The Power, Compensation Incentive To Executive Of State-Owned And Firm Investment

There are many non-efficiency investment decisions, including the over-investment or under-investment in China's state-owned listed companies,. In the two types of non-efficient investments, over-investment is more relatively clear. Two types of non-efficiency investments will affect the business performance and lower enterprise value, which do harm to shareholder wealth. Selected companies in China in Shanghai and Shenzhen A-share listed data for the year 2005-2008 as samples, test results are: the number of over-investment samples is less than the number of sample companies 0f under-investment, but the over-investment is larger than the scale of under-investment, the conclusion is proved in all kind of State-Owned Enterprises . There is a significant positive correlation between over-investment incentive and executive compensation in Local state-owned enterprises; the nature of state-owned enterprises in other levels, then the difference was not found to have a significant positive correlation. All types of state-owned enterprises, with a term of executive power and executive compensation on behalf of a significant positive correlation. China's state-owned listed company executives too much power, is one of the reasons leading to over-investment, the power structure is one aspect of agency costs. A comprehensive analysis of executive power, pay incentives for capital investment, contract ultimately proves ineffective, it may not contract itself, but rather the power to contract beyond the restraint mechanism.