Property Rights, Management Background Characteristics And Corporate Investment

At present, there is a convergence of investment projects in China, which manifests as overinvestment or underinvestment in a field for some time. The macro "convergence of investment" is closely related to the micro "herd behavior" in corporate investment. It will have a negative impact on macroeconomic stability and efficiency, and also will hinder the long-time development of enterprises at last. So it is necessary to study the influences of the herd behavior in corporate investment. The management plays an important role in the investment decision-making of a company. But the emotions, values and cognitive ability of managers can influence their behavior choice. Hence, combined with the special nature of corporate property right in China, this paper studies the factors of the corporate herd investment behavior from the perspective of management background characteristics. This perspective, especially background characteristics of chairman, was rare before.Firstly, this paper reviews the related literature systematically. And then on the basis of principal-agent theory, upper echelon theory and herd behavior theory, it discusses the reason why the background characteristics of management can impact on the herd behavior of corporate investment. Secondly, by using the data of A-share companies listed during 2009—2013 in Shanghai or Shenzhen Stock Exchange, this paper explores the existence of herd investment behavior of China’s companies, and combined with the ownership property of listing corporation, it does further research about the effect of between the background characteristics of top management team and chairman on corporate herd investment behavior by mulitiple regression. We come to the conclusion that: ①when investing a project, China’s firms act as the herds. Relative to the non-state-owned enterprises, state-owned enterprises’ herd behavior is more significant. ② there is a correlation between management background and the herd behavior. The results show that there underlies a positive relationship between chairman’s age and the herd behavior. As to top management team’s average age and tenure, the positive relationship also exists. But there’s a negative relationship between chairman’s age education, executive team’s size and the herd behavior. And the finance, accounting or eco-management education background of a chairman can restrain the herd behavior of investment. ③Distinguishing between state-owned enterprises and non-state-owned enterprises, this paper finds the management background characteristics’ impact on the herd behavior in corporate investment has a certain difference, and the impact is more significant in non-state-owned enterprises. Due to the objective environment, the management background characteristics is not the main factor of state-owned enterprises’ herd behavior. Finally, this paper put forward the corresponding countermeasures and suggestions according to the conclusions.