Ownership Concentration,Free Cash Flow And Over-investment

The Annual Report On China’s Industrial Economy points out that in 2015 China’s overcapacity contradiction over a year is more serious,caused by excessive investment overcapacity has had a tremendous impact on China’s macro economy,overcapacity intensified and more and more of the total excess industry increases,has become an obstacle to the steady growth of great resistance the economy of our country.In 2015,the Ministry announced that China’s overcapacity in the industry there are iron and steel,coal,electrolytic aluminum,cement,flat glass,shipbuilding and other industries.At the same time,in recent years,the supply side structural reforms are constantly pushing forward the implementation,and around the three to fill a drop of the task to promote the landing of the program,making the capacity to become a top priority in.Therefore,with the background,the phenomenon of over investment overcapacity in listed companies based on the present,research on the relationship between free cash flow and over investment,and the introduction of ownership concentration,to explore the relationship between the three,trying to provide suggestions to alleviate the over investment problem of overcapacity in China listed companies.This paper focuses on the domestic and foreign existing research,analysis of the relevant literature,free cash flow and over investment focus on equity,theoretical basis and provide guidance for the study of this paper lay;then the free cash flow hypothesis,principal-agent theory and information asymmetry theory,detailed theoretical analysis on the relationship between ownership concentration,free cash flow and over investment between them,and put forward the corresponding hypothesis.In the empirical part,this paper selects the overcapacity listed companies from 2008 to 2015 a total of 824 balanced panel data as the research sample,using Richardson model to measure the excessive investment,namely takes the model residuals as explanatory variables over investment,then select the equity concentration,free cash flow andcontrol variables to construct the regression model,with the help of Stats statistical software for analysis concluded: free cash flow and over investment is positively related to the company;when free cash flow is positive,more prone to excessive investment behavior;equity concentration can effectively inhibit the relationship between free cash flow and over investment.Finally,according to the conclusion of the study,China’s overcapacity in the transformation and upgrading of listed companies put forward feasible suggestions,mainly show that overcapacity in China listed companies should be rational use of free cash flow and effective to control the concentration of ownership in the process of operation,and countries should further deepen reform,continue to eliminate backward production capacity and at the same time,the digestion of excess capacity;this paper also analyzed the research limitations of the paper and future research directions.