Study On The Governance Mechanism Of Inefficiency Investment For Sme Board Listing Corporation

In recent years, economy has a remarkable development, while SMEs (small and medium-sized enterprises) also have gain great achievements, but SMEs also has many problems with the rapid development, such as inefficient investment. The separation of ownership and control right can cause the principal-agent problem, the enterprise undertake overinvestment; information asymmetry in capital market that caused some enterprises not be timely to raise corresponding capital, and caused underinvestment. Investment is the basis of SMEs growth, however its inefficiency investment seriously hampered the healthy development, and then damage its value.The development of SMEs is bound to affect the whole capital market, therefore, we cannot ignore inefficient investment problem in SMEs.This paper first analysis the background of SME board listing Corporation, and then put forward the problem of inefficient investment. On the Chinese and foreign literature review, we discuss inefficient investment of the SME board listing Corporation which based on free cash flow theory, asymmetric information theory and agency theory. The reason of SME board listing Corporation inefficient investment is the investment of information asymmetry and imperfect internal governance. Information disclosure existence defects in SME board listing Corporation, because the market supervision is not perfect, and initiative of information disclosure is weak, therefore. Information asymmetry is existed between investors and management, which affect the company’s financing in the capital market, and then have an important impact on the investment efficiency. Furthermore, the corporate governance mechanism of SME board listing Corporation is not perfect which have played an important role on investment efficiency, causing SME invests decision-making lack science. This paper research SME’s inefficiency investment mainly from the following aspects:First, we use the expected investment model to test the inefficient investment behavior; Secondly, verifing the relationship non efficiency investment with free cash flow; Finally, inspecting the effect of liabilities, cash dividends and corporate governance on inefficient investment.In this paper, we take theoretical analysis method and empirical research method on the SME board listing Corporation efficiency investment. Based on theoretical analysis, we investigate SME’s inefficient investment through drawing lessons from Richardson (2006) expected investment model, and then we verifing that there is positive relation between free cash flow and non efficiency investment, positive free cash flow easily lead to over-investment, and negative free cash flow caused underinvestment. Managerial ownership, the proportion of the first shareholder and monitoring scale can restrict inefficient investment, these factors mainly play a restrict role on over-investment, because supervision and encouragement to management can effectively control over-investment. While a lot of integration factor can control insufficient investment.This paper advance substantial suggestions on the problem of inefficient investment based on empirical results and theoretical analysis. First of all, in order to create macroscopic conditions for small and medium-sized board listing Corporation health development, the government should strengthen the management of capital market order; Secondly, the rational use of executive stock ownership for the company can create a better effective investment opportunities; finally, we can reduce inefficient investment through strengthening of the first major shareholders supervision and exerting the function of the board of supervisors. On this basis, we should guide small and medium-sized Corporation to conduct reasonable, scientific investment.