The Impacts Of Divergence Between Control Rights And Cash-Flow Rights On Chinese Listed Companies' Investment Behavior

As a major cause of company's development and an important foundation for growth of future cash flow,companies' investment will directly affect the company's financial decisions and dividends.However,inefficient investment behaviors of enterprises will lead to harmful economic fluctuations and waste of resources.China's listed firms are under the strong control of larger shareholders,while larger shareholders have enough control right to establish the investment decision to meet their own benefits.Under these conditions,the investment behaviors are distorted heavily in some degree,and a large amount of inefficient investment behaviors exist.The main empirical tests in this thesis employ financial statement data in listed companies of China from 2004 to 2006.We study the over-investment in firm level with the special consideration of the institutional backgrounds in China.The main questions in this thesis are:First,what is the true motive that results in the high sensitivity on invest and free cash flow? Second,whether the divergence between the control rights and cash-flow rights of the firm's ultimate controller will aggravate the degree of over-investment? Third,discuss the effect of related corporate governance factors on over-investment behaviors caused by agency problems between large shareholders and small shareholders.The studies through a series of empirical analyses suggest:(1) In listed companies of China,agency costs of free cash flow bring on high sensitivity on invest and free cash flow;(2) The sensitivity of a firm's investment to its cash flow increases as the degree of the divergence between the control rights and cash-flow rights of the firm's ultimate controller increases;(3) The increase of cash-flow rights of the firm's ultimate controller will ease the over-investment of the firm.As for the restrictive effect of corporate governance on companies' overinvestment,the restriction of other shareholders to the controlling shareholders and the independent directors' function is effective,and the institution shareholders don't work.