Financial Flexibility And Over-investment In Different Levels Of Corporate Governance

As one of the three major financial management decisions,investment decision-making plays a key role in financial management.It is the fundamental way to increase enterprise value and maximize shareholders' wealth.When the scale of investment has developed to a certain extent,the investment efficiency is particularly important,inefficient investment will not only result in waste of resources,but also affect the long-term development of enterprises and even survival,over-investment is a performance of inefficient investment.Over-investment refers to a business investing in a project with a negative net present value,damaging shareholders' wealth and business value.Financial flexibility is a capability for companies to deal with uncertainties,including the ability to respond effectively to crises and better capitalize on investment opportunities.But the financial flexibility is a double-edged sword,has its positive impact,but also has its negative impact.Inadequate financial flexibility will lead to excessive free cash flow and low level of financial leverage,leading to excessive investment in enterprises more serious.In view of China's capital market property rights of the significant differences,divided into state-owned enterprises and private enterprises.State-owned enterprises and private enterprises face different investment opportunities and financing constraints,and their investment efficiency will be different.Compared with the private enterprises,the financial flexibility of state-owned enterprises exacerbates the over-investment.Corporate governance,as an effective check-and-balance mechanism,has an inhibitory effect on the inefficient investment of enterprises.Through the supervision mechanism and incentive mechanism,can effectively reduce the financial flexibility on the deterioration of over-investment.Therefore,enterprises in maintaining financial flexibility at the same time to attach importance to the construction of corporate governance.This paper focuses on the impact of financial flexibility on over-investment,and introduces the corporate governance index to study the difference of financial resilience to overinvestment under different corporate governance levels.We select the sample data from 2000 to 2015,And according to the different nature of property rights,the sample data is divided into the state-owned enterprises and private enterprises,and further study,so that theoretical research can produce its practical significance,that the state-owned enterprises should maintain an appropriate level of financial flexibility and focus on building effective corporate governance Mechanism,to promote the financial flexibility to play its due role.This paper not only expands the research on financial flexibility and investment efficiency,but also puts forward some relevant countermeasures and suggestions to maintain financial flexibility,improve investment efficiency and improve corporate governance.