Institutional Environment,Managerial Equity Incentive And Corporate Inefficient Investment

As one of the “three tractors” which drives the growth of economy,investment plays a vital role in economic growth.However,in recent years,inefficient investment has been commonly existed in China's enterprises.And this kind of inefficient investment is very harmful to the growth of the national economy.Researchers have showed that inefficient investment,to a large extent,is related to information asymmetry and agency problem.So whether managerial equity incentives will encourage managers to think twice before they make investment decisions,thereby improving enterprise's inefficient investment,is a problem we should pay attention and research on.At the same time,all of the enterprise investment behaviors are carried out in a certain external institutional environment,what effect will institutional environment have on inefficient investment of firms and what is the role of institutional environment in the impact of managerial equity incentives on inefficient investment of firms?Firstly,this paper reviews relevant research on institutional environment,managerial equity incentive and corporate inefficient investment.On this basis,it helps to clarify the theoretical basis,the research scope and the research method.Secondly,we put forward the hypothesis of this paper by theory analysis.Finally,in order to further study the relationship between institutional environment,managerial equity incentive and inefficient investment,this paper selects A-share companies which implemented managerial equity incentive and listed in Shanghai and Shenzhen,using multiple regression analysis of empirical research to analyze the impact of institutional environment and managerial equity incentive on inefficient investment in enterprises and the role institutional environment plays in the impact of managerial equity incentives on inefficient investment in enterprises.The empirical results show that,firstly,good institutional environment is conducive to improving corporate inefficient investment.Compared with state-ownedenterprises,non-SOE is more sensitive to the change of legal environment,but it is not sensitive to the change of government intervention and financial development.Secondly,managerial equity incentive is conductive to improving corporate inefficient investment.Thirdly,good institutional environment can promote the beneficial effect managerial equity incentive has on corporate inefficient investment.At last,based on the empirical research results and combined with China's institutional environment and the reality of managerial equity incentive,we put forward four suggestions standing on the perspective of regulators and enterprises.Firstly,we must reduce the level of government intervention and improve the level of the rule of law and financial development.Secondly,enterprises should carefully consider whether to implement managerial equity incentives.Thirdly,we must improve the equity incentive policy,which includes rational design of equity incentive model and equity incentive level.Last but not least,enterprises should optimize the corporate governance structure.