The Relationship Between Executive Team Background Characteristics And Enterprise Over-investment

Into the twenty-first century, the rate of China’s fixed asset investment of the whole society has been keeping rapid growth. However, in sharp contrast, the efficiency of investment of Chinese enterprises has been declining, specifically, redundant construction and overcapacity in many industries, investment efficiency attracted the attention of theorists and practitioners. The separation of ownership and management in modern enterprise makes managers be in charge of daily management of the enterprise, which indicates that managers are mainly responsible for the formulation and implementation of business investment decisions. Due to the different managers have different background characteristics, they prefer to different investment projects, thereby affecting their investment decisions. However, previously, many scholars study over investment from the perspective of agency and did not take into account the impact of background characteristics of managers, which weakens the validity of their conclusions. Therefore, this article will combine the upper echelons theory and the principal-agent theory to study the relationship between the background characteristics of executive team and the over-investment level of corporate.Firstly, this paper systematically sorts out literature which are related with corporate governance mechanisms of over-investment related literature and collates into the following two aspects: the motivation of over-investment; the governance of excessive investment behavior. Secondly, this paper describes the principal-agent theory in detail, and on the basis of previous studies, giving a detailed analysis of the motivation of over-investment of business management. Then, this paper introduces the upper echelon theory and systematic analyzes the effect of background characteristics of business managers on firm performance and strategic choices. On this basis, the paper puts forward several assumptions.Finally, in order to test these hypothesis. Firstly, this article draws Richardson’s(2006) approach, selecting the data from 2008 to 2013 from listed companies in Shanghai Stock Exchange and Shenzhen Stock Exchange to estimate the level of over-investment of those listed companies. Then, build the model of background characteristics of executive team and over-investment, and use descriptive statistics and multivariate regression analysis to examine the relationship between the background characteristics of executive team and over-investment. Taking into account the special institutional background, on the TMT background characteristics of the different nature of the business property of corporate over-investment may be different, This paper further examines the relationship between the executive team and corporate over-investment background characteristics under different ownership among nature.The empirical results show that: the average age and degree of executive team were significantly negatively correlated with the level of over-investment, and the relationship between the average tenure of executive team and over-investment is u-shaped, which is consistent with the hypothesis of this paper; in non-state-owned listed companies, only the average tenure of corporate executives is significantly negative correlated with the level of over-investment, negative correlation between the average age and degree of the senior management team and over-investment is not significant; In the state-owned listed companies, there was a significant negative correlation between the average age and degree of the senior management team and over-investment, and the existence of u-shaped relationship between over-investment and the average tenure of the executive team. In this paper, these differences between non-state-owned listed companies and listed companies were reasonable explained.From the perspective of the background characteristics of manager, this paper studies the governance mechanism of over-investment, expanding the scope of the study of excessive investment, the result of this study is also significant for our future study of over-investment. Meanwhile, the research of the executive team background characteristics also has a guiding role for human resource management in business.