Product Market Competition、Managerial Incentive And Over-investment

An important feature of the modern enterprise system is the separation of ownership and control,"control the wealth and have a responsibility to ensure operating efficiency and production profits who areno longer owners and those who are entitled to the profits." When they both are utility-maximizingeconomic man, the agent can not reasonably be expected to always act in accordance with the interests ofclients, resulting in the principal-agent problem.Based on China’s transition period institutional context,The paper aims to start from product market competition and end of over-investment by managementincentives as the junction point, the product market competition and enterprise management incentives forinvestment decisions into a unified analytical framework. To investigate whether the management incentiveto curb excessive investment behavior of listed companies, the level of competition in the various markets,management incentive effect on excessive investment any difference.In this paper,2007-2011Chinese listed companies as samples of these paths are empirically tested.First, and the indirect mechanism from Product market competition to over-investment by managementincentive. Second, the author steps two ways: first, establish the expeeted investment model and get thevalue of expected investment. The actual amount of companies with over-investment can get by comparethe aetua linvestment and the expected investment. The seeond step: establish the model on product marketcompetition, management incentive and over-investment to test management incentives can play anintermediary role.This study shows that product market competition by promoting the improvement of managementincentive reduces over-investment behavior, Beeause the threat of liquidation induced by product marketcompetition is so serious, so we find that, as the product market competition intensifies, companies willimprove the management compensation incentive, increase incentives for management’s holdings, thesemeasures can effectively inhibit overinvestment managers. But this job is not found in the product marketcompetition and consumer overinvestment mediating effect relationship.Therefore, we believe that to improve China’s overinvestment serious problem, it is necessary tocontinue to optimize the company’s internal incentives, combine the management of the long-term interestsand business interests; At the same time to strengthen product market competition, with the power tosupervise the management of the market and improve investment efficiency. The combination of internaland external governance of listed companies is the inevitable choice facing our country.