Research On Overinvestment Of D Company Under Soft Budget Constraint

The investment problem of enterprises has become a hot topic in the financial field,which affects the ability of enterprises to create value.A large number of studies have proposed that a reasonable capital structure can restrain the investment behavior of enterprises.However,under the special institutional background of China,the phenomenon of soft budget constraint makes enterprise managers expect the government and Banks to provide extra subsidies after the event,leading to the failure of enterprise debt governance and excessive investment behavior.Although the relevant systems are being improved,we still have a long way to go to deal with the soft budget constraint of Chinese enterprises.At present,most researches on soft budget constraints focus on causes and countermeasures,while most researches on excessive investment are carried out from the perspective of corporate governance.There are relatively few direct researches on these two issues,and most of them are empirical researches.Therefore,this paper makes full use of existing research results,takes budget soft constraint as the entry point,analyzes the impact path of enterprise overinvestment caused by it through literature and case studies,tries to make contributions to the expansion of overinvestment research from the perspective of institutional background,and puts forward some Suggestions for relevant policy departments and enterprises.Firstly,this paper reviews the relevant concepts and theories,and analyzes the influencing mechanism between them,so as to provide theoretical basis for the case analysis in the following part.Secondly,for the enterprise in the case,the excessive investment behavior of the company under the soft budget constraint is discussed by analyzing the government intervention motivation,capital source,government policy and investment efficiency of its excessive investment.Through the case analysis,the conclusion is drawn: the soft budget constraint will affect the investment behavior of the case company from the strategic burden of the government,the soft debt constraint of the bank,the insider control and other aspects.Therefore,it is proposed to take corresponding measures from the inside and outside of the enterprise to harden the budget constraint and improve the investment efficiency of the enterprise.This paper puts forward that the present value of Eva can be used as the criterion to evaluate investment projects and to evaluate managers’ performance,so as to alleviate managers’ impulsive investment behaviors caused by "insider control".