The Empirical Research On Corporate Governance And Over-investment Of Listed Companies

As one of the troika pulling GDP growth, investment can accelerate the accumulation of business capital. Therefore, the investment decision plays a very important role in the development of the enterprise. However, many enterprises blindly expanded investment areas in recent year, leading to a waste of social resources and the lower efficiency in enterprise investment. Thus, we can found some listed companies with well management had been driven into bankruptcy by this problem.So a problem to be solved urgently is that how to restrict over-investment behavior. Corporate governance will bring a significant impact on corporate investment behavior. Therefore, this paper discussed the relationship between corporate governance and over-investment from the perspective of the internal and external governance.First, this paper analyses that the corporate governance has affect on curbing over-investment through theoretical knowledge, laid the theoretical foundation for subsequent empirical research. Secondly, we investigate the over-investment by Richardson model and perform the external and internal governance variables model regression. Empirical results show that a large portion of listed companies in China have over-investment problems. From the view of internal variables, equity restriction ratio, board meeting frequency, managerial ownership and supervisory board scale are associated with over-investment.The proportion of independent directors did not play a role in the reduction of excessive investment behavior. For the external variables, product market competition and creditor governance have great effect on curbing over-investment. Beside that, shareholding ratio of institutional investors and opinion of annual audit do not have great effect on the over-investments.There are also significant differences in the effect of the proportion of state-owned shares of different enterprises to curb over-investment. Finally, according to the above conclusions, we make relevant recommendations on how to curb over-investments by improving corporate governance.