Enterprise Group, Nature Of Property Right And Over-Investment

In recent years, the enterprise group have got rapid development In our country. According to statistics, In our A shares of all listing Corporations, the companies attached to the enterprise group as high as 76.97%. It plays a more and more important role in the economic development of our country, and the academic community pay more attention to it. The present research shows that the enterprise group can bring more financial support to the member companies, but can the resources within the group be effectively configured? Are the member companies capable of effectively using this part of the capital? Does it lead to more serious over investment? Or how the China’s special institutional environment to affect the company’s over-investment behavior of the company which belongs to the group? The existing studies have not fully explored these problems, and the scholars have not yet come to the same opinion. So it needs to be further analyzed.This paper is based on the phenomenon that the listed companies have over-investment problem in our country. And the purpose of this study is to explore the relationship between the enterprise group as well as the nature of property rights and the over-investment of companies. Firstly, we briefly reviews relevant research. Secondly we analyzed the effect of enterprise group on companies’free cash flow of investment and are the different nature of property rights will affects the over-investment of companies affiliated to the enterprise group. According to the previous analysis, we proposed hypothesis, built research models and used A-share listed companies from 2009 to 2014 in stock exchange data to analyze the hypothesis presented earlier. And we use comparative analysis and multiple regression analysis to study the influence.We found that the over-investment extent of companies affiliated to the enterprise group significantly higher than the independent public companies. Further research showed that when a company may face external financing constraints, this result also holds true. To some extent, the conclusion shows that the internal capital market is effective. In addition, we took into account the nature of property rights, and the result shows that, the extent of over-investment of state-owned group of enterprises are significantly higher than the group of private nature of the enterprises. And compared with the central government-owned group of enterprises, the extent of over-investment of local government-owned group of enterprises are significantly higher. The research conclusion of this paper provides a mechanism for the influence of the enterprise group on the over-investment of the member companies. That is, the enterprise group’s financial support for the member companies to raise the level of free cash flow then leads to more serious over-investment.Combine of empirical results and relevant literature, we propose the following policy suggestions to build efficient internal capital market and enhance the overall value of the group. Firstly, we should improve the legal system and standardize corporate governance. Secondly, we should enhence the independence of state-owned enterprises, thereby weakening the impact of government-to-business and give full play to the role of market-oriented regulation. Finally, we should regulate internal capital market’s operation and to continuously improve the financial company’s various functions. In particular, to improve the external financing capacity and the internal capital allocation efficiency of the financial company.