A Study On The Governance Mechanism For Small And Medium-Sized Listed Companies

In recent years, economy keeps in sustained and rapid growth in China which is driving by the main force investment. However accompanied with high growth of investment, low investment efficiency is bring adverse impact on macroeconomic. Information asymmetry of market economy and agency problem derived from the separation of ownership and control right have led to inefficient investment of enterprises, which means the deviation of the enterprises'investment from its expected size. Inefficient investment can be divided into overinvestment and underinvestment, with the former resulting from agency problem and the latter resulting from information asymmetry. As the important foundation for the enterprise's development and future cash flow, whether the investment decision is right or not is pivotal for SMEs (small and medium-sized enterprises). Hindering the growth and impairing value of the enterprises, inefficient investment will bring negative influence to the macro-economy. Scientific investment decisions become even more important against the background of financial crisis.Based on the asymmetric information theory and agency theory, choosing the listed SME companies as research samples, this paper analyzes the inefficient investment of SME listed companies. In this paper, firstly we build the expected investment model, which consider that investment demand depends on the growth opportunities. Growth opportunities are measured by Tobin's q. The larger Tobin's q is, the more investment expenditure should be. We use the fitted value of model to measure the expected investment, and the residual of model is regarded as inefficient investment. The empirical results show that there is also existed inefficient investment in the SME listed companies. Different with large enterprises, the general performance of inefficient investment is underinvestment rather than overinvestment. In the regression results based on different nature of controlling shareholders, state-owned companies prefer overinvestment while non-state-owned companies more inclined to underinvestment, and the inefficient investment of non-state-owned companies is serious than state-owned companies. The regression results of inefficient investment and free cash flow indicate that both overinvestment and underinvestment present high sensitivity of free cash flow, and overinvestment has a higher sensitivity. The sensitivity may be caused by asymmetric information or agency problem, which the essential reason of overinvestment-free cash flow sensitivity is agency problem and asymmetric information lead to underinvestment-free cash flow sensitivity.Against the phenomenon of inefficient investment widespread existing in SME listed companies, further discussion of whether debt, dividend and corporate governance can restrict inefficient investment is made in this paper. The results show that debt can restrict overinvestment but has little influence on underinvestment, and the effects of trade credit and short debt are better than bank credit and long debt. Dividend shows no significant effect on inefficient investment of SME listed companies. Corporate governance show little influence on inefficient investment. Except that institutional shareholder, manager-share and supervisory board pose a little bit influence on restricting inefficient investment behavior, other governances have little effect on inefficient investment, even aggravate inefficient investment.On the basis of the theoretical analysis and empirical results, suggestions from government, financial markets and micro-enterprise perspectives are proposed to reduce overinvestment and underinvestment, improve investment efficiency:the government should make more efforts to support SMEs and create a favorable environment for investment. The information disclosure and credit rating system should be improved, so as to reduce the information asymmetry between enterprises and banks or investors. It is necessary to construct the multi-level capital market and accelerate development of the bond market to offering a variety of financing channels for SMEs. The SMEs should improve their corporate governance to reduce agency costs, thereby restricting inefficient investment behavior.