Analysis On Influential Factors Of Inefficient Investment In GEM

In this dissertation,a research has been made on the inefficient investment problems in GEM firms.Inefficient investment denotes a common situation which shows a deviation from the optimal allocation in corporate investment decisions.In specific environments of corporate investment,debt,financing constraints,agency problems,concentration of equity ownership and diversification could all lead to inefficient investments.This paper tries to analyze from a theoretical perspective how the interaction and pandering will influence the efficiency of corporate investment.In this process,factors like FCF and debt would combine with the conspiracy between the manager and shareholder groups to determine the level of inefficient investment in a firm.In this theoretical framework,this paper needs to analyze how this framework would work in reality to determine the level of investment for GEM firms.The paper first makes an introduction and basic analysis about the realistic environment for most GEM firms and points out the whole economic environment of underinvestment,and based on this would several situations about the underinvestment part be analyzed.The paper chooses Panel Data of GEM firms from 2013-2016 as research samples and draw several conclusions by the approach of empirical researches:1.The Chinese GEM firms are mostly in a symptom of underinvestment and this underinvestment which comes from former overinvestment would constrain the current development of GEM firms.2.For underinvestment as a whole,the concentration of equity ownership would deteriorate the degree of inefficiency,the conspiracy between the manager and shareholder groups would make the capital in its running more concentrated to a few projects which would increase the private revenues of specific groups,which would lead to the lack of overall investments.3.The level of debt overhung will constrain the investment efficiency of GEM firms because the inner characters of these firms make them incapable in dealing with renegotiations on debt and subsequent financing constraints caused by debt,which would conversely lead to inefficient investment.According to the results concluded,the paper gives some advices for amelioration.