control benefit driving capital allocation and the control arrangement under the special equity structure in Chinese listed company, this paper empirically studies the capital allocation resulting in control benefit firstly from fixed asset investment and equity merge. the capital allocation resulting in control benefit is not increase the public benefit of control through improving corporation achievement , so the capital allocation decision is more likely to be the self- benefit behavior of the control shareholder.The study of domestic scholar on the behavioral corporation finance is still on preliminary stage, the effect of executive's overconfidence to the corporation investment under governance structure of Chinese listed companies is not investigated .Based on theoretical analysis of external factors of driven and behavioral form of executive's overconfidence in listed companies, put the irrational behavior of investor in stock market into constraints term, establish decision-making model of corporate investment under the executive's overconfidence.The results show that compared with moderate-confidence general manager, the overconfident general managers are more lead to inefficient overinvestment under the special control-right structure of Chinese listed companies.The studies of domestic scholar on the effect of stock-right refinance to the corporation investment is almost presented as one result of the stock-right refinance preference, and still suppose that the market is efficient. Begin with the statue quo of that price in stock market is overrated in China, pricing diversity under the dual-structure of share setting and the market's financing environment which is form by these diversity, link to the refinancing policy in stock market in China, this paper checks up the implemental condition of share financing preference of large shareholder and its influence on corporate financing behavior deeply and painstakingly, and prove that the transmission mechanism, that is through share refinancing channel, financing environment in stock market in China effects corporate investment behavior, is existing.At the same time, this paper investigates the effect of the stock-right refinance preference of large shareholder to corporation investment under control structure of Chinese listed companies.