Managerial Power, Market Competition And Over-Investment

Investment is the driving force of enterprise development. And over-investment will hinder the pace of enterprise progress. With the rapid development of China’s economy, it led to some problems such as over-investment. In order to accelerate the development of enterprises, it often produces blind investment. In modern enterprises, the separation of ownership and management is generally accepted, which leads to the problem of agency. Management as a party to master the right to operate, representing the shareholders and creditors, is the hub of a variety of relationships. Managerial power is an important content in the research framework of corporate governance; managers who have enough power can directly affect the company’s investment decisions. When managers have conflicts with the interests of shareholders, it is likely to violate the wishes of shareholders and invest in their own favorable projects which finally damaging the interests of shareholders. Every company is in the market, so the companies’decision-making will be affected by the market environment. The greater the market competition, the greater the pressure and risk managers bear. And it will affect managers’investment decisions. And in the different property rights of enterprises, the impact of the managerial power over the over investment is different. Market competition is also different for different management authority. This paper makes an empirical study on the above problems.Based on the above discussion, this paper selects the listed corporation in Shanghai and Shenzhen Stock Exchange as the research object, the data of over-investment in 2009 to 2013, using Richardson’s investment model to predict the over-investment in 2010-2014, the data of managerial power and market competition in 2010 to 2014. This paper studies the relationship between managerial power and over-investment, and also studies the impact of market competition on the relationship between the two parts. The sample is divided into state-owned and non state-owned listing Corporation and we carry out the above research.This paper uses empirical analysis method, expecting our country to cultivate a reasonable competition market and listed companies in China can be reasonable control on the managerial power and improve the efficiency of investment, increase the interests of shareholders. For companies with different property rights, we can adopt different policies to improve the investment efficiency. Finally promote the sustainable development of China’s listed Corporation.Through the analysis, this paper draws the following conclusions: Firstly, there is a significant positive correlation between the managerial power and over-investment in the listed Corporation. Secondly, the positive correlation between managerial power and over-investment in state-owned listed corporation is more significant than that in the non state-owned listed corporation. Thirdly, when the other conditions are same, the market competition degree is higher, the managerial power will be restricted, and the positive correlation between managerial power and over-investment will decrease significantly. Fourthly, the more intense market competition, the positive correlation between managerial power and over-investment in non state-owned listed corporation is less significant than the state-owned listing Corporation.The research results of this paper have some implications for the construction of the macro competition market and the control of the managerial power and the excessive behavior of investment in the enterprises.