Managerial Power, Overinvestment, And Firm Performanc

Under the modern enterprise system,ownership and control are separated,and there is a principal-agent problem between owners and managers.However,in state-owned enterprises,due to the absence of owners,the agency link between managers and ultimate beneficiaries is prolonged,and the principal-agent problem is more serious..Although stateowned enterprises have carried out a series of deepening reform measures,they have not yet established a sound corporate governance mechanism in a real sense.This paper explores the influence of the overflow of managerial power on corporate overinvestment and corporate performance,and proposes relevant governance measures,which will help strengthen the institutional constraints on the managerial power of state-owned enterprises.The case study in this paper selects China Huarong Asset Management Company as the case study object.First,it measures the management power of Lai Xiaomin’s gang,and focuses on how the Lai Xiaomin gang uses management power to affect the company’s investment scale and the distribution of investment assets;second,it quantitatively analyzes the company’s performance and development from over-investment at the group and subsidiary levels.The influence of strategy;Finally,it explores the causes of the excessive power of the management of Lai Xiaomin’s gang,and proposes corresponding governance measures.The conclusion of this paper is that when managers with unconstrained power make corporate investment decisions,they no longer consider increasing corporate value and taking social responsibility,but improving short-term performance and obtaining personal benefits.Therefore,when choosing a company expansion strategy,they tend to be more aggressive,and when choosing investment targets,they also prefer projects that can transfer benefits and high-risk assets that can improve performance in the short term.Excessive investment behavior under the influence of management power can seriously damage the long-term interests of the company.On the one hand,it is manifested in the deterioration of financial performance.Although large-scale investment in high-risk assets in the short term can expand the company’s scale and improve the company’s profitability,when the macroeconomic downside risks begin to be exposed,the company will suffer high losses,which will affect the company’s profitability.On the other hand,it distorts the company’s development strategy.Even if the company’s chosen development strategy and business direction are completely correct,the company’s operating conditions will deteriorate due to excessive investment in high-risk assets,limiting its own development space.The reasons for the unconstrained management of state-owned enterprises include the simplification of board seats caused by the centralized ownership structure within the company,the failure of internal control mechanisms,the failure of party committee supervision mechanisms,and the lack of external supervision.