Research On Inefficient Investment Behavior Of The Listed Companies In Electric Power Industry

As a link between financing and the distribution of dividends, Investmentdecision not only involves the issue of funds raising, but also affects the efficiency ofthe funds allocation. However, in the real economic society, Enterprise’s investmentdecision would be affected by various factors, the phenomenon that Enterprisesviolate the principle of maximizing the corporate value and make the InefficientInvestment is widespread, this Inefficient Investment behavior will not only result inthe waste of resources and production factors, but also would damage the interests ofshareholders and investors, at the same time, the macro-economic structure will bedistorted, the healthy development of macro-economic would be affected as well.Electric power industry belongs to monopoly industries of our country, and it isalso the basic industry which is related to the national economy and the people’slivelihood. With the development of our national economy, the social demand forelectricity continues to expand, the expansion of electricity sales market hasstimulated the development of entire electric power production, in recent years, theinvestment level of basic construction in electric power industry has improvedcontinuously, as the capital and technology intensive industry, electric power industryprojects has some characteristics like taking more money, large scales, long recoveryperiod and so on. Meanwhile, the electric power industry has the characteristic ofstate-owned monopoly,"internal control" and "shareholder control" exist at the sametime, thus in order to reduce the threat to positions, realize the maximization of theirown utility, the company managers would have managerial entrenchment when theyrespond to the threat of internal and external control mechanisms, and it will distortthe investment decisions and result in the inefficient investment behavior.The object of study in this paper is the listed companies in electric powerindustry, and this paper analyzes the inefficient investment behavior of the listedcompanies in electric power industry from the perspective of managerialentrenchment. The paper takes the panel data from2006to2010in listed companiesof electric power industry as the study sample. First of all, the paper measures theexistence of inefficient investment behavior in listed companies of electric powerindustry, then selects five main factors which affect managerial entrenchment, likemanager’s age, manager’s tenure, manager’ s ownership, manager’ s compensation， and manager’ s relocation cost, and the paper studies the impacts these five mainfactors have on the inefficient investment behavior with the method of multiple linearregression. The empirical study results show:(1) Inefficient investment behavior oflisted companies in electric power industry exists in the period2006-2010;(2)Manager’s age, tenure and relocation cost all have significant positive relevance withinefficient investment behavior of listed companies in electric power industry;(3) Thehigh shareholding ratio of state shareholders is also an important reason which resultsin the further deterioration in Inefficient Investment behavior of listed companies inelectric power industry;(4) The shareholding ratio of managers is generally low inlisted companies of electric power industry, the "zero stake" is widespread, andmanagers can not improve their controlling right over the enterprises, and increase thelevel of managerial entrenchment, then influence the investment decision of thecompany by the low proportion of shareholding;(5) The compensation incentivepolicy carried by listed companies in electric power industry does not play the properrole in encouraging and restraining managers. Finally, based on the empirical research,this paper puts forwards some recommendations on how to curb Managerialentrenchment, regulate investment behavior of listed companies in electric powerindustry and improve investment efficiency and so on.