Influencing Factors Of China Listed Companies To Invest In Research

This paper begins with an analysis of the status quo of investment by listed companies in China and points out the prevalence of investment distortions, like over-investment and under-investment, and inefficiency in investment as a result. Based on the above fact, a theoretical and model analysis is made so as to ascertain the driving factors of corporate investment distortions. It is discovered that information asymmetry, irrationality of corporate managers, market inefficiency and institutional environment may have influence on corporate investment decisions, and possibly would further incur investment distortions. Then an empirical research, based on the data set of Chinese listed companies, is used to document the credibility of the four driving factors of corporate investment. Accordingly, four conclusions are obtained. First, investment of listed companies is significantly affected by cash flow, which possibly indicates the great effect of information asymmetry on investment and the fact that principal-agent cost as a result of information asymmetry acts as the primary problem of listed companies in China. Second, there exists a remarkable negative correlation between investment and book to market ratio. It implies that the performance of market and companies are correlated and market inefficiency would influence corporate investment. Third, corporate investment also has a negative relation with top managers' age. It can be induced that managers 'idiosyncrasy may exert an influence on investment, and hence fore the irrationality of managers must be taken into consideration in the process of investment decision-making. Finally, the percentage of shares held by the state positively correlated with investment, which indicates the impact of corporate equity structure and institutional deficiency on investment.