The Relationship Between Managers' Characteristics And Inefficient Investment

Investment decision is one of the most important strategic decisions of the enterprise,inefficient investment behavior will lead to the waste of funds and improper use,which directly hinder the healthy development of enterprises and damage the interests of shareholders.It has been proved that the enterprise managers' background characteristics have a significant influence on the inefficient investment behavior.The manager 's age,occupation experience,learning background can reflect personal social relationships,decision preference and risk orientation.Managers of different characteristics make different investment decisions according to their own experience and judgment and then affect the efficiency of inefficient investment.But most of the studies only study the relationship between managers and inefficient investment from the static perspective,seeing the development of different levels of enterprises as homogeneous.The growing enterprise has stage characteristics,so it is important to explore the influence of the life cycle on enterprise.Therefore,this paper introduces the perspective of the enterprise life cycle to explore the influence of the background characteristics of managers on the inefficient investment in different life cycle stages.In base on the Upper Echelons Theory,the Principal-agent Theory and the Life-cycle Theory,the paper defined the important concept of the study.The inefficient investment can be divided into overinvestment and underinvestment.The Manager is defined as the general manager,vice-general manager,secretary of the board,financial chief and chief accountant,chief engineer and other senior managers,using average age,average tenure,average degree as background characteristics.Enterprise life cycle is divided into growth period and mature period and decline period.The paper used listed companies in 2012-2015 as study samples,using the expecting-residual-model to measure the inefficient investment,and the cash-flow classification to divide the life cycle,analyzing the relationship between life cycle,the managers' characteristics and inefficient investment.The study shows that average age can significantly reduce the overinvestment,increase underinvestment in the mature and decline period.The average tenure can significantly reduce the overinvestment in the mature and recession period,reduce underinvestment in the growth period and increase the underinvestment in the recession.The average degree of education can reduce overinvestment in all period of enterprise life and reduce underinvestment in growth and maturity period.According to the result,highly-educated managers have theoretical and informational advantage to making effective investment.Companies which invest excessive hire older managers can help making steady investment,avoid risk and reducing overinvestment,while companies in maturity and decline period should hire young people to enhance the vitality of enterprises,reduce the underinvestment.Companies should avoid significant changes in management in growth and maturity period to ensure managers having deep understanding of enterprise to promote investment efficiency,and make appropriate change the management to introduce new investment idea in the case of underinvestment and decline periodThis paper has two innovations:(1)The paper discussed the influence of managers' background characteristics on overinvestment and underinvestment.(2)The paper discussed the influence of the manager's characteristics on the enterprise the dynamic perspective of enterprise life cycle,provided theoretical basis to select the appropriate managers according to enterprise development stage.