Financial Flexibility,Internal Control And Inefficient Investment

Investment as one of the most important economic activities of enterprises,throughout the entire life cycle,is an important factor affecting its future development.The correct investment decision-making can make enterprises inject more cash flow and enhance the value of the enterprise.On the contrary it may bring irreparable damage to the enterprise.In reality,due to the presence of principal-agent issues and information asymmetry,the company's inefficient investment behavior is widespread.Therefore,how to improve the efficiency of investment and curb the inefficient investment behavior of enterprises is an urgent problem to be solved in China.In the process of globalization,enterprises face more and more intricate economic environment,and the concept of financial flexibility came into being.In addition,China is at a critical moment of economic transformation and upgrading,uncertainty risks increase,so many companies deal with emergencies through the reserves of a certain level of financial flexibility in order to timely access to financial support and grasp the favorable investment opportunities.At the same time,the internal control system of our enterprises has been gradually improved,and the high quality internal control can improve the internal management level of the company,discover and correct the deviation in the decision-making process,prevent the management from investing in the net present value of the investment project less than 0 or abandoning items with net present value greater than 0.Based on the above background,this paper explores whether the financial flexibility can improve the investment efficiency of listed companies in practice,and puts the internal control into the analysis frame,combining with the nature of property rights of listed companies,and deeply discusses the influence of internal control on the relationship between financial flexibility and inefficient investment.Based on the combination of theoretical analysis and empirical test,this paper first defines the concepts of internal control,financial flexibility and inefficient investment.Through the analysis of the literature on the relationship among financial flexibility,internal control and inefficient investment at home and abroad,this paper provides a theoretical basis for empirical test.Secondly,it chooses the listed companies of A-share manufacturing industry in China from 2012 to 2015 as the research object.It studies the effect of financial flexibility on the problem of underinvestment and overinvestment and the governance effect of internal control on the relationship between financial flexibility and inefficient investment.We would like to improve the investment efficiency of listed companies in China's manufacturing industry,and then gradually improve the value of the company.The main conclusions of this paper are as follows:(1)The less flexible financial reserves,the more serious the lack of investment.The effective internal control can alleviate the financing constraints to a certain extent,thus alleviating low investment caused by the lack of financial flexibility.(2)The higher the level of corporate financial flexibility,the more likely to lead to excessive investment.High-quality internal control can reduce the company's agent conflict,thus restraining the company's excessive investment phenomenon in financial flexible reserves.(3)To further distinguish the nature of property rights,this study finds that in non-state-owned listed companies,the governance effect of the internal control on the relationship between financial flexibility and inefficient investment is more obvious.Therefore,we need to combine the appropriate financial flexibility and good internal control mechanism,solving the problem of inefficient investment in listed companies more effectively.Finally,according to the theoretical and empirical research,this paper puts forward some suggestions on improving the internal control system and reasonably reserving financial flexibility,and provides a new direction for the follow-up research.