An Empirical Research On The Effect Of Equity Agency Conflict On Investment Decision Of The Listed Companies Under Large Shareholder's Controlling

Investment decision of the corporation is an efficient choice in investable projects under capital constraints. Investment decision, the main cause for corporation development, the crucial basis for future cash-flow increase and the foundation for decision-making of financing and dividend policy, influences the management risk, profit level, capital market's evaluation of company's management achievements and development prospect. As for the value creation, investment decision is the most important one of finance decisions. The single-largest-shareholder ownership structure is the basic character of corporate ownership in china for historical cause. Concentration of ownership makes large shareholder have enough incentive to monitor managers, thus it will avoid the free-rider behaviors of shareholders under dispersed ownership in a certain extent. At the same time, concentration of ownership makes large shareholder gain control right of the corporation. Because of large shareholder's self-serving nature and opportunism, he will pursue the private benefit of control at the expense of other shareholders'benefit. Because the benefit of control comes from controlling resource of investment, when the legal system is not perfect for protecting small shareholders'benefit, controlling shareholder usually increases the benefit of control at the expense of other shareholders'benefit through influencing investment decision of the corporation.First of all, this paper builds a game model between large shareholder and manager under large shareholder's controlling, theoretical analysis finds that the better choices of large shareholder and manager are colluding to snatch the benefit of controlling. Then build a conflict model of interest between large shareholder and small shareholer base on the theory of corporate investment,which considers effect of small shareholders. Theoretical analysis finds that both private benefit and shared benefit of control influence enterprise investment decision. While the share holding of controlling shareholder increases, his ability of snatching the private benefit of control becomes higher and higher, and percent of his losing due to inefficient-investment becomes bigger and bigger. so the investment ratio climbs up and then falls down. Lastly, on the basis of foregoing theoretically analyzing, this paper applies the data of Chinese A-share listed companies during 2001-2005 to test the impace of equity agency conflict on corporation investment decision under large shareholder's controlling. hoping to get much more empirical evidence for corporation investment behavior in china. At the final part of this paper, some suggestions and strategies were advanced for governing listed companies'inefficient-investment in light of the above research achievements and Chinese current economic policies.