The Empirical Study On Measure Andinfluencing Factors Of Inefficient Investment Of Sate-ownedlisted Companies

The investment decision is the most important part of the financialdecision-making of the enterprise,whose efficiency directly determines the increaseand decrease of the capital stock of the enterprise and the rise and fall of the enterprisevalue. However, Chinese enterprise especially the state-owned enterprises have theinefficient investment with varying degrees, namely underinvestment andoverinvestment. Underinvestment refers to the investment decision makers passive oractive give up the project whose net present value is positive. Overinvestment referstothe investment decision makersinvest the free cash flow in the project withnegativenet present value.The state-owned enterprise is the pillar of the nationaleconomy development, whose investment amount and scale are often far greater thanthe private enterprises, also the impact on the economy is more far-reaching.Therefore,state-owned enterprise investment should be more careful.However, the specialeconomic and political system background of our country, which determine that thestate-owned enterpriseshave to face with even more complicated problem ofinvestment.Such as policy burdens, soft budget constraint, government intervention,insider control,split share structure, risk mechanism flaw.These problems result in thatthe state-owned enterprise’s investment decision has been seriously distorted, and leadto the investment is inefficient. The12th Five-Plan has pointed out that forstate-owned enterprises need to adjust the investment structure, increase theinvestment efficiency. So, how about the efficiency of the state-owned enterprise onearth? What influencing factors lead to the investment inefficiency of the state-ownedenterprise? To solve these two problems, this paper uses the sate-owned companies in2006-2010as the sample, from the internal management level, external financing level and macro-control level, on the basis of investment theory, asymmetricinformation theory, the principal-agent theory, and government interventiontheory,combines mathematics, economics, statistics, econometrics, physics, and otherdiscipline’s related tools and methods, to research the measure and influence factorsof inefficient investment of sate-owned listed companies in China.The logical structure of this paper is as follows:The first part is an introduction. This part starts from the present situation of thestate-owned listedcompanies’investment, puts forward the questions of the inefficientinvestment, and defines therelevant concepts, expounds the research methods and thecontent of this paper.The second part is liter review. Firstly, the inefficiency of the foreign enterpriseinvestment behavior research has been reviewed from the angles of financingconstraints and agency cost. And then, this part reviewed the domesticresearch on theinefficiency of the enterprise investment behavior, from the angles of financingconstraints, agency cost and government intervention.The third part is the state-owned listed companies’ investment situation analysis.This part analyses the current situation of state-owned enterprise’s particularity of theinvestment behavior, including the investment environment, investment behavior,financing behavior and governance structure, and the specialChinese systembackground.The fourth part isthe theoretical analysis and the research hypotheses. This partputs the financing constraints, agency cost and government intervention into atheoretical framework for consideration.The fifth part is the model design and construction. This part based on theexisting measure methods of investment opportunities,through the GMM method forparameter estimation of the VAR model, to create the―Fundamental Q‖as a newmeasure, constructs the measure model of inefficiency investment of thestate-ownedlisted companies and influence factors analysis model.The sixth part is the empirical analysis. This part on the basic of the analysis ofthe measure of the state-owned listed companies’ investment inefficiency, uses OLSto regress the influence factors model, and uses the White inspection and LMinspection to test the autocorrelation for heteroscedasticity and sequence of the model.Because the model hasheteroscedasticity, so this paper uses WLS to regress the modelfor the second time.The seventh part is countermeasure suggestion. According to the result, this part points out the corresponding countermeasures, in order to reduce the inefficiency of tstate-owned listed companies’investment.The eighth part is conclusion. This part summarized the main ideas of the paper,and point out the limitation of the study and the future research direction.Based on the investment force model state-owned listed companies the efficiencyof investment theory study found that:(1) the enterprise investment financingconstraints by a negative drag Ffc.(2) the agency cost make enterprise investment is apositive the driving forces Fac.(3) the government intervention will lead to state-ownedenterprise investment is a positive the driving forces Fgi.(4)The state-owned listedcompanies investment behavior by Ffc, Fac and common Fgithree kind of force.The measure of the inefficiency investment of the state-listed companies showsthat:(1) generally, the listed companies present an overinvestmentphenomenon, but,the whole non-state-owned listed companies are in the state of underinvestment, andthe overinvestment of state-owned listed companies is more than the underinvestmentofon-state-owned listed companies, that result in the whole of the listed companies inChina are in the overinvestment state.(2)Most companies appear insufficientinvestment because of financing constraints and lack of funds; But small companies,especially the state-owned listed companies, have plenty of cash flow, and more seriousby the agency cost and government intervention, and thus easy to appear excessiveinvestment.(3)The companiesholding by central governmentand provincialgovernment is in excessive investment state; County government not enoughinvestment holding company is most severe; The last for the whole people allcompanies. So, the state-owned shareholders of a listed company, the higher thepolitical level, the holding company the easier to excessive investment; Instead, thelower level, the more likely to appear insufficient investment.The theory and empirical studies on the factors of the efficiency investment ofstate-owned listed companies show that:(1) Thestate-owned companies’investmentbehavior aside from the influence of financing constraints and agency cost, but also theserious government intervention.(2) Development of finance can effectively improvethe enterprise financing environment, so as to reduce enterprise in the informationasymmetry and cause financing constraints, reduce the lack of investment in theenterprise. But for government intervention by the state-owned enterprise, thedevelopment of the financial industry failed to have hardened the soft budget constraintfunction. China’s local financial development degree differ greatly. In the developmentof the high degree of enterprise often exist in the investment area to overreact, and in the development of the areas of the low level of the enterprise often exist in theinvestment insufficiency.(3) The debtdoesn’t have the constraints of managers,because our country’s state-owned enterprises are faced with the soft budget constraint,asset substitution more significant role.(4) State-owned listed companies in ourcountry has serious agency cost, and agency cost increased enterprise excessiveinvestment and financing constraints by state-owned listed companies, the managershave excessive investment motives even if also can not be implemented.(5) Theindependent directors can reduce excessive investment and enterprise to reduceinvestment is insufficient, but significantly lower, explain the independent directors ofthe supervision role is limited.(6) The constraints of the executive compensation role isnot obvious, on excessive investment and didn’t play a inhibition, but increases themanager position and keep people reduce investment motives. The state-owned listedcompanies the managers’ salary incentive effect on the failure.(7) Dividend distributioncan reduce managers have free cash flow, thereby reducing the excessive investmentbehavior.(8) The state-owned listed companies because of government intervention,bear the government directly the economic efficiency and the social efficiency dualgoal and excessive investment. In the light of empirical results, this paper providesfollowing suggestions:(1) Improve information disclosure system and improve theefficiency of capital allocation;(2) Strengthening internal structure management,establish the responsibility mechanism;(3) Decrease policy burdens, hardening softbudget constraint;(4)Promote equity reform, and reduce government holding.