Research On The Managerial Ownership And Over-investment Of Enterprise

With the continuous development of our economy, the inefficient investmentproblem of listed corporate in our country increasingly prominent, especially theover-investment problem. Under the modern enterprise system, there are inevitableconflicts of interest between ownership and operators. Managers put free cash flowinto various non-ideal projects, and make decisions which contrary to the goals thatmaximize enterprise value and shareholder value. Shareholding by management caneffectively reduce agency problems in enterprises, and transform the "entrenchmenteffect" between ownership and managers into the "alignment effect", make themanagers more cautious when they make investment decisions, and effectively reducethe over-investment behavior, improve enterprise value.Firstly, this article reviews the management equity’s effect to the investment ofcorporate and the corporate value, the related theory of the cause of over-investment,and the influence of corporate property to the over-investment. Secondly, this articleuses empirical research methods to verify the managerial ownership impact oncorporate over-investment behavior, finds out the best level of managerial ownershipof listed company in China, to effectively inhibit the over-investment of free cashflow, and discusses the different effect of managerial ownership to over-investment indifferent corporate property. Finally, this article makes a robustness test to the bestlevel of managerial ownership of listed company.In empirical study, this article selects the corporate listed in Shanghai andShenzhen Stock Exchange from2009to2011three years sample data which listedbefore2009, received3888sample observations. Carried on statistics and analysis the3888samples observations from different angles, and established three cumulativeprogression models, which are the expected investment model, the managerialownership and over-investment relation model and the managerial ownership andover-investment-free cash flow model, use the descriptive statistics, correlationanalysis and linear regression analysis to systematically analyze the managerialownership and over-investment behavior in China. The results prove that:(1) The proportion of managerial ownership enterprise’s quantity is low, thestate-owned enterprise quantity is less than the non-state-owned enterprises. Theoverall managerial ownership proportion of listed companies is low in our country, the extent to managerial ownership incentive system in state-owned enterprises islower than non-state-owned enterprises.(2) The free cash flow was significantly positively related to over-investment inthe listed companies in our country. The more free cash flow, the more seriousover-investment. And managerial ownership is negatively correlated withover-investment, which suggests that managerial ownership can inhibitover-investment behavior to a certain extent.(3) There was a quadratic curve relationship between managerial ownership andover-investment-free cash flow, the over-investment of free cash flow sensitivity hasa u-shaped relationship with managerial ownership. When managerial ownership ratioget to26.45%, the over-investment of free cash flow sensitivity is the lowest,maximize restriction of over-investment of enterprises.(4) Compared with state-owned enterprises, managerial ownership’s restrictionto the over-investment in state-owned enterprises is more apparent. For state-ownedenterprises, the effect of managerial ownership incentive system is small, which cannot well inhibit over-investment behavior.Finally, based on the results of empirical analysis, this article proposes relevantpolicy suggestions including four aspects, which are perfection of laws and regulations,establish internal constraint mechanism of enterprise, the supervision mechanism ofthe CSRC and bond financing.