Can The Managerial Ability Mitigate Corporate Non-Effective Investment?

Using a sample of the Chinese manufacturing listed companies in Shanghai and Shenzhen stock market during the period from 2010 to 2016,the relationship between managerial ability and the level of corporate non-effective investment is empirically tested in this paper.The empirical results show that the managerial ability is negatively correlated with the non-efficiency investment level,which indicates that the level of non-effective investment has been significantly mitigated with the improvement of the level of managerial ability.When the sample is divided into state-owned enterprises and private enterprises,the relationship between managerial ability and the level of non-effective investment is not significant for the state-owned enterprises,indicating that the effect of managerial ability on non-effective investment is weak.However,for private enterprises,the managerial ability negatively effect the level of non-effective investment significantly,indicating the managerial ability has obvious mitigating effect on the for the corporate non-effective investment.It may be due to state-owned and private enterprises face different problems between agency problems and information asymmetry.In addition,People reduce the corporate non-effective investment behavior mainly through controlling the agency problem and alleviating information asymmetry problem.The problem of agency is more likely to lead to over-investment,but information asymmetry is more likely to make under-invest.When we differentiate the sample from over-investment and under-investment,we find that the relationship between managerial ability and non-effective investment is not significant for over-investment.but for under-investment,the managerial ability negatively effect the non-effective investment.It shows that the influence of managerial ability on the non-effective investment is mainly realized through alleviating information asymmetry problem which easily lead to financing constraints,rather than inhibiting the agent conflict between the manager and the shareholders.