The Analysis Of Influencing Factors About Over-investment In Chiiiese State-owned Listed Companies

Investment behavior is an important economic activity of an enterprise. The levelof investment efficiency also deeply affects efficiency and value of an enterprise.Excessive investment is investing resources in projects that can’t increase the value ofan enterprise or even have negative net present value. It’s also a non-efficientinvestment behavior of reducing the efficiency of funds allocation. It’s common inmany listed companies, especially in Chinese state-owned listed companies. Manyscholars have discussed the factors and measures of companies’ over-investment fromthe viewing angle of corporate governance. Many scholars from domestic and abroadhave researched mechanism and factors of over-investment in listed companies. Butthe research about causes of excessive investment in state-controlled listed companiesis still rare. This article discusses the factors of over-investment in Chinesestate-controlled listed companies from two aspects of internal governance andexternal environmental. It has a certain academic value and practical significance forthe study of over-investment and how to improve the efficiency of investment instate-owned listed companies through improving governance mechanisms. From thereform of Chinese state-owned enterprises, is it able to produce good results throughusing governance mechanism to improve the over-investment problem? Is it able toinhibit over-investment from improving equity excessive concentration, increasingstake of the largest shareholder or improving executive compensation? Is it can reallyconstrain over-investment behavior by increasing liabilities? How is the relationshipbetween external environments, such as intensity of market competition, level of ruleand government intervention, and investment behavior of company? How to makecorporate governance affects investment behavior of company?This article analysis the over-investment behavior of Chinese state-controlledlisted companies though agent theory, hypothesis of free cash flow and investmenttheory under financing constraints. And then puts forward the assumptions aboutinternal governance factors of enterprise influences on over-investment, like:①itexists positive correlation between ownership concentration and over-investment,equity balance plays a certain constraint on over-investment;②it exists negativecorrelation between executive compensation and over-investment in state-controlledlisted companies;③it exists positive correlation between debt financing andover-investment in state-controlled listed companies. For external environmentalfactors impact on the state-controlled listed companies, this article puts forwardassumptions like:①it exists negative correlation between product marketcompetition and over-investment in state-controlled listed companies;②it exists negative correlation between the level of rule and over-investment in state-controlledlisted companies;③it exists positive correlation between degree of governmentintervention and over-investment in state-controlled listed companies. This thesis isdivided into six parts, concrete structure as follows: the first part is introduction. Itmainly introduces research background and significance, research methods and ideasas well as basic framework of article; the second part is literature review. It is thereview of research from domestic and foreign scholars about the factors of internalgovernance and external environment, and then evaluates these literatures; the thirdpart is related explanation and theoretical basis. It explains the concept of investmentexpectation and over-investment, and then puts forward the theoretical hypothesis; thefourth part is theoretical analysis and hypothesis. This part analysis the internal andexternal factors of over-investment in state-controlled listed companies and putsforward the hypothesis; the fifth part is empirical analysis. It includes sampleselection, data sources, research model, description of study variables, empiricalresults from descriptive statistics and multivariate linear regression analysis by usingsample data; This article selects annual report data of Chinese state-controlled listedcompanies from2009to2011as the analysis object. The last part is study conclusionsand policy recommendations. This part makes conclusions on the basis of thetheoretical and empirical research findings, puts forward the related suggestions,points out the lack of article and proposes the future research directions.The Internal governance model using stake of the largest shareholder, total stakeof the second to fifth greatly shareholders and debt level as the explanatory variablesof internal governance model, using over-investment level of state-controlled listedcompanies as interpreted variable. The results show that it has positive correlationbetween equity concentration and over-investment; equity balance can play a certainconstraint on over-investment; with executive compensation improving,over-investment is certain mitigation, while increasing debts can’t suppressover-investment of the state-controlled listed companies. For external governancemodel, this article uses degree of competition in product markets, index of rule leveland index of government intervention as explanatory variables, and uses over-investment as interpreted variable for linear regression test. The test results verify thefacts that the more higher degree of competition in the market and rule level are, themore lighter level of over-investment is, but it has positive correlation between degreeof government intervention and over-investment.