The Research On Private Benefits Of Control And Bank Loan To Over-Investment In Listed Companies

The investment is the cornerstone of company growth and profit increasing. Efficient, scientific investment decisions can promote the company’s development, also can make significant traction on China’s macro-economy. Behind the rapid economic growth, there are a lot of duplication, excessive construction of excessive investment, which result in a waste of social resources, the decline in value of the company. Over-investment is a worth and difficult studying in the direction of corporate governance.With ownership concentrating, the controlling shareholders on corporate financial decisions play a decisive role. The income of controlling shareholders consists of two parts, one is the revenue sharing, which is the present value of dividend flow for shareholdings; the other one is the private benefits of control, which is the benefits only enjoyed by controlling shareholders. Due to maximize its own interests, controlling shareholders will make the investment decisions which harm the interests of minority shareholders. In the pursuit of private benefits of control, controlling shareholders will be through the non-efficiency investment decisions to control more resources, might take a negative present value projects, resulting in over-investments in enterprises. As a major source of debt financing, the impact which bank loan for the companies’over-investment on is complex:On one hand, asymmetric information between shareholders and creditors will aggravate moral hazard of controlling shareholder, leading to more serious excessive investments; On the other hand, as a kind of debt financing, bank loan can restrict the investment decisions which made by enterprise management, curbing over-investment. But because of the widespread soft budget constraint, this inhibition is weakened accordingly. Therefore, examining the impact of private benefits of control and bank loans for companies to over-invest is the focus of this paper.It’s basing on method of combining the theoretical analysis and empirical analysis, this paper research on the relationship of private benefits of control, bank loan and over-investment of listed company. In theory, this paper analyzes the private benefits of control how to form the over-investments in listed companies based on principal-agent theory and control theory of the right of private benefits of controlling, also analyzes the influence mechanism of bank loans for companies to over-investment based on the theory of information asymmetry and of soft budget constraints. First, the empirical part select 2012-2014 a-share listed companies in Shanghai as a study sample, learning from Richardson’s Expected Investment Model to estimate the degree of over-investment, using multivariate regression model and empirical study on private benefits of control, bank loans, differences in the nature of equity on the effects of over-investment.Through empirical research, we find that the relationship between private benefits of control and over-investment excessive positive correlativity, further, relative to the non-State-owned listed companies, the promotion of private benefits of control for over-investment is more prominent in the State-controlled listed companies. Bank loans led to excessive investment in listed companies, and this promotion is more significant in the State-controlled listed companies. By check-and-balance of stock ownership enterprises can weaken the ability of controlling shareholders to gain private benefits of control. Check-and-balance of stock ownership effectively alleviates the over-investments in listed companies.