Research On Relativity Of The Board Committee And Overinvestment Behavior Of Chinese Listed Companies

In recent years, Chinese economy keeps a fleet rate of increase. And investment plays an important role in the development of Chinese economy. But because of the restrict of resource and consume demands,"hot invest" phenomenon appears in many industry and regions. Business enterprises are the main participants in economy circulation."Hot invest" of the macroscopic level is the "overinvestment" of the microscopic level. Overinvestment is the investment with negative net present value, which injures the value of whole business enterprise beyond the company growth opportunity or development direction. The Chinese market economy is still at its first stage, which is more; the ownership structure of most corporate is not reasonable at all. The overinvestment trend of Chinese listed company is obvious and serious under above condition.There is an inextricably link between Corporate investment behavior and corporate governance. Effective corporate governance through a series of institutional arrangements to achieve the shareholders, creditors and managers between the checks and balances to guard against and defuse the conflicts between shareholders-the creditors, shareholders-managers and guard against investment risks. As one of the mechanisms of the inner core, the efficiency of its governance is directly related to corporate investment behavior and performance of the company. As the market competition under the conditions is intensified among enterprises, company management is increasingly specialized. Board members are from different areas, it is difficult to serve the company with a comprehensive, in-depth understanding. They often will rely on their own knowledge and social experience to make judgments, but this is difficult to meet the company requirements. In this case, the Board set up professional members of internal corporate governance can play a key role.This paper researches the relativity of the board committee and overinvestment behavior of Chinese listed companies. This paper introduces the research significance, research content, and research purposes, the main innovation and inadequate and so on; then the status of the board committee of was analyzed. Secondly, the theory of overinvestment in research synthesis, respectively, from the principal-agent theory, asymmetric information theory, free cash flow theory, corporate governance and other aspects in-depth, extended to the board of directors and board committee of settings can affect overinvestment in and then put forward the hypothesis. In the current study, using2007data of listed companies, based on the empirical model, we will have a further examination to check out that whether the board committee will help the independent directors, board meetings curb excessive investment institutions or not.This paper use the software Eviews6.0to research the problem and here are some results:the overinvestment of China’s listed companies is very serious with a growing trend; Board Committee of listed companies mainly are:Audit Committee, Compensation Committee, Strategy Committee as well as the nominating committee, they are set up with a lower proportion, which have a big gap between Britain and other developed countries. Among them, the Audit Committee, Compensation Committee are set up with a higher proportion, strategy, while the nominating committee are with a lower percentage. Board Committee has a negative correlation with overinvestment cash flow sensitivity, indicating that board committees of listed companies are set to inhibit overinvestment. Different board committee affected differently, the audit committee, compensation committee didn’t affect the overinvestment cash flow sensitivity; by contrast, the strategic committee and the nominating committee did affect the overinvestment cash flow sensitivity. Compare to those listed companies which didn’t set board committee, the ones which set board committee played a better role in inhibiting excessive investment; the same case also went to the board meeting system.