Over-investment In Research

The first few years of the 21^st century has witnessed a rapid and sustained economic development in China which not only blessed varieties of companies in this economy with unprecedented opportunities but also led to their overinvestment which greatly undermined the corporations' vitality. As a result cases of failure due to overinvestment appeared successively. Why enterprises tend to over-invest? And in terms of Corporate Governance is there any mechanism that can effectively suppress this tendency? This article tries to discuss the effect of several important factors in Corporate Governance on overinvestment. And finally, it comes to the conclusion that among these elements a properly-designed shorter debt maturity structure does help to restrain the overinvestment tendency in an economy which still needs time and effort to establish a perfect economic and legal system...