Agency Cost,Financial Leverage,and Over-investment By Listed Companies

In order to lead the world economy,China's economy has experienced a leap-forward development in the past decade.This development is of great value to the overall development of the society.It has made the scale and investment environment of many enterprises better.Now.However,information asymmetry,agency costs,and other reasons have always existed.Many companies cannot adapt to the changes in social and economic development and have made investment strategies different degrees of inappropriateness,such as inefficient investment.These bad tactics greatly infringe on the rights of creditors and corporate shareholders.Therefore,the study of over-investment in enterprises has attracted the attention of the academic community.In fact,the appropriate debt has certain advantages for the development of the company.It is an important financing channel.However,domestic empirical research has not reached a unified view on the content of this part.In China's enterprises,there is such a phenomenon that the company's ownership and management rights are divided,not one,which will cause the client to own the company's assets,and the agent is the manager of the company's assets entrusted with the operation of the company..Because of the asymmetric information,the owner outside the enterprise cannot determine the degree of effort of the manager for the work.This leads to the phenomenon that the manager(agent)pursuing the maximization of his own interests will have the phenomenon of betraying the interests of the trustee.This resulted in agency costs.Because the agency cost will waste the company's resources,it will damage the interests of shareholders and creditors,which is not conducive to the reasonable control of social resources.In our country,the problem of agency costs is mainly reflected in state-owned enterprises.How to reduce agency costs and solve agency problems is an important fundamental issue in the reform of state-owned enterprises.Therefore,this article will use agency costs as an entry point to study the impact of financial leverage on over-investment in listed companies.This article uses a combination of theoretical and empirical methods to study selected topics.First,review and review the literature on agency costs,financial leverage and over-investment in listed companies,and then use relevant theories to analyze the impact of agency costs and financial leverage on over-investment in listedcompanies in China.In the empirical process,this article uses data from all A-share listed companies in the Shanghai and Shenzhen stock markets over the five-year period from 2012 to 2016 to establish an optimal investment model and return them.If the residual is greater than zero,it is over-invested as a dependent variable.Then,through descriptive statistics,correlation,and regression analysis,it discusses whether financial leverage has an impact on over-investment.It also studies how financial leverage influences agency costs and thus plays an important role in over-investment..In addition,this article will also consider the difference in the effect of agency costs and financial leverage on the over-investment of listed companies with different property rights in China.Finally,based on the above conclusions,relevant countermeasures and suggestions are proposed.These conclusions have implications for exploring the governance effects of financial leverage,improving the capital structure of listed companies,and reducing agency costs.At the same time,they help improve and advance related theories,and offer opinions and suggestions on mitigation of excessive investment by enterprises.