An Empirical Study On The Reiationship Between Board Characteristics And Inefficient Investment Of Listed Companies On GEM

The investment activity of listed company is an important foundation for company’s future cash flow growth. It is directly related to the survival and development of company, and indirectly affects the efficiency of capital allocation. Since the reform and opening up, china has made great achievements in economic development. Investment has played an important role in boosting economic growth. However, phenomena of serious non-efficient investment widely exist among listed companies, which seriously affect the development of market economy, and reduce the financing efficiency and operational efficiency of listed companies. These problems should be solved. as the core of corporate governance, also the knot between stockholders and managers, board of directors undoubtedly affect the efficiency of investment decisions, so it would be meaningful to probe into the effects of board characteristics on company’s investment behavior.This paper first sums up early research theories on the relationship between board features and inefficient investment, then selects2009-2011financial data of companies listed on GEM, and does empirical studies to discuss the relationship between board features and inefficient investment. This paper improves the current contents of investment theories, shows the effect of board features on corporate investment behavior, and has targeted a number of recommendations to improve GEM listed companies’investment efficiency.By empirical studies, the results were that:(1)Free cash flow is in positive correlation with over-investment, free cash flow is in negative correlation with under-investment.(2)Director board size has significant effect on reducing over-investment and alleviating under-investment.(3)Combination of general manager and chairman of board has a positive impact on the over-investment and under-investment of companies, it would be wise to separate general manager from chairman of directors.(4)The proportion of independent director is in positive correlation with over-investment and under-investment, which reveals that the independent director system of companies listed on GEM fails.(5)The proportion of directors receiving compensation is not significantly in positive correlation with over-investment and under-investment, the share holdings of board directors is not significantly in positive correlation with over-investment, but significantly in positive correlation with under-investment. Both the conclusions explain that salary incentive mechanism and equity incentive mechanism of companies listed on GEM do not play an effective role in companies’ investment behavior.(6) The frequency of board meeting has significant effect on reducing over-investment and alleviating under-investment, which give us a hint that board meeting should be held regularly.