The Characteristics Of Top Management,Corporate Governance And Inefficient Investment

With the development of China’s economy and government adjustment,economic development presents the new normal,from rapid growth,the optimization and upgrading of economic structure,from investment driven to innovation driven.However,at the present stage,investment still has a significant impact on economic growth,and will not change in a short time.Along with the high growth of investment,there are many problems in the choice of investment projects of listed companies.,such as some listed companies have the serious idle problems that don’t raise funds in according with the intended plan to project resulting in waste of resources,some companies invest the project of high risk resulting in the great risk of funds withdrawal,some companies violate the agreement of creditors or shareholders and change the aim of investment funds,and so on.These unreasonable decisions reduce the value of company,affect the company’s development direction and the production ability of enterprises and the interests of stakeholders,and at the same time it will lead to waste of resources and slow down the pace of economic development.Avoiding inefficient investment and improving the efficiency of investment is a hot issue that has attracted wide attention in both academic and practical fields.Hambrick and Mason(1984)proposed the upper echelons theory.They think that the characteristics of executives,such as age,gender,education,work experience and tenure could be regarded as the reflection of value orientation,cognitive ability,risk preferences and other psychological characteristics,and impact on the organization’s strategy and organizational output decisions.In investment,there are many different choices and judgments of investment behavior,because of the differences of individual characteristics,executives’ cognitive ability and risk preferences are different.Therefore,executives with different characteristics make different decisions of investment.Corporate governance can alleviate the principal-agent problem and improve the companies’ performance and investment efficiency.With the adjustment of managers’ risk preferences and psychological status,corporate governance can alleviate the agency problem and urge managers making high level of investment decisions.Therefore,corporate governance can regulate the relationship between executives’ personal characteristics and the efficiency of investment.Corporate governance can be divided into supervisory mechanism and incentive mechanism.Although they are different,both of them can restrain the principal-agent problem and keep the interests of the top management in step with companies.In the process of corporate governance,the main task is to find the smallest sum of the three items:the cost of supervision,the cost of incentives and the deviation from the shareholder’s objective,so as to maximize the interests of the companies.The main purpose of this paper is to explore the relationship between the characteristics of top management,corporate governance and the behavior of inefficient investment.Based in 2013-2016 China’s Shanghai and Shenzhen main board listed companies as the research object,using principal-agent theory,asymmetric information theory,upper echelons theory and supervision and incentive theory of corporate governance and other related theories.This paper discussed the relationship between the characteristics of top management and inefficient investment,and then discussed whether the characteristics of top management have different effect on two types of inefficient investment(volitional inefficient investment and operational inefficient investment).Combined with supervisory and incentive theory of corporate governance,this paper discussed supervisory mechanism and incentive mechanism of corporate governance regulate the relationship between the characteristics of top management and inefficient investment.The results show that there are inefficient investment behaviors in Chinese enterprises,and the possibility of operational inefficient investment is greater than that of volitional inefficient investment.Age and tenure of top management can significantly affect the level of inefficient investment,and have a greater impact on operational inefficient investment.Internal governance can supervise and encourage managers to improve the efficiency of investment,but it still needs to be improved in depth.The experimental data show that the supervisory mechanism and incentive mechanism of corporate governance can also restrain the expected relationship between executives’ characteristics(age,tenure)and inefficient investment.This paper consists of six parts.The first part is the introduction.Introduce the basic framework of this paper,and mainly expounds the research background,purpose,theoretical and practical significance,and so on.The second part is the literature review.Reviews the literature of the characteristics of top management and inefficient investment,corporate governance and inefficient investment,and expounds the related viewpoints of scholars at home and abroad.Review the characteristics of top management,corporate governance and inefficient investment,comb and analyze the relevant literature.The third part,theoretical analysis,definition of related concepts and hypotheses.The specific contents include the definition of related concepts,the introduction of high echelon theory,principal-agent theory and the theory of corporate governance,and the hypothesis of this paper.The fourth part,research design.Firstly,define and quantify the variables.And then,construct the research model to lay a solid foundation for the empirical test.Describe selection of data,sources and analysis methods.The fifth part is data analysis and results.With Richardson(2006)model and other established model,this chapter first calculate the level of inefficient investment,get the score of supervision and incentive mechanism with the principal component analysis method,and then correlation analyses and regression analyses to draw relevant conclusions.The sixth part,conclusion.According to the empirical results,provide reasonable suggestions for performance management,the staffing of senior management,the incentive mechanism of equity in incentive mechanism and supervision mechanism,and summarize the shortcomings of the study and expectations for further research.Combined with the results of this study,we propose the following recommendations:(1)It should be strengthened emphasis on long-term effect of incentives.(2)When selecting and developing management,the enterprise should gradually infiltrate the strategic goal of the enterprise to the management,and make it more consistent with the enterprise strategy while making the investment decision.(3)Market should improve the market mechanism in China manager step by step,referencing to the mature experience of market operation mechanism in western developed countries,combining the characteristics of China’s socialist market economy,to develop the socialist market manager system which meets the China’s national economic conditions.(4)Establishing a more perfect supervisory mechanism,and making it play a real role.(5)Strengthen management and control of key resources.