Empirical Study On The Effect Of Ownership Structure On Inefficient Investment In Building Materials Industry

As one of the most important financial decisions, investment determines the growth of the company’s future cash flows and reaching the target of enterprise value maximization. However, in the imperfect capital market, the enterprise investment decisions often deviate from the value maximization goal, produce inefficient investment, characterized by overinvestment or underinvestment. Such inefficient investment behavior, not only undermining increasing corporate value, but also affect the healthy and stable development of the national economy. In addition, because of the special institutional arrangements, ownership structure has some special characteristics, such as highly concentrated ownership and dominance state-owned ownership. Whether there is a certain correlation between this special ownership arrangement and inefficient investment, is needed to be studied at present. Therefore, the paper attempts to study on the correlation of ownership structure and inefficient investment, in order to provide the empirical basis to alleviate the problem of inefficient investment by improving the ownership structure.In the paper, the listed companies in building materials industry is selected as object of study, to do empirical analysis between ownership structure and inefficient investment. The paper select six years data of listed company in building materials industry from2007to2012as the sample. First, the paper measures the existence of inefficient investment behavior in listed companies of building materials industry using Richardson (2006) model. Then from the nature of ownership, ownership concentration and ownership balancing to analyze the influence of ownership structure on the inefficient investment with the method of multiple regression analysis. The empirical results show that:(1) The listed companies in building materials industry widespread exist inefficient investment behavior, the state-owned listed companies exist obvious overinvestment, the private listed companies exist obvious underinvestment;(2) State-owned equity exacerbate inefficient investment issues;(3)Ownership concentration is positively correlated with inefficient investment;(4) Ownership balancing can alleviate the inefficient investment problem;(5) In the state-owned listed companies, ownership balancing is not significant positively correlated with inefficient investment. Finally, according to the empirical conclusions, the paper provide some suggests to reduce inefficient investment behavior through improving ownership structure.