Corporate Governance And Efficiency Of Investment And Financing Research

Investment and finance are the most important activities in corporate. Improving the efficiency of investment and finance always is important subject in economics and management. But both of them are separated not only in theory study but also in practice. The MM theory which constructed under the frame of new classic economics and founded by Modigliani and Miller in 1958 brings forwards that finance structure has no relation to the corporate value. This theory proves that if the capital market is perfect, that is free for in and out, information is sufficient and no transition cost and tax, the choice of finance structure is independent of corporate value. Traditional western asset investment theories suppose that the value of different projects could be added, so the investment decision is simplified to judge if the net present value is positive. So the decision of investment and finance is just the compare of capital cost to the yield. The problem not only lies in the study of investment and finance, it is for not connected with corporate governance. In another word, the theory of investment and finance developed under the corporate management. So it is simplified as the compare of cost and income, a technique problem. As the property right structure gets more and more complex, the importance of corporate governance is more and more obvious. Study of corporate governance has to be combined with investment and finance. Finance determine the relationship of investors, it is the basement of governance mechanism. And governance mechanism has important effect on investment. On the other hand, corporate value come from investment, the goal of improving corporate governance is to improve investment decision-making. The efficiency of investment has effect on finance. Comparatively, the theory of corporate finance has been researched deeply because it has inevitable relationship to the corporate value and governance. But present research has been restricted to this scope and other facets still remain many blanks. In the practice of our corporate, the efficiency of investment and finance gradually get attention only in recent ten or twenty years. After many years reform, corporate governance are close to that of developed market economic countries, but it is only similar in shape not in spirit. Corporate has more ways to finance but the efficiency of investment has declined. The problems such as inner control and one shareholder leading have not been solved yet. Undercapitalization and overcapitalization appears alternative or in the same time, the inefficiency of investment and finance has endangered to the safe of the whole country.