Research Of Related Issues On Enterprise Overinvestment Of Chinese Private Listed Companies

As an important foundation for growth of future cash flow, companies'investment will directly affect the company's financial decisions. However, inefficient investment behaviors of Enterprises(Excessive investment, investment insufficiency) will lead to harmful income fluctuations and waste of resources. Some of researchers show that, in order to pursuing personal interests, the controlling shareholders often occupy small shareholders'interests. This kind of phenomenon is excessive investment phenomenon. In a bad legal protection conditions, the agency problems between the controlling shareholders and the small shareholders become more serious. However, there are some scholars shows that the controlling shareholders have not only occupy the tendency of funds of listed company but also can protect the listed company. The controlling shareholders have higher cash flow right which can suppress the listed companies'invest .So the paper chooses Shanghai and Shenzhen stock markets for the sample of Private listed companies from 2002 to 2007.And we study the behavior of Private listed companies' over-investment by theoretical and empirical.In this study, this paper introduces the related theoretical basis at home and abroad, then Literature the review. Secondly, analyze the definition of enterprise excessive investment and its cause, and then comprehend the cause of excessive investment fundamentally. In the empirical section, selecting Private listed companies during 2002-2007 as research sample, establishing enterprise investment model , taking multiple linear regression analysis to test the relationship among governance environment,shareholder control and enterprise overinvestment.The results of the study showed that private listed companies in China have overinvestment problem; Positive free cash flow can easily lead to excessive investment; Along with the increase of shareholding, controlling shareholder have consistent interests with small and medium shareholders, the motivation of using free cash flow to make excessive investment is abate, thus inhibit excessive investment behavior. As the process of marketization improving, legalization level and investor protection level also improved. The cost of the controlling shareholders'benefit expropriation is high, so this would weak the controlling shareholders excessive investment behavior. Based on the above findings, combined with the actual situation of our country, this paper presents suggestions in order to complete the inside and outside mechanism of corporate governance.