Reasearch On The Relationship Between Accounting Information Qaity And Over Investment Based On Free Cash Flow Thory

In recent years, with the rapid development of our economy, companies hold sufficient free cash flow. In order to get high profits, The Management use idle funds to reinvest. This expands companies’competitiveness. However, due to the maximization of self-interest,the companies’management tend to diversify investments, and even investment idle capital in the net present value less than zero investment projects, resulting in excessive investment behavior. Over-investment not only reduce the value of the company and damage the interests of shareholders, but also affect the healthy development of macro economy.Therefore,it becomes an important part in the study of Fundamentals of Financial Management how to improve over-investment governance. Scholars have studied how to improve over-investment governance from various angles such as the ownership structure, debt financing and management shareholding,but little research on over-investment problem from the point of view of the quality of accounting information. It is the most representative viewpoint which Jeson puts forward free cash flow theory in1986on the cause of over-investment.The paper is based on this perspective, then analysis and studies the quality of accounting information the quality of accounting information for improving over-investment governance.It is more practical.This paper uses the normative methods and empirical methods. First, it reviews the domestic and foreign related literature, then analyzes over-investment based on free cash flow theory and clues for improving over-investment governance from the role of accounting information quality in the enterprise management.Secondly,this paper puts forward hypothesis,then tests these hypotheses on the sample which consists of3270firm-year observations from2009to2011. The empirical test when there are a lot of free cash flow in listed companies, management are more prone to over-investment behavior, verify whether or not there is a relationship between over-investment and free cash flow. It also verifies relationship between over-investment and accounting Information Quality. High quality of accounting information can inhibit the over-investment behavior or listed companies with enough free cash flow. Finally, this paper makes a general summary and puts forward some countermeasures in view of the listed company excessive investment problems.