An Empirical Study On Government Intervention And Behavior Of Overinvestment Based On The State-owned Listed Company

With adoption of China’s reform and opening-up policy, Chinese skyrocketed economic developments accompanies with the fast GDP growth. Did it really bring the rising value of whole society especially for those enterprises? Investment, export and consumption are three elements of GDP as well as three major driving forces of economic development. Of which, the elements of investment has the lowest market degree, which plays the important role in economic fluctuation. Therefore, investment is most officially favored to achieve national or regional GDP growth. But promotions for different enterprises differentiate in different types including the cost and the level of its difficulty. For under the Chinese market economy today, government intervention in the private enterprise is difficult, since the civilian battalion enterprise is the private property which is protected. In comparison, state-owned enterprises are more directly controlled by the government. From this aspect, we assume that the government achieves its fast GDP growth through the intervention of corporate investments. However,"the GDP-centered theory" can bring many disadvantageous factors, which results in the excessive investments by the state-owned enterprises.The research of excessive investment starts late in China, we consider this excessive behavior due to information asymmetry and agency problems based on the foreign research results. However, this theory is inconvincible because it is based on market research which excludes institutional environment on the impact of corporate behavior. Domestic research foundation is different from those of other countries; China is in a special period of economic restructuring, so a lot of theory in our country does not apply to this special socialist market economy. However, until now, only a small amount of literature appears. And, unfortunately, those literature does not indicate the reasons for government’s intervention on listed companies, possible explanations are:on the one hand, the state-owned listed company manager’s own self-interest can cause excessive investment; on the other hand, government used excessive investments to meet its goals. In view of this, this article focuses on the research for causes and consequences of the government intervention for state-owned corporate. The object of the research is to provide further evidences to rich the excessive investment system theory, which also provides the theory and evidence in support of Chinese government officials’ achievement evaluation model.This article is based on institutional background, to research the intertwined relationships between the government’s intervention and the excessive investments of state-owned listed companies. Especially in under-developed areas, intrigued by GDP centered theory, government officials, who want to achieve their own achievements, led to more serious excessive investments.At the mean time, the indirect government ownership of the state-owned listed companies appears much lowered over-investments. This paper discusses the impact of changes of the Chinese government’s performance assessment model change on our country’s enterprise investments, as the result, in July2006, the government introduced the policy transformation of government performance model of state-owned listed companies which plays a certain constraint effect on excessive investments.This paper is applied by using the combination of the normative research method and empirical research method. A mathematic model based on government intervention and the state-owned enterprise of our country over investment behavior theoretical characterization was performed, on the other hand, the analysis of large amounts of data, in order to test the authenticity of normative analysis conclusion. Among them, empirical research is mainly through the use of EXCEL, SPSS statistical software for data descriptive statistical analysis, correlation analysis, regression analysis and variance analysis.Research is into the following four levels:firstly, state-owned enterprises of China’s listed companies are generally put in excessive investment and insufficient investment empirical testing, and screen out the presence of excessive investment behavior of the those companies; secondly, filter out excessive investment behavior of the state-owned enterprises listed companies as samples, the integrated use of agent theory, financial constraints theory and corporate governance theory to establish a model on the overinvestment behavior theoretical characterization was performed; Finally, through the intervention of the government in state-owned enterprises motivation research, to study the government intervention in the investment of the consequences leading to the analysis for causes and consequences of government reform of our country, especially the government officials’ achievement assessment model reformation.This paper is divided into five parts:Firstly, the introduction. Primarily focuses on the research background, significance, content, ideas and methods.Also a brief description of the shortcomings of this paper.Secondly, the literature reviews. Based on the domestic and foreign researches of status of excessive investment in Retrospection and prospect anticipation, especially our intertwined relationships between the government’s intervention and excessive investments.Thirdly, the government intervention and excessive investment theory. The keywords of this paper are government intervention and excessive investments. Therefore, according to the two aspects are discussed about the behavior of government intervention theory and excessive investment theory, to illustrate the study foundation of this paper.Fourthly, the empirical study. This chapter is the key chapter, from excessive investment system level proceed with, through the establishment of model to filter out in last few years exists over-investment in state-owned enterprises, and with these state-owned enterprises as the research objects, to verify the government intervention and excessive investment in state-owned enterprises behavior and influence, to reach the final depth of the government intervention motivation and the consequences.Finally, the conclusion. Mostly aims on conclusions about the research’s results and its inspirations, the innovation and its significance, and the contribution and the description of the shortcomings.This paper mainly studies the innovation and contribution:(1) the excessive investment research, based on China’s current transition period system background, combining the current China’s specific national conditions, to make up for past excessive investment research only limited to market economy under the premise of the defect, through the construction of state-owned corporate governance characteristics analysis framework, investigates the state-owned listed companies on investment and the influence of its institutional roots, thus providing the behavior of government intervention to influence corporate investment behavior and the internal mechanism of further evidence for excessive investment in China.(2) from the state-owned listed companies through the perspective of government intervention on the impact of over-investment, to provide further evidences to understand the behavior of government intervention under the company’s objectives and incentive distortion caused by the economic consequences. By comparing the performance evaluation mode changes before and after the state-owned listed company investment behavior, to validate current performance evaluation model of validity, to speed up institutional innovation, and to deepen the reformation of the state-owned enterprise solving the weakness of internal governance issues.