External Auditing,Executive Power And Inefficient Investment

Over the past 30 years of reform and opening up,China's economy has developed rapidly,and the scale and number of listed companies in China have also continued to grow.The separation of the two rights under the entrusted agency has become an inevitable mode for the development of enterprises to a certain stage.Because of the self-interest tendency of management and the goal of maximizing personal interests and the goal of maximizing company value,the management's inefficient investment in the business process will be reduced the value of the company.From the overall point of view,the overall efficiency of enterprise investment in our market is not optimistic.The inefficient investment of enterprises accounts for a relatively high proportion,resulting in the sub-optimization of resource allocation and the insufficient use of social wealth.These problems need to be solved.In recent years,the role of external auditing in promoting the development of Chinese enterprises and improving the capital market has become increasingly prominent.As an important external oversight mechanism,external auditing has provided investors with more valuable information and carried out independent information transfer in the market.It has an irreplaceable role.By summarizing the literature at home and abroad,it is found that the academic research on executive power is mainly focused on the relationship with compensation,and few scholars have studied the relationship between it and inefficient investment.There is little literature on the relationship between external audit,executive authority and inefficient investment.In this context,this paper discusses and examines the relationship between external audit,executive power and inefficient investment,in order to enrich relevant research and provide more reference for the practice community.This paper mainly uses empirical research method,and takes the data of Shanghai and Shenzhen A-share companies from 2010 to 2017 as a sample,and establishes a regression model to study the correlation between the three.This paper first defines the meaning of external audit,executive power and inefficient investment,and then analyzes the relationship between executive power and enterprise inefficient investment by establishing regression model 1.The positive correlation between the two is tested,that is,the greater the executive power,the more the enterprise's inefficient investment,and found that in the case of over-investment and under-investment,the positive correlation between the two is significant.Because external audit is an important external governance mechanism in corporate governance,it has an important oversight role.Based on this,this paper establishes regression model 2 to conduct an empirical test of the impact of external audit on inefficient investment.It is found that high quality external audit can effectively restrain the inefficient investment of the company,and the inhibition is significant in the case of underinvestment.Finally,on the basis of the above test,considering that the external audit will impose certain restrictions on the use of the company's management power,thereby reducing the positive effect of the abuse of executive power on inefficient investments,This paper also designs the interaction item between external audit and executive power,establishes regression model 3,tests the influence of the interaction between external audit and executive power on the inefficient investment,and finds that the external audit can constrain the inefficient investment caused by the expansion of executive power.And in the case of excessive investment,it is significantly effective,thus affirming the necessity and importance of high-quality external audit for enterprise business development.The innovation of this paper lies in the research and analysis of the relationship between external audit,executive power and inefficient investment,and provides more valuable information for the practice community on the basis of enriching related theories.Through the research,this paper verifies that the excessive power of the executive leads to the inefficient investment of the enterprise;As an important external supervision,the external audit plays an effective role of restraint and restraint,thus providing reference opinions for the internal organization of the enterprise,the distribution of power,and the choice of external audit services.