Study On The Influence Of Free Cash Flow On Inefficient Investment Based On Internal Control

As an important financial management activity of an enterprise,its investment activity not only affects the business results and financial status of the enterprise,but also affects the distribution of the entire social resource.Because of the agency cost problem and information asymmetry,modern enterprises have a close relationship between the stock of Free Cash Flow and investment efficiency.In recent years,domestic and foreign scholars have done a lot of research on the sensitivity of governance investment-cash flow,but there is less literature on internal control that can weaken the relationship between Free Cash Flow and non-efficiency investment.Therefore,under the influence of free cash flow on non-efficiency investment,this paper adds internal control quality as a regulation variable,trying to find a way to effectively control the non-efficiency investment of enterprises.Further,according to the nature of property rights,the listed companies are divided into state-owned enterprises and non-state-owned enterprises,so as to study whether there are differences in the governance effects of internal control on free cash flow and non-efficiency investment for different actual controllers,thus enriching China's unique institutional background.Governance of non-efficiency investment.This paper takes the financial data of listed companies in Shanghai and Shenzhen manufacturing industry from 2012 to 2017 as a sample.Firstly,the relationship between Free Cash Flow and non-efficiency investment is tested.The results show that the more Free Cash Flow,the more serious the over-investment;freedom Enterprises with a Shortage of Cash Flow are more prone to under-investment.In order to effectively manage the sensitivity of investment-cash flow,this paper introduces internal control variables to further examine the impact of internal control quality on cash flow-investment efficiency.The results of the study indicate that high quality internal controls can constrain over-investment(under-investment)behavior of companies with sufficient Free Cash Flow(Shortage Cash Flow).According to China's unique institutional environment,the listed companies are divided into state-owned enterprises and non-state-owned enterprises.It is concluded that the internal control of non-state-owned enterprises has more obvious effects on cash flow-investment efficiency than state-owned enterprises.Finally,based on the conclusions obtained,the paper puts forward some policy recommendations such as strengthening internal control construction,strengthening supervision of cash flow and improving the efficiency of state-owned enterprises' investment and investment.