The Influence Of Corporate Governance On Over-investment Behavior

Enterprises play an important role in the economy development. However, because of over-investment increasing, economic growth has exceeded reasonable range.The phenomenon of overheating has caused a series of problems, such as excess capacity, raw material shortage, inflation, etc.Although the Chinese economy has developed very well in 2010, the state will continue the investment programs in order to alleviate the financial crisis. So, it is possible to lead to the over-investment problem. Firstly, this paper analyzes theoretically the possible factors in order to restrict the over-investment and proposes related assumptions. Finally, according to the regression results, this paper puts forward the corresponding suggestion.The construction of this paper is as follow.Chapter one is the introduction. This chapter introduces the research background and significance. In China, most of the listed companies are state-controlled enterprises. This phenomenon has caused a series of problems, such as one share dominates exclusively, the absence of owners, controlled by the manager, and governance structure is not perfect. It is easy to cause the controlling shareholder, management have the motivation of self-serving. Besides, the capital market information is opaque, the regulatory mechanism is not severe, and macroeconomic policies have adverse effects, which make China's listed companies have excessive investment phenomenon. Then, having China's a-share listed companies data in 2008-2009 for the study sample, referring model of the Vogt (1994),this paper makes the regulate analysis and empirical research for the factors about the over-investment behavior of China's listed companies.Chapter two is the literature review and comments. The foreign researches hold this view that the asymmetric information and the conflict among the stockholders, creditors and executives easily cause the over-investment. Besides, domestic scholars believe that the administrative intervention of local government and the soft budget constraint can also cause the over-investment. By reducing the free cash flow and the agency cost, we can solve the problem of the over-investment.Chapter three is research hypotheses. The hypothesis is based on theoretic research and the management structure of China's listed companies.Chapter four is the empirical analysis. First put forward the sample selection standard and the definition of variables. Then, build an empirical model according to the theory and test the relationship between the corporate governance of listed companies with the over-investment investment behavior.Chapter five is Conclusion. Empirical results only support the hypothesis:①Some listed companies in China have over-investment.②The independent directors can effectively restrict the over-investment behavior of China's listed companies.③Managers owned shares can not restrict the over-investment behavior of China's listed companies. However, this paper can not prove the rest of the hypothesis. Based on the conclusion, this paper presents the following recommendations:optimizing equity structure of listed companies; improving the situation of Chairman and General manager's arrangement; perfecting managers incentive mechanism and the system of independent directors; improving performance evaluation system of local officials; solving the problem of soft budget constraint Limitations of the study are as follows. First of all, it is not easy to convert some governance factor into quantitative indices. Secondly, this paper fails to consider location and profession characteristic of the listed company. So, these disadvantages make the research conclusion lack of integrity.The research on the over-investment behavior of China's listed companies is not so much, this paper want to use the perspective of evidence to make some contribution. The main innovation of this paper is as follows. Firstly, this paper summarizes systematically the research literature at home and abroad about the over-investment behavior, which can be used as reference for later research. Secondly, previous studies have often concentrated in a specific industry. So, this paper collects the data of a-share listed companies in the last two years in order to making the conclusions of the article is more universal.