Agency, Information And Inefficient Investment Of Chinese Listed Companies

Investment theory is always one of the hot researching fields on the economic theory and corporate finance. In recent years, along with the development of information economics, contractual economics as well as the behavior economics, inefficient investment phenomenon deviating from standard rule of net present values caused by information asymmetry, agency problems and irrational behaviors has been becoming the focus of the researchers'attention and obtained the substantial results. However, the studies of western researchers generally based on the mature market-oriented economy characterised by clear property rights, sound governance structure, tight supervise, as well as reliable credibility and law. By contrast with it, Chinese market system having many own special merit on corporate governance, investment and finance mechanism is immature, nonstandard and defective. Focus on 2000-2004, using normal and data analysis, This paper tries to reveal the essence and mechanism of the Chinese listed companies and provide the constructive suggestion on bringing down it.This paper has the results as follows: First, Chinese listed companies were obsessed by financial constrains and agency problem. Nevertheless, for firms with low growth opportunities, agency problem was the dominant factor; for firms with high growth opportunities, no obvious evidence to indicate that the dominant factor was agency problem or financial constrains. Secondly, the negative relation of debt financing and Chinese listed companies investment was stronger than investment-cash flow sensitivities. Moreover, this discipline role had different influential mechanism: high leverage control the free cash flow problem in the firms with low growth opportunities; but for firms with high growth opportunities, maybe debt overhang and agency problem having equal influence result in the negative relation. Thirdly, as the split share structure and"Domination of a Single State Shareholder", the sensitivities of investment-cash flow have notable divergence: for firms with high growth opportunities, financial constrain is light for state-controlled firms than non-state-controlled firms; for firms with low growth opportunities, the diversity of equity character does not lead to the difference of free cash flow problem. Moreover, the impact of debt financing on investment does not have significant difference between stated-owned listed companies and non- stated-owned companies. Lastly, in contrast to financial healthy enterprise, financial distress enterprise has more serious information asymmetry more prominent adverse choice and moral hazard. So its sensitivity of investment-cash flow is more stronger. In china during transiting periods, to eliminate financial distress situation, firms with high leverage often take all kinds of strategies to abandon debt. Financial distress listed companies probably distort investment, especially over-investment.The author thinks that, as unreasonable equity structure, imperfect governance mechanism, insufficient protection for creditor and small investors, as well as lagging supervise an management, the information asymmetry and agency problem are quite serious. And it leads to significant inefficient investment. The key and effective measures are to build effective governance mechanism. Although the reform of split share structure have been finished, the sensitivities of investment-cash flow and the influential factors of inefficient investment of Chinese listed companies need further research.