| Corporate governance plays an important role in investment decision-making process,the level of corporate governance directly related with the firms' investment efficiency. With the in-depth study of corporate governance,we found many listed companies around the world is not controlled by the largest shareholder of the company,however,they are handled by the ultimate controller. The ultimate controller can gain lager ultimate control rights than their cash flow rights by related transactions,family managing,pyramid structure and participating management etc. The separation between ultimate control rights and cash flow rights could eventually lead to agent conflict of ultimate controller and the minority shareholders',moreover it will affect corporate decision. Investment decision as an insignificant strategic decision in the company is directly affected by the agency problems of the company. Suffered by the influence of agency problems between the ultimate controller and other shareholders agent ,there will be inefficient investments such as excessive investment and insufficient investment.Firstly,This paper analyzes the basic theory of ultimate control rights ,cash flow rights and corporate investment,and introduces the definition calculation of the ultimate control and cash flow rights and the theory of over-investment and underinvestment. Secondly,this paper establish the contract model of the ultimate control rights ,cash flow rights and corporate investment. The relations between the ultimate control rights ,cash flow rights and corporate investment are discussed. Based on the analysis of the model,this paper chooses 215 listed companies with more than 10% control rights as a sample. Based on free cash flow agency theory,this paper analyses whether Chinese listed companies is underinvestment or over-investment. Then based on the agent confront caused by the separation between ultimate control rights and cash flow rights,this paper make an empirical analysis of relations between ultimate control rights ,cash flow rights and corporate investment.This paper draw a conclusion that there is over-investment in Chinese listed companies,which shows ultimate control rights is positive with firms'investment and cash flow rights is negative with firms'investment. Cash flow rights restrain over-investment behavior,which verifies the incentive effect of cash flow rights. Ultimate control rights have restriction on over-investment,perhaps because balance structure ownership and external supervision. Otherwise,when ultimate control rights separate from cash flow rights,ultimate ower will be apt to carry out over-investment behavior and tunneling behavior. Therefore,when the separation of ultimate control rights and cash flow rights are reduced,the corporate investment efficient will be improved. When companies make decision related with investment,they should considerate the influence of ultimate control rights and cash flow rights. |
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