Research On Top Management Characteristics And Over-investment Behavior

Investment decision is one of the three major financial decisions, play an importantrole in business activities, the investment activities of listed companies is an importantfoundation for future cash flow growth, and it is directly related to survival anddevelopment. But in recent years, with the rapid growth of our country economymacrocosmic level “overheating” company excessive investment gradually arousespeople’s attention, at the same time, microcosmic level overinvestment problems hasgradually become a hot issue. In1976, Jensen and Meckling has put forward theconcept of excessive investment, refers to the enterprise investment beyond its ownability and growth opportunities, the capital investment in the negative NPV isnon-profit projects. Excessive investment will not only waste the resources of enterpriseand damage the shareholders’ wealth, but also severely hampered the normaldevelopment of the enterprise. Zhejiang province’s economy develops rapidly,meanwhile, in order to expand its scale or to pursuit of high profits, some listedcompanies diversified blindly, put their money in some unrelated to their main businessareas, resulting in excessive investment behavior, and even could eventually lead tobusiness failure.The previous scholars mainly focused on corporate governance, free cash flow,corporate debt, the accounting information quality,related with excessive investmentSenior executives are one of the most important corporate human resources, they playan indispensable role in enterprise management, but their important roles in theinvestment activities are usually ignored. Therefore this article attempts to research theinfluences about the executives’ background characteristics on excessive investmentbehavior, which will provide certain theoretical basis to help us prevent and curb over-investment. At the same time, it will provide some reference to strengthen the humanresource management and build efficient management team of listed companies, whichhas important theoretical and realistic significances.The article selects the data of non-financial listed companies from2010to2012in Zhejiang province as the research sample, based on the “upper echelon theory” Firstly,we use the Richardson (2006) model to measure the over-investment level, which isused as explained variable, and then we select gender, age, education, profession,political background as the explanatory variables, And then in order to distinguish the differences of the state-owned enterprises and non-state-owned enterprises, we divideall the samples into two groups, and analyze the results of the regression. The finalempirical results indicate that:(1) Zhejiang listed enterprises have widespreadphenomenon of over-investment, the problem is more prominent than we thought.(2)Executive team average degree, the proportion of the Economic and managementprofessional background, average tenure, family background and so on, thesecharacteristics will have an inhibitory effect on the excessive investment.(3) Seniorpolitical background can aggravate the overinvestment of the enterprises, executiveswho has political background are more likely to over-investment. In the state-ownedand non-state-owned enterprises, the relationship between the executives’ backgroundcharacteristics and over-investment has some significant differences, we will has carriedon the further and concrete analysis.