Corporate Governance, Political Ties And Overinvestment

The company’s investment behavior of the company’s future cash flow growth plays a vital role, directly affect the merits of the company’s performance. Rather than the efficiency of investment behavior, including over-investment and under-investment, will affect the company’s development, resulting in waste of resources and income volatility. Since opening up, China’s rapid economic development, GDP also rapid increases. But we see GDP growth, it really brings the whole community, especially the value of the enterprise value of it? Exports, consumption and investment are the three components of GDP, China’s economic development in the three carriage driving force. However, this troika, their determinants and realized in different ways. Among them, the level of investment in this part of the market’s lowest, but also can play the role of GDP immediate, huge fluctuations in the economy. Therefore, investment is favored by most officials, or their use of investment growth in the region’s GDP. Owned enterprises directly controlled by the government, government intervention in investment by state-owned enterprises to achieve GDP growth. In excitation mode of government officials, also facing the same problem,"only on the GDP," will bring a lot of negative factors of economic growth, which led to a state-owned holding enterprises more serious over-investment behavior. In China, the private economy has become an important part of the national economy, its level of investment efficiency is largely affects the allocation efficiency of China’s capital. However, in recent years, private enterprise, in order to seek political protection, access to scarce resources to hire former government officials or business executives to actively participate in politics original phenomenon is also not uncommon, and in the government to catch and relations, had to make the blind expansion of business scale and many short-sighted inefficient over-investment is also increasing.Improve well-known corporate governance can inhibit the efficiency of decision-making behavior of non-excessive investment companies, however, before the conclusions are applicable to over-investment enterprise of political ties it? This has become the main target of this study. Therefore, this paper focus on the classical theory, namely to explore the impact of the corporate governance of listed companies over the political ties and investment relations from the ownership structure, directors and supervisors and senior management incentive mechanisms such as governance structure, and the sample was divided into state-owned listed companies and A comparative study of private listed companies through the line.In this paper,2003to2012A-share listed companies as samples collected by hand, chairman and general manager of political contact data, and the use of dummy variables assignment method, empirical study of the state-owned listed companies and private listed companies, political impact on the relationship between over-investment. When results showed a significant increase in political relations between the degree of over-investment in listed companies. Further, due to the corporate governance restraining effect on excessive investment, the paper selected several corporate governance mechanisms, empirical study of the impact of these corporate governance mechanisms on political affiliation of excessive investment. The study found that directors and executives can effectively restrict the basic incentive there is excessive investment behavior of political contact, but the state-owned listed companies and private listed companies, the situation is different.