Research On Internal Net Worth、 Executive Resbonsibility And Firm-level Investment

The growth and expansion process of enterprises are inseparable frominvestment activates. Due to the impact of asymmetric information andagency problems, enterprises often face under-investment andover-investment. Both of the two types are called inefficient investment andthey may result in inefficient allocation of resources and damaging corporatevalue. With foundation of asymmetric information and agency problems, ourresearch focuses on the relationships between internal net worth andinvestment expenditure, internal net worth and inefficient investment.This thesis makes research observation on5115selected samples from1023enterprises in A share market between2008–2012. Throughdescriptive statistics and regression results, we find that, internal net worthhas a significant positive correlation with investment expenditure. Besides, when there is under-investment in enterprises which often caused byasymmetric information, as external financing is fixed, an increase in internalnet worth will relieve under-investment. When there is over-investment inenterprises, as internal capital exceeds investment requires, an increase ininternal net worth will aggravate over-investment.In addition, our research adds variable of executive responsibility. Theregression results show that, when an enterprise has an executive who isresponsible for engineering or investment department, thus will depressinvestment expenditure and reduce inefficient investment. These findingsexplain that strengthen corporation governance is useful to improveinvestment efficiency.