Information Disclosure Quality,Free Cash Flow And Inefficient Investment

Investment is a very important economic activity in the daily operation of a company and is the key to its ability to make a profit.Therefore,the efficiency of a company’s investment will directly affect the maximization of the company’s operating profit and growth rate.However,with the development of the company,the contradictions caused by principal-agent and information asymmetry make the investment efficiency of the company inextricably linked to the stock of free cash flow within the company.In recent years,Chinese scholars have gradually increased their research on the governance of corporate inefficient investment,but fewer studies have been conducted from the government perspective of improving the quality of information disclosure.To this end,this paper examines the economic consequences of information disclosure from the perspective of investment efficiency,tries to find ways to effectively mitigate inefficient corporate investment,and provides references for opinions to accelerate the construction of information disclosure system and governance of inefficient investment of listed companies in China.Based on the above background,this paper firstly analyzes the correlation between free cash flow and inefficient investment within the framework of free cash flow hypothesis and financing constraint hypothesis;then,introduces the moderating variable of information disclosure quality to study its influence on the relationship between free cash flow and inefficient investment;finally,groups the listed companies according to the nature of property rights,and studies the influence of information disclosure quality on free cash flow and inefficient investment in state-owned enterprises and non-state-owned enterprises respectively.Based on the empirical data of A-share listed companies on the Shenzhen Stock Exchange from 2004 to 2020 and using a fixed-effects model,the results of this paper show that:(1)The more sufficient free cash flow of a company,the more it causes over-investment behavior.And high-quality information disclosure can alleviate over-investment caused by sufficient free cash flow;(2)The more shortage of free cash flow of a company,the more it will cause under-investment behavior.And high-quality information disclosure can alleviate under-investment due to shortage of cash flow;(3)The moderating effect of information disclosure quality on free cash flow and inefficient investment is more prominent in non-state owned enterprises than in state owned enterprises.Finally,based on the obtained findings,relevant policy recommendations are proposed for listed companies.On the basis of strengthening the construction of information disclosure system,effective internal and external supervision should be implemented at the same time,including strengthening the supervision function of independent board of directors and external supervision mechanisms such as legal environment governance,media governance,and audit governance.