Corporate Governance And Enterprise Efficient Investment Research Under Pyramid Structure

Investment is the source of the company’s future cash flow growth，It is also themain driving force to promote business growth, and therefore, the investment decisionis directly related to the ability to achieve the goal of maximizing corporate value.Throughout China’s listed companies, non-efficiency investments is widespread, theperformance of some listed companies in the funds used to repay bank loans,storemoney in bank to earn interest,trust the Financial Institutions to invest,these will causeInsufficient investment.There will be money invested in listed companies NPV of newinvestment projects of non-compliance, and even the existence of enterprises in orderto expand the scale of the blind, the funds invested in some of the mainindustry-independent and is not familiar with the area, such as their overinvestment.Through the study of Chinese listed companies show that over-investment is morecommon than underinvestment and therefore inefficient investment research thispaper is limited to over-investment.Former controlling shareholders for corporate investment decisions in the role ofnon-efficiency study was limited to the immediate holding of the largest shareholder,but actually has impact on listed companies’ financial decision-making and control isthe ultimate controlling shareholder of the company behind it. Numerous studies showthat most of the world the existence of a listed company are the ultimate controllingshareholder, the ultimate controlling shareholder of the company as a basic feature ofinternal governance mechanisms affect the company’s financial decisions. Thepyramid structure is to strengthen the control of an ultimate controlling shareholder ofthe most common ways. In the pyramid ownership structure, the ultimate controllingshareholder of the use of cash flow rights and control over non-separation efficiencyinvestments, occupation and interests of minority shareholders of listed companies.Based on previous studies, our order after screening2010-2012A-share listedcompanies based on1985data, drawing Vogt (1994) examine the effects of the modelare the ultimate controlling shareholder and corporate governance of non-efficiencyinvestments. The main conclusions of the study are:(1) investment and free cashflow was a positive correlation between investment and cash flow of this correlationis due to over-investment problem under the lead agency.(2) separation ofownership and increased the over-invested enterprises, but with the increase in cashflow rights, overinvestment eased.(3) In the corporate governance mechanism, the effect of concentration of ownership of non-linear over-investment, in the end whatkind of relationship needs further study; independent directors on the suppression ofexcessive investment has had a positive effect; while equity balances, chairmanIsolation and general manager of two jobs, executives holding all three mechanismsof inhibition were not excessive investment companies produce the desired effect,which may be associated with the prevalence of corporate governance relating to thestatus quo, the majority of listed companies in China are state-owned enterprisereform made of " dominance" is very serious, and the rest of its major shareholderswill not be able to compete formed; chairman and general manager Althoughformally created separation, but essentially inherent relationship formed essentiallyno separation; the proportion of executives holding too low, equity incentives inChina’s capital market is not perfect, was not able to form a layer of executives toform an effective incentive mechanism.Accordingly, this paper puts forward some suggestions:(1) improve the legalsystem, strengthen the protection of minority shareholders. Increase the ultimatecontrolling law violations punishment, but also reduce the cost of litigation for theultimate control of the minority shareholders of people.(2) improve the disclosure ofinformation to improve decision-usefulness of information to improve the adequacyand timeliness of the behavior of the controlling shareholder and other relatedinformation disclosure.(3) foster corporate shareholders, the shareholding structureof several large shareholders to establish checks and balances. Must optimize theequity structure, the proportion of2,3,4,5bit by shareholders prior to the increase, theformation of multiple large shareholders and minority shareholders jointly controlledcompanies numerous checks and balances situation.4) construction of the boardshould focus on the substantive aspects of the specification, rather than just form.First, to improve the setting of the two roles, not only in the form of separation, butalso to substantially separated. Secondly, the establishment of the Board of Directorsas the representative of senior management constraint system. Finally, to form a soundmanager market as soon as possible.