Research To The Influential Factors Of Excessive Investment Of Family Holding Listed Companies

With economic development, investment has become a way to get the cash flowgrowth in the future, and “Hot invest” phenomenon has appeared in some regions,inefficient investment will result in a waste of resources. In the early stages ofdevelopment, family businesses generally do not have excessive investment with shortproxy chain and low agency costs. With the development of the family business, thechanges of governance structure, the introduction of manger, family business begins tohave agency costs and excessive investment behavior, therefore, exploring the impactfactors of family business’s over-investment is particularly important.This thesis, on the basis of reviewing a large number of literature and related theories,conducts a preliminary inquiry on family business over-investment’s factors.First,introduce the relevant theory. Secondly, analyze the causes of companies’ excessiveinvestment, including agency costs, asymmetric information and financial constraintscaused by excessive investment, as well as the concept of the family business andgovernance structure. Finally, the thesis conducts an empirical study. In the empirical part,to a family of listed companies in2009-2011as the sample, analyze the behavior ofover-investment in family businesses drawing Richardson (2006) model, the results showsthat37percent of family businesses existing over investment, and this explains that listedfamily firms have less invest efficiency. Followed by occurrence of excessive investmentcompanies as samples, using linear regression, logistic regression do empirical research onthe factors of having significant impact on over-investment. The empirical results showthat family businesses have the phenomenon of over investment. There is a significantpositive correlation between Free cash flow and overinvestment; The correlation betweencontrolling shareholder and over-investment is positive, but the effect was not significant;There is a significant negative correlation between the first shareholder’s ownership percentage and over-investment. The correlation between short-term liabilities andover-investment is significant negative, while the long-term liabilities and over-investmenthas a significant positive correlation. There is a significant positive correlation betweenpolitical association and the family business over-investment, and the local politicalassociation has a more significant impact.Taking these empirical findings, based on our national conditions, this paper proposessome policies and proposals to reduce family business over-investment.