Study Of The Entrusted Investment Of Listed Companies

Entrusted investment is an innovation of finance and a representation of developing if marketing economic and capital market. The foreign entrusted investment is normal under relatively perfect law environment, but more and more problem have been emerged because Chinese law environment and capital market for entrusted investment of listed company is not perfect. It affects those listed companies who carried out the entrusted investment business in achievement, reputation honest and exerted a bad influence in our security market.As things are at the moment, we did not have a unified conclusion on the character and advantage or disadvantage of the entrusted investment both in theory and practice. This paper analyses the cause, current situation, existent problem and risk effect of entrusted investment in china, and combine with empirical analysis, explain capital source of listed companies'entrusted investment and whether listed companies could carry out entrusted investment. Based on the analysis, our study reveals that: (1) financing activity does have a significant impact on entrusted investment by listed company. Companies with lower debt ratio or equity financing in recent two years tend to do it. (2) Companies with underperformance in core operations tend to carry out entrusted investment to color financial performance. There is a relationship of reverse change among entrusted investment and performance and whole earning capacity. (3) Major shareholders'control ability has outstanding impact on the entrusted investment, the possibility of entrusted investment of listed companies which in the control of major is bigger shareholders.The result shows that the recent boom of entrusted investment by listed companies results from their motivation for"money encirclement"or earning management. Companies that entrust their fund in entrusted investment lose their competitive power in low utilization ratio of capital and growth capability, but it is wrong to negate entrusted investment. Therefore, the paper puts forward correlated advice from the aspects of management and supervisory to make the operation of entrusted investment more legit and perfect.