An Empirical Research: The Effect Of Corporate Governance On Enterprise's Over-investment Behavior

As the main cause of enterprise growth and the important basis of the future cash flow increase, the investment behavior becomes the beginning of the finance behavior. The enterprise's value is fundamentally determined by its investment behavior, whether the investment behavior is efficient or not is related to the max value of enterprise. But related dates show that, in recent years, the investment behavior of enterprises in China is extremely inefficient, one of the important reasons is the over- investment. And the relation between corporate governance and enterprise investment behavior is very close, the level of corporate governance is related to the investment efficiency of the business enterprise directly. Under the background described above, this paper researches the real effects of the corporate governance in listed companies on over-investment behavior under the actual circumstance of China.Specifically speaking, firstly, based on the principal-agent theory, the information asymmetry theory, the stakeholder theory and the competition theory, this paper deeply explores the use and meaning of corporate governance to the reduction of the over-investment behavior, and it is the basis of the whole paper. Secondly, this paper measures the over-investment degree of Chinese listed companies with the objective dates, then analyzes the effects of corporate governance on Chinese listed companies'over-investment behavior from several aspects, they are the ownership structure, the board governance, the executives incentive, the creditor governance, the product market competition, the institutional environment, and this paper also has made an empirical test on the analysises. Finally, the research provides some policy recom- mendations for the governance of over-investment and the improvement of corporate governance.As shown by the empirical study of overall sample, the ownership structure is significantly related to the over-investment behavior, but different level of over- investment isn't found in the companies which have different ultimate controllers; the board has no constraints on the over-investment behavior; the more the salary of executives is, the lower the level of over-investment is, but the managerial ownership mechanism has no constraint and incentive at all; companies with less debt tend to over-invest; the impact of product market competition on the over-investment is limited; the betterment of institutional environment is beneficial to the reduction of over-investment. In addition, the study also found that, in the companies with diffe- rent ultimate controllers, specific corporate-governance aspects have some different effects on over-investment behavior:in the companies under government control, more salary of executives, fiercer product market competition lead to a less over-investment, but the ownership structure has no significant impact; in other companies, the ownership structure has significant impact on the over-investment behavior, but the salary of executives and the product market competition have insignificant impact.