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External Governance Environment, Political Connection And Corporate Investment Efficiency

Posted on:2016-11-10Degree:MasterType:Thesis
Country:ChinaCandidate:H LiaoFull Text:PDF
GTID:2309330482469578Subject:Accounting
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Investment, one of the three important engines which drive our economic growth, holds the crucial position in the national economy all the time, giving play to its fundamental role. The inefficient investment behaviors common in enterprises, however, have not only created enormous waste of resources, but also seriously impeded sound and sustainable social and economic growth. Under the circumstances in which China’s economy has stepped into the new normal after over 30 years of rapid growth, it has become the social focus to study the inefficient behaviors in the enterprises and propose the corresponding solutions. The current research holds that the information asymmetry and agency problems are the main reasons for the low efficient investment among enterprises. On the one hand, under the specific economic and political systems in our country, the senior managers, with their own political connection, are always able to play a great role in investment efficiency; on the other hand, political connection, as a micro-mechanism, is to be influenced by the external macroscopic environment when functioning. Due to the economic imbalance among our different regions, the external governance factors, will touch the investment efficiency, such as differences in financial development, legal construction, marketization, etc. Therefore, in studying investment efficiency of enterprises, it is a right way to combine the political connection with the external governance environment, which conforms to the situation of China’s corporate governance in transformation period and the demand of national economic development.this thesis makes a literature review on the research status about the relation among enterprise political connection, external governance environment and investment efficiency studied by experts and scholars at home and abroad, and points out the defects in our existing research. On this basis, the reciprocal effect on investment efficiency by political connection and external governance environment is regarded as the research focus. In order to explore the external factors in a more systematic way, the external governance environment is further divided into two dimensions in the thesis: financial marketization and legal construction, with the market index utilized as an aggregative indicator to measure it.The influence on investment efficiency by corporate governance under the different institutional environment is systematically studied, thus finding the factors in institutional environment which affect the relation between political connection and invest efficiency. Taking social capital theory, rent-seeking theory and information asymmetry as its theoretical foundation, the thesis puts forward the relevant research hypothesis. Then, using A share in all manufacturing-listed companies from 2007 to 2014 from CSMAR as its sample and STATA to build its research model, the thesis analyzes the differences of corporate investment efficiency under various types of connection and external governance environment and the relevant reasons, with over-investment and under-investment as the starting point.The thesis finds that corporate with political connection is lower in investment efficiency due to inefficient investment caused by over-investment, the phenomenon of which is obvious in state-owned enterprises and non-state-owned enterprises. The influence of financial development on investment efficiency is different according to the types of enterprise. The higher the finance develops in one region, the higher the investment efficiency of its state-owned enterprise is, whereas the non-state-owned enterprise is opposite. The legal construction plays a positive, but not prominent, role in investment efficiency of the state-owned enterprise, while marketization has a positive and significant impact on the investment efficiency. The further empirical research finds that the financial development and legal construction can weaken the negative effect on investment efficiency by political connection in enterprises. Hence, it will be of great importance to the future development of our enterprises to enhance external governance environment and properly handle their political connection.
Keywords/Search Tags:external governance environment, political connection, nature of property right, corporate investment efficiency
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