A Study On Corporate Investment Decision Reacting On Stock Price Signals

As a core function of stock market, value discovery can promote listed company to improve their funds use efficiency, but mis-pricing problems are often been used by corporate managers. It is usual to find that local listed companies in China enhance the capital and enlarge the stock during overvaluation period of the stock price. With lucubrating on corporate governance worldwide and springing up of behavioral corporate finance theory, it not only remodeled and developed the theoretic hypothesis of traditional corporate financing, but also shown up a new viewpoint of research on mechanism of the acts of corporate investment, in frame of the combination of governance mechanism and behavior character of financial decision-making body.This paper uses the newly research achievements of corporate governance theory and behavioral corporate financing theory for reference adequately, based on China stock market special characters: investment and financing rules and regulations system, the unique equity division arrangement system of the listed companies, wildly fluctuated stock prices and low cash dividends, etc. This paper probes the investment behavior of listed companies based on the stock price valuation deeply and systematically. In order to make a criterion to behavior model of investment under the statue quo of governance in listed companies, improve transmission mechanism of financing condition in stock market to investment behavior, support empirical proof and referenced basis which are more close to the current market environment.The research concludes that local listed companies appeared having strong investment willingness during overvaluation period of the stock price. The equity refunding policies play a decisive role to whether corporate investment decisions depend on stock price. During loosened period of the equity refunding policy, owners of non-tradeable shares in the equity division arrangement system have obvious opportunism behaviors. And the purpose of listed companies management retaining high earning instead of paying cash dividend is selfish pursuit of possessions, not because of financial constraint. At the end of the paper, related policy proposals have been put forward.