Research Of China Listed Companies’ Irrational Investment Behavior Based On CEO Career Concerns

With the continued growth of domestic investment in fixed asset, Micro-level companies’investment has become the focus of attention of management and academic areas. However, in reality companies’ investment is not always effective; there are a variety of irrational investment behaviors which detract from companies’value. Although irrational investment behavior of listed companies is very important to study, the related research is still rare, only scattered to explore individual investment vision, unable to form a complete theoretical analysis framework. Besides, researches focus on managers’economic interests to explain agency conflicts in investment behaviors, neglects to understand from managers’intention to get good career prospects, and lack rigorous empirical research methods and comprehensive empirical evidence.Based on Chinese listed companies irrational investment, from the perspective of CEOs’career concerns, The paper propose firstly a whole analysis framework of studying irrational investment behavior, such as investment myopia, over-investment and irrational diversification. The paper analysis mechanism of managers’career concerns affecting investment in three dimensions of time, volume and risk. To China’s listed companies as samples, the paper tests the ownership nature in irrational investment behaviors. Through the exploring of Chinese managers’career concerns affecting investment behavior, the paper gets conclusions following.(1) Managers’career concerns come from performance stress, experiences in companies and managers market. The worse performance, managers is more likely to lose their jobs, experiences in companies can alleviate this pressure, in the form of managers serving as chairman in the same time, or holding companies’shares, or serving for a long time in the company, which can dilute pressure of forced turnover. Compared to internal managers who promoted from company inside, managers from outside market face smaller pressure of forced turnover.(2) There is there is an U shape relation between CEO career concerns and investment myopia, specifically, both CEO in the high and low career concerns are tended to act more short-sighted investments, and executives in mid-career-concerns may have more long-term thinking. The larger of the corporate, the stronger of myopia impulse. In Hi-Tech companies managers’ shares holding can suppress investment myopia, while in non hi-tech companies managers’shares holding is too low to suppress.(3) There is there is an U shape relation between CEO career concerns and over-investment, specifically, both CEO in the high and low career concerns are tended to invest more. This relation is strongest in listed companies controlled by central government, followed by listed companies controlled by local government, and less in privately-owned companies. Furthermore, privately-owned companies are restricted to free cash flow, while state-owned companies not. Corporate governance inhibits over-investment of state-owned companies, while privately-owned companies not.(4) There is there is an U shape relation between CEO career concern and diversification, specifically, both CEO in the high and low career concerns are tended to invest more diverse. This relation is strongest in listed companies controlled by local government, followed by listed companies controlled by central government, and less in privately-owned companies. Furthermore, corporate financing constraints significantly inhibit diversification, especially in privately-owned companies. The higher ownership of local government, the more diverse of listed companies, while this relation neither exist in companies controlled by central government nor privately-owned companies.