Market Competition,internal Control Quality And Investment Efficiency

Investment activities,as one of the "troikas" that drives economic grow,have always been a hot topic in academia.High-efficiency investment activities are not only conducive to the promotion of corporate value,but also crucial to the rational allocation of social resources.However,in the capital market,due to the widespread existence of information asymmetry and principal-agent problems,there are more or less inefficient investment phenomena in the development process of enterprises,which are specifically manifested as over-investment and under-investment.As an internal governance mechanism of an enterprise,the improvement of the internal control quality can alleviate the problem of principal-agent to a certain extent,and can also reduce the degree of information asymmetry of the enterprise,thereby improving investment efficiency.As an external governance mechanism,product market competition can effectively alleviate the problem of information asymmetry in enterprises.Scholars have reached a consensus on this.However,whether product market competition can reduce agency problems has not reached a consensus conclusion,and further research is needed.As the internal and external governance mechanism of the company,internal control quality and product market competition have some overlap in reducing the degree of information asymmetry and easing the agency,then how will the two governance mechanism affect investment efficiency? In terms of their effects on investment efficiency,are they alternative effects or complementary effects? Further research is needed.From the existing literature,most of the current researches focus on the internal governance mechanism of investment efficiency,and less research focus on external governance mechanisms,such as product market competition.Based on the above background,from the perspective of product market competition and internal control quality,this article starts from the direction of mitigating information asymmetry and agency problems to explore the effect of the two governance mechanism on investment efficiency.The innovation of this article is to incorporate the three problem into the same framework to analyze the role of product market competition and internal control quality on improving the efficiency of investment.And this article divide the inefficient investment phenomena into the overinvestment and underinvestment sample groups for further research.Firstly,the relevant theoretical foundations are expounded,includingprincipal-agent theory,information asymmetry theory.And I put forward the hypotheses of this article based on the relevant theories;Then this paper uses the financial data of A-share non-financial listed companies from 2014 to 2018 as a research sample,using Richardson efficient investment model to measure investment efficiency.This paper conducts full-sample and sub-sample regression analysis through empirical methods to study the impact of product market competition on investment efficiency,overinvestment,and underinvestment.Based on this,this article takes the internal control quality as a research perspective to further explore the effect of product market competition and internal control quality on the impact of investment efficiency.This paper draws the following conclusions:(1)Product market competition has a positive effect on the improvement of investment efficiency,which is specifically manifested as: the more intense the product market competition,the more it can suppress the company's over-investment behavior and alleviate the under-investment phenomenon;(2)This paper incorporate product market competition,internal control quality,and investment efficiency into the same frameworkare.It is found that the improvement of the internal control quality can reduce the possibility of over-investment and under-investment behavior of enterprises,and plays a similar role in improving investment efficiency as product market competition.Therefore,there is a substitution effect between the two governance mechanism.In other words,with the improvement of the company's internal control quality,the relationship between the product market competition and the investment efficiency will weaken.Therefore,companies should start with internal quality control and external product market competition to curb inefficient investment behavior.On the one hand,enterprises should promote the construction of an internal control system and optimize the internal control environment;on the other hand,the government should further strengthen product market competition to create a fair competition environment,so that it can improve the efficiency of resource allocation.