Equity Nature, Inefficient Investment And Corporate Performance

The unique classification of state-owned companies and private companies creates a different kind of agency conflicts and thus a different investment policy. So it is quite necessary to study how ownership affects investment behavior. Besides, we also need to check out the relationship between the investment efficiency and company performance.The paper selects the data of496listed companies in Shanghai and Shenzhen Stock Exchange from the year2005to2009, studying the inefficient investment decision of different companies. Empirical part of this paper is mainly divided into two parts:the first part, with reference to Vogt (1994), Richardson(2006) and Gongfu Chang(2007), we build a model to test the type of the companies’inefficient investment. The second part, using the residuals getting from the first part as the data of the degree of non-efficient investment, we build a model to test the relationship between inefficient investment and companies’performance.The main conclusions of this thesis are:As for the type of non-efficient investment, we found out that both of state-owned companies and private companies perform insufficient investment tendency, with a stronger significance in private companies. And private companies’ cash-held behavior is more easily influenced by macroeconomic environment. There exist companies with excessive investment and insufficient investment at the same time in both of state-owned companies and private companies.As for the correlation of investment efficiency and company performance, the sample overall reflect a negative correlation between the company performance and the non-efficiency levels of investment. Both of the two kinds of ownership reflect a negative correlation, with a stronger significance in private companies. Company performance of private companies is more sensitive to the changes of non-efficient investments.