The Influence Of Top Management Team's Human Capital And Internal Control On Investment Efficency

Investment decision-making is an important part of financial decision-making in modern enterprises.High,investment efficiency guarantees the steady increase of cash.flow of SME's and sustains.their healthy growth.It is also a prerequisite for expanding corporate market value.As the biggest part of national economy and the most dynamic sector,SME's play a crucial role in the social and economic development of China.Growth Enterprise Market(GEM)listed companies,the distinguished representatives of MSEs,in particular,constitute an emerging force that drives China's economy.GEM-listed companies,as compared with other SME's,have more excellent human resources and better corporate regulations,which is a most important element other than human resources that impacts corporate investment efficiency.Therefore,the research on the effect that top executive human resources and corporate internal control exert on the investment efficiency of China's GEM-listed companies are both theoretically significant and empirically rewarding.Based on the theory of human capital,upper echelons theory,principal-agent theory and information asymmetry,this study explores the investment efficiency of GEM-listed companies from two respects-top executives human capital and internal control.It includes the effects of top executives and internal control on corporate investment efficiency,as well as their interactive effects.Based on the analysis of the factors,the average value index,heterogeneity index and comprehensive index of the top management team's human capital were extracted from age,education level,professional title and tenure of the members of the top management team,which correspond to the strength,breadth and overall situation of the team's human capital.This study assesses the sample company's internal control framework in reference to the internal control index published by Shenzhen DIB.Based on the 2010-2015 data of China's GEM-listed companies,this study examines the effects of human capital and internal control on investment efficiency both theoretically and empirically.In accordance with the "problem-theoretical analysis-empirical analysis-conclusion and suggestions" research paradigm,the study adopts a two-pronged approach-"human capital(top managerial executives)--behavior-economic consequences”and“regulation(internal control)-behavior-economic consequences”to the analysis of the motivation of non-efficient investment,effects of top management team's human capital and internal control on investment efficiency(non-efficient investment),and their joint effects on investment efficiency(non-efficient investment)by using the theory of human capital,the upper echelons theory,the principal-agent theory and the information asymmetry theory.This line of research consolidates and enriches previous studies in this field.As for the empirical analysis,we construct unbalanced panel data regression model in testing the hypothesis.The results show that the average index(strength),heterogeneous index(breadth),and comprehensive index of top management team's human capital can significantly inhibit a company's non-efficient investment,and thus improve its investment efficiency.The quality of internal control can also strongly restrain the inefficient investment of the enterprise.The interactive effects of top management team's human capital and internal control can significantly strengthen the inhibitive effects of human capital or internal control on non-efficient investment alone.This thesis comprises seven chapters,and is structured as follows:Chapter 1 introduces the background and significance of the research topic,research methods and the possible innovative contributions.Chapter 2 systematically reviews the domestic and foreign literature on corporate internal control,human capital and investment efficiency.Chapter 3 performs a theoretical analysis and empirical assessment of the investment efficiency of China's GEM-listed companies.Chapter 4 analyzes theoretically the mechanism of the influence of human capital on the efficiency of enterprise investment,based on the human capital theory and the upper echelons theory.Based on the four factors such as age,education level,professional title and tenure of members of the top management team,using the factor analysis,the average value index(strength),heterogeneity index(breadth)and comprehensive index(comprehensiveness)of human capital of top management team were constructed.The empirical results show that the human capital of the top management team of GEM-listed companies is negatively correlated with overinvestment and underinvestment,both in strength,breadth and comprehensiveness.It shows that the human capital of senior management team can restrain the inefficient investment of listed companies in GEM and thus enhance the investment efficiency.Chapter 5 analyzes the mechanism of the impact of internal control on investment efficiency(inhibiting inefficient investment in enterprises)in light of principal-agent theory and asymmetric information theory.The internal control index of listed companies issued by Shenzhen DIB is selected to measure the quality of internal control of the sample enterprises.Empirical test is conducted to examine the influence of internal control quality of GEM-listed companies to inhibit non-efficient investment and enhance the efficiency of corporate investment.The empirical study shows that the higher the quality of internal control of GEM-listed companies,the higher the efficiency of corporate investment.Chapter 6 studies the interactive influence of the top management team's human capital and internal control on the efficiency of investment.By constructing a ractive term between the human capital of the top management team and internal control quality,the interaction between the human capital and internal control on investment efficiency is tested empirically.The empirical results show that the top management team's human capital and internal control of GEM-listed companies can interact with each other,and there is indeed an interaction in the impact on investment efficiency.Chapter 7 concludes the thesis,proposes suggestions for policy-making,and points out the possible directions for further study.Possible innovation points of this thesis are shown below:Firstly,unlike previous studies on the factors affecting the efficiency of corporate investment which mostly stress corporate governance or internal control and other institutional factors,as well as some factors about human such as managers' psychology and emotions,this study introduces the theory of human capital in economics into the research on the efficiency of investment in enterprises.It studies the influence of top management team's human capital and internal control on investment efficiency from two aspects of“human”and“regulations”,expands the research perspective of the investment behavior and investment efficiency of enterprises,enriches and develops the investment theory,at the same time,also enriches the research on the economic consequences of human capital and the factors that affect investment efficiency.Secondly,this thesis constructs the top management team's human capital index.Almost all previous research literature on human capital is based on the characteristics of human capital,and the economic consequences are studied separately from the mean and heterogeneity of different dimensions,such as age and education level.Because the variables of different characteristics of human capital have different dimensions,they seriously affect the correctness of the research results.On the basis of the existing literature,and based on the characteristics of human capital in the four dimensions of top management team members' age,education level,professional title and tenure,through the factor analysis,this paper constructs the human capital average index,heterogeneity index and composite index from the aspects of strength,breadth and comprehensiveness,which eliminate the influence of variable dimensions on the results and enrich the measurement method of human capital.Thirdly,based on the research paradigm of "contributing factors-behavior-economic consequences",this study discusses the efficiency of enterprise investment(inefficient investment)from two aspects:"human"(top management team's human capital)and "regulations"(internal control).This study analyzes the influence of human capital on the quality of internal control and the governance effect of internal control on human capital.Moreover,by means.of sociology and management research methods of interaction effects,getting the interactive items of the human capital index and internal control quality into the regression model,it also analyzes and empirically tests the interactive influence of two important factors,“human”and“regulations”,on the investment efficiency,which is different from the previous study on the economic consequences of human capital or internal control.