Research On Enterprise's Over-investment In The Equity Incentive Process

As the main driver of company's development and important foundation of growth of future cash flows, Investment behavior of listed company not only affect the company's financing decisions and dividend, but also affect the smooth operation of the whole macroeconomics. In recent years, investment is the driving engine of China's economic development, it accelerate the rapid growth of our economy undoubtedly. But at the same time, unrestrained investment results serious overcapacity and a waste of resources in some areas. Especially since four trillion investment plans was identified in executive meeting held in the State Council on November 5, 2008, people arouse more concern about the efficiency of investment. How to prevent blind investment and low-level redundant construction issues become the focus of public disputes. As the main body of the market, enterprise how to prevent overinvestment effectively, maximize corporate value then promote whole economy's development, become an urgent problem to be solved.This paper reference the study results of domestic and foreign listed companies'overinvestment, against the manager's overinvestment behavior, based on the principal-agent theory, asymmetric information theory and corporate governance theory, take the manager's overinvestment and equity incentive as the entry point, the paper make the shareholder's internal control as a endogenous variable, by building a model including manager's overinvestment level and shareholder's internal control level, this paper derived interactive cycle mechanism among the equity incentive level, the degree of overinvestment and internal control level in theoretical system, and made a evolutionary game analysis on manager and shareholder's decision from the dynamic point of view. Finally, the paper selected listed company's data in representative industries of China, made an empirical study to confirm theoretical research.After a series of theoretical and empirical research, we can conclude:①There is overinvestment phenomenon in China's listed companies.②Raise the level of equity incentive not only encourage manager to work harder, but also reduce the degree of enterprises'overinvestment.③The degree of manager's overinvestment and the level of shareholder's internal control are negatively correlated, strengthen the degree of internal control can reduce enterprise's overinvestment effectively.④Because of the existence of internal monitor costs, the degree of internal control decreased with the increase of the level of equity incentive, so it stimulates manager's overinvestment motivation. The interactive circle mechanism among the three indicates that design optimal equity incentive level and the degree of internal control have important theoretical and practical significance to solve enterprise's overinvestment.