The Study On Inefficient Investment And Control Mechanism Of China's Listed Companies

The macro level of investment is one of the important driving forces of economic growth. Since the financial crisis, China has maintained steady and rapid economic growth, in which investment played an important role. However, the scarcity of natural resources and social restrictions of consumer demand lead people recognizing the need to improve the efficiency of investment. If investments exceed the reasonable amount, the society will be "overheated", then causing some economic or even social problems; And if investment are non-efficiency, production capacity and social resources will be seriously wasted.Enterprises are the main part of economy, macro-level "non-efficiency investment" and the micro-level "non-efficiency investment" are inextricably linked, the existence of cash flow of provided the material basis for the survival of enterprises, but the asymmetric information between the creditors, shareholders and managers lead to non-efficient investment behavior. Non-efficient investment behavior, including two categories, one is over-investment behavior; the other is insufficient investment behavior.This thesis uses the free cash flow hypothesis to analyze the non-efficiency investment status caused by free cash flow, agency problems as well as information asymmetry, and then propose the restricting factors of the inefficiency investment of China's listed companies. In this paper, data from 2009 and 2010 of Shanghai and Shenzhen stock market which was provided by Wind and CSMAR database after excluding outliers shown 2054 listed companies as samples, of which 952 of Shenzhen stock market and 1102 of Shanghai stock market. In this paper, by using non-investment behavior as the starting point, drawing on the idea of Richardson (2006) to the actual business investment, free cash flow, corporate growth opportunities, business assets and corporate debt structure to build a reasonable level of investment for each enterprise, then divided the samples into overinvestment and underinvestment categories. By using the model of Vogt (1998), this paper then build the non-efficiency investments, free cash flow and control mechanism (ZY) model to restrict the search for non-listed companies. In this model, the variable control mechanism (ZY), includes the nature of the largest shareholder, ownership concentration, stock checks and balances, duty separation of chairman and general manager, the scale of independent directors, management incentives, long-term debt maturity structure.Combined with the preceding theoretical analysis and assumptions, by building a model to analyze the efficiency of China's listed companies, this article describes the statistical model and it was built by ownership structure, corporate governance, debt financing. Then we got the following conclusions:(1) The prevalence of non-efficiency investment of listed companies in China, and found that with the improvement of free cash flow, listed companies in China t increases the efficiency of investment which indicating that samples are greatly sensitive to cash flow.(2) High share concentration of China's listed companies. It leads to weaker equity checks and balances, large shareholders may be combined with other large shareholders to against the interests of minority shareholders and creditors. So the mechanism of checks and balances cannot inhibit the non-efficiency of business investment.(3) Now in China, the independent directors are playing a relatively big role, a large proportion of independent directors of companies can effectively inhibit the occurrence of non-efficient investment behavior.(4) For the debt maturity structure aspect, short-term maturity structure of debt plays a relatively big role compared to the long-term maturity structure. Short-term debt maturity structure can inhibit excessive investment, but also it can inhibit underinvestment, however, long-term debt maturity structure has contributed to non-efficiency investments. Finally, combined with empirical research and normative study, the paper gives the following policy recommendations:(1) Optimize the equity structure.(2) Improve the establishment of two posts of chairman and general manager, strengthen the supervision system.(3) Improve the system of independent directors.(4) Establish executive incentive system to avoid "internal person control" issue.(5) Set debt maturity structure more reasonably.