Research On Influencing Factors Of State-owned Enterprises Over Investment

Recent years,over-investment has been a hot area of research. Many facts show that Chinese companies tend to over-invest, and over-investment in state-owned enterprises is more common, and more serious. Existing studies on the effects of over-investment factors are mainly around the principal-agent theory, asymmetric information theory and the theory of free cash flow.Few research studies touch on the effects of external factors on the over-investment in state-owned enterprises. Due to the special property background of state-owned enterprises,and state-owned enterprises plays a special role in Chinese economy, external factors such as government intervention have an important impact on investment.This paper studies the impact of internal and external factors on the Chinese state-owned enterprises over-investment.This paper select state-owned non-financial enterprises of Chinese A-share listed as the research object, select data from2005to2009, then establish a measurement model of over-investment and a model of over-investment effect factors. The regression residuals was used as independent variable and dependent variable in the analysis, and the analysis particularly focused on the relationship between over-investment and managerial ownership, ownership concentration, debts level, free cash flow, level of government intervention, the market level, the legal level. The following conclusion was made:Firstly,compared with insufficient investment, over-investment exists in state-owned enterprises more commonly. And there are more state-owned enterprises that have over-invested. Among them, the electricity industry, gas industry and water production and supply industry have the most serious tendency to over-investment.Secondly, state-owned enterprises have high degree of ownership concentration, most state-owned enterprises have free cash flow available for disposal.This provides the possibility for state-owned enterprises to over invest. There is a positive correlation between over investment and ownership concentration, free cash flow, government intervention. The level of government intervention has the greatest impact on state-owned enterprises over investment and it is the driving factor of over investment.Thirdly, there is a negative correlation between over investment and the level of indebtedness,marketization,legal development. And the level of indebtedness has the most effective inhibition to SOE over-investment.Lastly,there is no significant correlation between shareholding managerial level and SOE over investment, this shows the shareholding status didn’t act as an effective incentive for management level in china and it didn’t ease the agency conflict between managers and shareholders.This paper enriches research of SOE over investment and unveils the impact that government intervention has on SOE over-investment. This paper provides arguments of governing SOE over-investment, and has important theoretical and practical significance.