The Study Of Over-investment And Governance Of Private Pyramid Firms

The enterprises' s investment behaviors are always the focus of microeconomics, however because of principal-agent problem and information asymmetry, inefficient investments such as underinvestment and overinvestment sometimes happen. How to govern the inefficient investments ,which will reduce the enterprise value, is always the hot debate of theory and practice circle. In my country ,private economy has became an important part of economic system. And their investment behaviors also play an important role in the country's economic growth.However there are overinvestment behaviors due to blind impulse and short sightness .So to analyse the overinvestment behavior of the private listed companies is significant to theoretical guidance and policy development .The Existing literature about overinvestment were mostly about the firms of spersed ownership structure,and our domestic researchers were focus on the state-listed companies.So their results may be not suit to the private companies which mainly adopt the pyramid ownership structure.In view of this,this article which is based on the previous results select the private listed companies of pyramid ownership structure as research sample. And this paper comprehensively consider some factors such as the pyramid ownership structure,cash dividend,debts and corporate governance how to effect the overinvestment behavior.This article study the private enterprise of pyramid ownship structure which issuing A-shares only in the city of Shanghai and Shenzhen from the year of 2005 to 2007. First we used models to sift the samples which had over-investment behaviors.Next,we considered how to goverce this inefficient investment.As result , we have found that the controlled shareholders' voting right,the seperation of shareholders' voting right and cash right will aggravate the overinvestment situation; more independent indirectors in the board of directors and higher current liability ratio can suppresses the overinvestment remarkablely. Although the degree of product market competition can inhibit the overinvestment in the listed companies, the effect was not significant. Based on the empirical research results, the article had brought forward some useful suggetions: decrease the separation of the controlled shareholders' voting right and cash right,establish laws to reinforce the controlling of controlled shareholders,reinforce the faithfulness education of the directors and the superior managers,enhance the independence of the independent directors, Strengthening the cash dividend`s function on the over-investment constraints,fully display the fuction of the debts.