The Relationship Between Board Independence And Corporate Inefficient Investment

At present,The non-efficiency investment of enterprises seriously restricted the healthy development of market economy, it also has adverse effect on the enterprise value. The corporate governance can effectively relieve the adverse influence on the investment efficiency. The board of directors is the core of corporate governance mechanism, and its efficiency of operation has no doubt an effect on the non-efficiency investment to a certain extent. But foreign experience shows that only fully independent board can optimize decision making, has the effective supervision and incentive managers, avoid the infringement r of shareholders’ interests, so as to make investment decisions tend to value maximization goal direction. But now, the independence of the board of directors of listed companies, there are still some problems, which restrict non-efficiency of investment will be subject to a certain extent. Based on this, this paper re-examined the relationship between the board independence and the corporate inefficient investment ad to strive to clarify the independence of the board if the company would have an impact of non-efficiency investments, and how they affect it.As to the measurement on the board independence, relevant research mainly adopts the proportion of independent directors, in addition, chairman and CEO two hats-one, the number of specialized committees under the Board, the remuneration of directors not receiving the proportion are also often used as the board independence measurement. Therefore, there is no uniform measurement and they are too single. Based on the literature and theoretical foundation, combing the relevant research on the equity balance degree and board independence, this paper summed up the relationship between the two, that is, With the improvement of the equity balance degree, board independence also increased accordingly. Therefore, in addition to the proportion of independent directors, the paper also uses the equity balance degree to measure the degree of independence of the board.Through empirical research, this paper draws the following conclusions:First, the non-efficiency investment measurement regression result shows that 64.59percent of China’s listed companies are in a state of under-investment; and35.41%of the listed companies show over-investment; we can see more of the listed companies are in a state of under-investment; the mean of over-investment is significantly greater than the mean of under-investment, so the degree of over-investment is more serious.Second, in terms of the mean, the proportion of the independent directors in our listed companies is low, relevant laws and regulations request listed company independent director proportion should be up to one-third, some listed companies in our country are in line with the rules, but there are still a part of the listed companies do not meet the requirements;the average of the equity balance degree is close to5%, showing that the controlling shareholders or the relative controlling shareholders are in the absolute dominance, the ability of checking and balancing of the second to the fifth largest shareholders is quite limited;Third, the proportion of independent directors and the under-investment has a significant positive correlation, indicating that the higher the proportion of the independent directors, the more serious of the problem; but the equity balance degree and the under-investment is significant negative,indicating that the improvement of the equity balance of listed companies can effectively alleviate the under-investment;Fourth, the board independence and the over-investment regression result shows that,there is a significant negative correlation between the over-investment and the proportion of independent directors, indicating that in the case of over-investment, a higher proportion of independent directors can make this problem be effectively alleviated; the equity balance degree and the over-investment is not significant negative, indicating the improvement of the degree of the equity balance don’t effectively curb the over-investment.Fifth,As can be seen from the regression results, increasing the number of board meetings can effectively alleviate the under-investment due to the improvement of the proportion of independent directors, but it doesn’t play an effective way to inhibit over-investment. In addition, the number of board meetings do not play an mediate effects effectively on the relationship between the equity balance degree and the under-investment,over-investment. This conclusion also indirectly shows the board meetings do not fully play its role.In the final relevant policy suggestions are put forward, according to the insufficient research,we made a prospect for the follow-up study.