Private Benefits Of Control Of Listed Companies And The Excessive Investment Research In China

The future of the enterprise depends on investment decisions. The right investment opportunity is the only way to look for new profit opportunity. Investment includes construction projects, new project, sharing and holding equities investment, technological transformation investment. Corporate investment is decided by the senior executives like general manager agreed with the board of directors approved execution. Due to the board of directors is dominated by controlling shareholders; the behavior of general manager actually represents the interests of the controlling shareholders, and not by the rule of maximization of profits to all the shareholders. So there will be the tendency of over-investment. The income of controlling shareholders includes sharing revenue and private benefits. The sharing revenue is the present value of dividend flow for share holdings, private benefits of control is the benefits only enjoyed by controlling shareholders. By empirical model building to research investment measurement, Li Xing (2007) found that the quite part of listed companies exist over-investment, and in recent years have growing tendency. With the development of China’s economic, investment is one of the three dominant of economic development for China; it became to be a very important part of China’s economic. But in recent years, Chinese GDP growth too fast, it means that there may be a lot of blindly construction and repeat construction. And a lager of scholars at home and abroad through studies show that the enterprise are the major shareholder or professional managers in order to individual personal private through the investment decision against the interests of all the shareholders, devour the interests of small and medium shareholders phenomenon. And Chinese capital market regulation is not perfect, the private benefits of control caused over-investment worth researching.It’s basing on method of combining the theoretical analysis and empirical analysis, this paper research on the relationship of private benefits of control and over-investment of listed company. The first, briefly introduced the theory in domestic and foreign scholars of the related field, and then establish theoretical model research on the relationship inner between private benefits of control and over-investment of listed company based on financing constraints and dividend policy and presented the empirical research hypothesis. In the empirical analysis part, the first step is measure private benefits of control, in this paper used shareholder structure reform period data from2002to2011years. And verifies the listed companies in China are existence the degree of private benefits of control, further, found that the relationship between private benefits of control and over-investment excessive positive correlativity. The next step is analysis the relationship between the control of larger shareholders, financing constraints and dividend policy, found that negative correlation between controlling shareholding, financing constraints and over-investment. It is shows that the more ownership concentration higher the more financing constraints bigger and the degree of over-investment more lowly. Because the over-investment of the listed company’s cash dividends payout are lower than the average level value of the same trade, it shows that over-investment of the listed company cash dividend payment rate is low.