The Effect Of Enterprise Property And Inefficient Investment On Company Performance

For the sustainable development of the company and the growth of the future cash flow,investment decision plays an important role.The company's investment efficiency determines its development prospects and overall value.In view of China's national conditions,it is quite necessary to study how enterprise property affects the inefficient investment of listed companies in China.This paper explores the correlation between companies' inefficient investment and company performance,and inspect how enterprise investment behavior affects the promotion of company performance,distinguishing the ownership into state-owned enterprises and private enterprises.In this paper,we selected the unbalanced panel data of non-financial A shares listed companies in 2007-2015 as the sample,a total of 9368 observations(contains 1732 lag data).In the empirical part,we use two multivariate linear regression models to estimate the inefficient investment level,and then explore the relationship between inefficient investment and company performance.In model 2,there are two sub models,in order to distinguish the over-investment and under-investment.The study found that Chinese listed companies generally exist inefficient investment,and the overall sample shows a significant tendency of over-investment.Both the state-owned enterprises and private enterprises have shown over-investment tendency,but the over-investment in state-owned enterprises is more severe.Due to the wide range of information asymmetry and agency costs,under-investment individuals also exist in these two enterprises,but there are more over-investment individuals.Comparing the company performance of state-owned enterprises and private enterprises,the nationalization of enterprise property will damage the company performance.State-owned enterprises would abuse free cash flow and has a higher agency costs,leading to a lower company performance but higher dispersion degree.Further study found that inefficient investment level of the overall sample negatively correlated with company performance.However,distinguishing the over-investment and under-investment,an appropriate amount of over-investment will improve the company performance.Only when the degree of over-investment reaches a certain critical point,it starts to have a negative impact on company performance,which is more significant in state-owned enterprises.However,the negative impact of under-investment on company performance is greater than the overall negative impact of inefficient investment,which is more prominent in private enterprises.