An Empirical Research: The Effect Of Corporate Governance On Enterprise’s Investment Efficiency

Investment decision is considered to be the most key and importantdecision in the enterprise. It attracts people because：on the one hand, itinvolves the raising of capital, on the other hand it involves the capitalallocation efficiency. Therefore, the enterprise investment decisionsdirectly impact financing and dividend policy, which affect thecompany’s business risk, the profit level and the evaluation of capitalmarket for its business performance and the development prospect. Itbecame the starting point of the company’s financial decisions. But atpresent, our country economy is growing while the enterprises’management are chaotic, A large number of blind and repetitiousconstructions are made and the investment efficiency is very low. Thispaper will list company investment behavior and investment efficiency asthe key research object.This paper first expounded the related theoretical basis of corporategovernance, the concepts and the investment efficiency measures aredefined. Then theoretically analyzed the investment efficiency’s influencefactors in China and put forward some assumptions. Then, havingChina’s share listed companies data in2008-2010for the study sample,set up an investment efficiency measure model. Finally through multipleregression analysis, the relationship between governance structure andinvestment efficiency are tested.This paper have the following results through empirical analysis:(1)Most of our listed enterprises have insufficient investment behavior,investment spending levels and internal cash flow, investmentopportunities have positive correlation.(2)Ownership structure has asignificant influence in investment efficiency. The board of directors did not play the role of restraining non-efficiency investment behavior.Executive pay raise is helpful to restrain the non-efficiency investmentbehavior. Executive’s shareholding system also can’t play their role ofincentive and restraint due to the listed company executive shareholdingpercentage is generally low at present.(3)In the companies with differentultimate controllers, equity concentration and ownership restrictionaspects have some different effects on investment efficiency.Finally, with the analysis of empirical results, this paper presents thefollowing recommendations to improve their investment efficiency:optimizing equity structure, strengthening the the construction of theBoard, improving incentive mechanism of executive and improving theexternal governance mechanisms.