Research On The Relationship Between Corporate Governance, Internal Control And Inefficient Investment

At present, our country’s economy is in an important period of transformation and upgrading, from traditional extensive to intensive development; more emphasis on scientific planning and sustainable development. The macroeconomic policies such as promote energy conservation and eliminate reduction, eliminate backward production capacity; industrial relocation will affect firms’ investment decisions. In 2011-2015 is a crucial stage of the 12 th five-year plan in our country, what’s the investment situation of enterprises, how to improve the investment efficiency of enterprises is the key to this study.At first, this paper respectively reviews literature from the two aspects of the relationship between corporate governance, internal control and inefficient investment, and the relationship between corporate governance and internal control.And on the basis of principal-agent theory and asymmetric information theory, put forward hypothesis and build research model. Then, the paper choose manufacturing industry listed companies’ data in 2011-2013 as sample and reference from Richardson(2006) model, the sample is divided into overinvestment and underinvestment group, so as to research of corporate governance, internal control impact on inefficient investment.The empirical results show that:(1) ownership structure: The largest shareholder’s stake with overinvestment and underinvestment has a significantly positive correlation; the impact of ownership balance on overinvestment is significantly negative correlation, but significantly positive correlation with underinvestment; the controlling shareholder’s equity properties for state-owned listed companies with significantly positive correlation with overinvestment, but negative correlation with underinvestment significantly.(2) The Board governance: The proportion of independent directors and the board size significantly restrain inefficiency investment behavior. CEO duality can increase inefficient investment.(3) Management incentives: Management equity incentive mechanism can inhibit inefficient investment behavior significantly. But the negative correlation with management monetary and inefficient investment is not significant.(4) Internal control can significantly inhibit inefficient investment behavior.(5) There is a significantly positive correlation between corporate governance and internal control.(6) Put corporate governance and internal control together research their influence on inefficient investment, finding that the interactive terms significantly inhibit inefficient investment.Finally, results of this study recommend the following four aspects:(1) optimize the ownership structure;(2) strengthen the construction of the board of directors;(3) improve the management incentive and monitoring mechanisms;(4) improve the internal control system. From the perspective of relationship between corporate governance and internal control, to study its influence on inefficient investment, is the innovation point in this paper.Because this paper only considers the internal governance mechanism,external governance mechanism is not research,future scholars can put this factor into further exploration.