Research Of Corporate Governance And Efficiency Of Investment

The corporate governance theory maintains that the separation of ownership and control leads to the problem of agent. The interests conflict between shareholders and managers, shareholders and creditors, inner shareholders (largest or control shareholder) and exterior investors (small-medium shareholders) impacts greatly on the selection of investment project and the efficiency of resource allocation in listed companies in China. And the efficiency of investment is no exception.Most literatures at home and abroad tend to analyze the relationship between the free cash flow and over-investment, and then introduce the impact of the ownership structure, the characteristics of board and the decision-making of financing on the behavior of corporate investment. However, until now few literature analyze the problem of how circulate equity in listed corporate impact the efficiency of investment (over-investment and underinvestment). Take non-financial companies listed in Shanghai stock exchange and Shenzhen stock exchange from 2003 to 2009 as research samples, this paper analyzes the reasons why the efficiency of investment is low, describes the investment efficiency of the companies listed in China, and examines the relationship between four aspects of the corporate governance (the shareholding proportion of the largest circulate shareholder, the total number of the Annual General Meeting, the shareholding proportion of the Board Chairman and the shareholding proportion of the Supervisory Board) and the efficiency of investment (over-investment and underinvestment) by the way of theoretical analysis and empirical examination.This paper found that the phenomenon of underinvestment in China is prevalent, while over-investment is more serious. There is significant negative connection between shareholding proportion of the largest circulate shareholder and over-investment, while positive connection with the underinvestment. There is significant positive connection between total number of the Annual General Meeting and over-investment, while negative connection with the underinvestment. There is significant negative connection between shareholding proportion of the Board Chairman and both over-investment and underinvestment. There is significant positive connection between shareholding proportion of the Supervisory Board and over-investment, while no significant positive connection with underinvestment. Based on the conclusion, this paper gives some advices on how to improve the efficiency of investment.