| Investment decision-making, financing decision-making and dividend distributiondecision are well known as three most important decisions in modern financialmanagement. Investment decision has influence on dividend distribution decision andfinancing ability, so the investment decision is decisive for enterprise. Excessiveinvestment and under-investment are not efficient. In China, real estate industry iscritical in national economy and has close relationship with the steady andwell-organized development of our country’s economy. The proportion that real estateinvestment is in fixed assets investment in China is rising from2003to2011, reaching26.2%in2011. The continuous expansion of real estate investment still cannot meetthe housing needs of people whose income is low. Meanwhile, the rate of housingvacancy increased. Over-investment happened in listed real estate company. Muchresearch has been done on the corporate governance mechanism for over-investment,but there is poor research on corporate governance mechanism of over-investment inview of the real estate industry.Based on data of a-share listed real estate company in SSE and SZSE from2008-2011as sample, two methods of normative research and empirical research areused to test the relationship between not only over-investment and free cash flow butalso over-investment and corporate governance factors that include the share ratio ofthe largest shareholder, the separation of two leadership posts between chairman andgeneral manager, size of board of directors, the proportion of independent directors,executives incentive of equity and size of the board of supervisors. Research’sconclusions are as follows:First, over-investment of listed companies of real estate in our country is sensitiveto free cash flow. The company who has more free cash flow more easily goes toover-invest.Second, taking corporate governance factors, only the board scale has asignificant influence of "U" type on cash flow sensitivity of over-investment for theChina’s real estate listed companies supporting the hypothesis. The rest of thegovernance factors have no inhibiting effect on over-investment. In china’s real estatelisted companies, because of high concentration, the share ratio of the largestshareholder has no significant influence of reverse "U" type on over-investment.Because two leadership posts separates just in form but not essentially, the separation of two leadership posts between chairman and general manager doesn’t have asignificant negative relationship with over-investment. Due to too low, the proportionof independent directors with over-investment doesn’t have a significant negativerelationship with over-investment. Because the proportion of executives’ equity is toolow, the executives’ equity with over-investment shows no significant negativecorrelation. Due to its small scale and being able to evaded, size of the board ofsupervisors shows weak positive correlation with over-investment. |
