Research On The Relationship Between The Institutional Environment, The Internal Governance Of Private Listed Companies And Corporate Investment

Investment is a fundamental and important financial activities of the corporate, is also key determinants of the corporate profits and value creation. In recent years, many scholars at home and abroad have done a lot of theoretical and empirical research on corporate investment, and they have gradually developed a series of underinvestment and overinvestment theory. As an important part of China’s private economy, Private listed companies play an increasingly important role in promoting the development of the socialist market economy. Because of the imperfect institutional environment and internal governance, investment inefficiency phenomenon which include underinvestment and overinvestment, are very common among China’s private listed companies, how to improve investment efficiency is an important research issue facing China’s private listed companies.From the theoretical and empirical perspectives, this paper explains the relationship between internal governance institutional environment and corporate investment. Firstly, through reading and combing a large number of domestic and foreign literature, using double-agent theory, institutional environment theory and investment theory, this paper analyzes logical relationships between the internal governance of private listed companies, institutional environment and investment behavior, and put forward relevant research hypotheses. Secondly, on the basis of Richardson (2006) model, the paper introduces the institutional environment variables, internal governance variables and dummy variables, and build an empirical research model.Finally, based on unbalanced panel data for five consecutive years from2008to2012, this paper selects2497private listed companies as samples from the CSMAR and other databases, analyzes empirical relationship between internal governance, institutional environment, and corporate investment to test the hypotheses. Empirical studies have found:First, increasing the level of internal governance of private listed companies can help suppress corporate underinvestment and overinvestment. Second, the higher ownership concentration of private listed companies, the weaker effectiveness of suppressing corporate underinvestment and overinvestment behavior. Third, the equity restriction and managerial ownership of private listed companies do not play an effective role in governing corporate underinvestment and overinvestment behavior. Fourth, the corporate governance of shareholders meeting and the Board of Directors of private listed companies can restrain underinvestment and overinvestment, but the impact is relatively weak. Fifth, improving the institutional environment of private listed companies area which includes the government environment, market environment and legal environment, can help companies suppress corporate underinvestment and overinvestment behavior. Sixth, the better of internal governance of private listed companies and regional government environment and market environment where private listed companies locate, the more powerful effects to suppress corporate underinvestment and overinvestment. And the effect of legal environment is not as good as government legal environment and market environment.These findings suggest that a better environment and internal governance system helps muffle private listed companies underinvestment and overinvestment. According to the conclusions of empirical research, we propose a microscopic corporate governance suggestions and macroscopic institutional environment policies, through which will significantly improve corporate investment behavior of private listed companies.