Study On Product Market Competition, The Board Governance And Behavior Of The Over-investment

In recent years, investment is driving the development of China's economic, at the same time, it also brings some risk. Over-investment behavior, such as unregulated investment of companies and blind expansion of investment, not only stands for a waste of social resources and low efficiency of business investment, but also influent the development of enterprises for further malignant increased funds. In order to alleviate the over-investment problem, some scholars at home and abroad study the way of curbing the over-investment based on the perspective of product marked competition or board governance. However, because these studies is isolated to examine the mutual relationship among product market, competition, board governance and over-investment, but not examine them in a unified analytical framework, so they are one-side. The paper aims to start from product marked competition and end on over-investment by treating board governance as one important mediator, place them in a loagical research framework. By using this framework, this study examines whether the product marked competition can play an important role in improving the inhibition of over-investment.First of all, on the basis of former researching, the author analysis the direct mechanism from product market competition to over-investment, and the indirect mechanism from product market competition to over-investment by treating board governance as an intermediary. Second, the author steps two ways:first, establish the expected investment model and get the value of expected investment. The actual amount of companies with over-investment can get by compare the actual investment and the expected investment. The second step, establish the model on product market competition, board governance and over-investment. The paper verifies that board governance can play an intermediary role by using the methods of two-stage broad-squares regression and Intermediate test method.The results show that the board-size have played a full intermediary role in the process of product market competition curbing over-investment. However, the grade of separation of two staff, the proportion of independent directors, the frequency of chairman of board change, incentive compensation of board and incentive equity of board have played part of intermediary role in the process of product market competition curbing over-investment.Therefore, with increased competition in product markets, companies can curb the over-investment effectively by expanding the board size, reducing the frequency of chairman of board change, improving the grade of Separation of two staff, hiring more independent directors, providing the effective incentive compensation of board and equity incentive of Board.