Power, Perks And Investment Efficiency Of State-owned Enterprises

In recent years, with the advancement of state-owned enterprises (SOEs) marketization and promotion of internal management efficiency, the reform of SOEs in China has made remarkable achievements. SOEs occupies an important position in our economy, maintains the stability and promotes the efficiency of the SOEs have an irreplaceable role to economic stability and prosperity of the country. The healthy development of SOEs has been one of the focuses of attention from all walks of life.Currently, with the steady development of SOEs, at the same times, our country also faced some problem on the internal management, especially since the2008financial crisis. It damaged our economy. In the SOEs, on the one hand, there is the management of using its power to enjoy high perks, on the other hand, corporate investment efficiency is relatively low, have both overinvestment and underinvestment problem. Moderate perks can incentive the management to work better, while overconsumption could backfire. Both the excessive perks and inefficient investment from the management will have damage to the enterprise value and company performance. So, perks means what? Whether there is a certain relationship between perks and the efficiency of investment? Will perks help to ease the SOEs overinvestment and underinvestment or otherwise? This article will use the empirical research to analyze those problems.This article selects the disclosed financial statements and notes of the listed SOES, from2007to2011. We studied the management power, perks and the investment efficiency of the SOEs. Through the empirical analysis, the following conclusions are drawn:(1) In the SOEs, the more the management power, the greater the level of perks; Differentiate the different control level of SOEs, central enterprises and local government controlled enterprises’perks level is significantly higher than other SOEs. (2)There are positive relationship between management power and overinvestment, while the relationship between management power and underinvestment is negative. The greater the managers power, the higher the overinvestment, the lower the underinvestment; Differentiate the different control level of SOEs, central enterprises have the lower overinvestment caused by the management power, while the local government controlled enterprises have the higher overinvestment caused by the management power.(3)Between perks and overinvestment, we found that perks is positively associated with overinvestment in the SOEs. Distinguish between control, we found the central enterprises has the lower overinvestment caused by perks than other SOEs.(4)This study also found that perks helps to lower the underinvestment of SOEs. Improvement of perks can reduce the degree of underinvestment of SOEs. while the higher the free cash flow of the underinvestment enterprises, perks can better help to reduce the underinvestment; Distinguish between control, we found that central enterprises have the lower underinvestment, while the local government controlled enterprises have the highest level of underinvestment.Finally, combined with the empirical research results, this paper put forward the following suggestions for the SOEs:(1)Firstly, we should focus on and restrain management power appropriately. When management power is high, it may become an important means of management to grab control gains. Although in recent years, the management power of SOEs decreases, we still need to attach importance to the governance of excessive perks problems of.(2)Attention to the perks behavior of the overinvestment enterprises. Research suggests that there is an obvious positive correlation between perks and overinvestment, the improvement of perks level from management will increase enterprises’ overinvestment behavior. At the same time, access to perks may also become one of the purposes of overinvestment.(3)Appropriate use of management power and perks to underinvestment enterprises. In this research, we found that both management power and perks have negative relationship to underinvestment. That means they have good effect to the enterprises’ underinvestment. In views that there are more underinvestment enterprises in existing SOEs, we can give more power and appropriate perks to management to encourage more active investment of management, in order to reduce the degree of underinvestment of SOEs.