Research On Correlation Between Ownership Concentration, Nature Of Ultimate Ownership And The Efficiency Of Investment

In the modern micro-enterprise management, investment decisions are the most important of the three financial decisions. Because the investment decision is the main motivation of a company’s growth, and companies’expanding reproduction is based on the investment decision, investment decisions directly affect the company’s dividend policy and financial decisions; thereby affect the level of corporate profits and performance levels. However, due to the impaction of various factors, the target of the investment is not the right one which should maximize enterprise value or create the most wealth for shareholders. The appropriate investment method has been distorted. Issues like overinvestment or underinvestment arise. At present, the capital market in our country is immature and imperfect, the controlling shareholder of "dominance" phenomenon is quite common. The controlling shareholder of the listed companies for their personal reasons has exerted a serious negative impact on the investment decisions. Another prominent feature of the listed companies in our country is that many companies are controlled by the government. And the government always makes ineffective investment decisions. Therefore, this article focuses on the two common issues that affect the efficiency of investment in order to solve the plight of inefficient investment.Firstly, through reviewing the relevant literature and theory, we analyze the relationship between ownership concentration, nature of ultimate ownership and the efficiency of investment in investment theory, asymmetric information theory and the principal-agent theory, then put forward the hypothesis. In the main part of the empirical analysis, with Richardson model, this article tests the correlation between ownership concentration and investment efficiency using the data of A-share listed companies from 2010 to 2013, combined with the special circumstances and institutional context of transition economies, then carry out further analysis by differentiating nature of ultimate ownership. Conclusions show:the ownership concentration degree that represented by the first shareholder’s shareholding ratio, the proportion of top five shareholders and the proportion of top five shareholders square have a positive relationship with non-efficiency of investment; Z index as the representative of the ownership concentration has no significant correlation with the non-efficiency of investment; in state-owned enterprises, there is a high significant positive correlation between ownership concentration and non-efficiency investment. While this is not that strong in the private companies. The findings not only help us to better understand the factors affecting investment behavior, but also lead us to dig the further reason of the different efficiency of the investment. We may also provide theoretical support for the improving of investment efficiency of listed companies.