An Empirical Study On The Relationship Between Equity Incentive And Inefficient Investment Of Listed Companies In GEM

As an important link of company operation,the investment activity is an important foundation for company's future cash flow growth.It is not only directly related to the survival and development of company,but also indirectly affects the efficiency of capital allocation.Since the reform and opening-up,China has maintained a high speed economic growth rate and made great achievements in economic development.Our country has become the world's second largest economic entity.As one of the three carriages of economic growth,Investment has played an important role in boosting economic growth.At the same time,phenomena of serious non-efficient investment widely exist among listed companies,which reduce the financing efficiency and operational efficiency of listed companies,and seriously affect the healthy development of market economy.The efficiency of enterprise investment behavior is mainly due to the principal-agent problems and factors such as information asymmetry cause.To solve this problem,equity incentive mechanism emerged at the right moment.With the completion of the reform of non-tradable shares and issuing of related policies and regulations by CSRC,equity incentive mechanism is increasingly common in the listed company.The GEM is emerging power and important part of capital market in China.It is playing a vital role in optimizing the structure of capital market and promoting the high tech small and medium-sized enterprise healthy development.Because the existence of inefficient investment behavior seriously impedes the development of economy and Equity incentive mechanism popular in the gem,discuss the relationship between equity incentive and inefficient investment in the GEM listed company is of great significance.Selecting 2011-2015 financial data of companies listed on GEM,this paper first builds investment model to test the inefficient investment of sample.Considering most of the gem listed companies are in growth period,free cash flow's influence on the investment behavior is obvious,paper then explores the relationship between free cash flow and inefficient investment.Finally introduces the index of equity incentive,and does empirical studies to discuss the influence of implementation of equity incentive on the inefficient investment caused by free cash flow.The results show that,phenomena of non-efficient investment widely exist among GEM listed companies.The behavior of under-investment is more general,but the level of over-investment is higher.The inefficient investment level is closely related to the level of free cash flow.Rich free cash flows intensify the level of over-investment,and the shortage of free cash flow will increase the occurrence of under-investment.The implementation of equity incentive mechanism in the GEM can effectively ease the under-investment caused by shortage of free cash flow,but its function of restraining over-investment is not obvious.In the end,this paper try to make some suggestion for the regulator and companies on the base of explanations of empirical results,and point out the inadequacies of this research and indicate future directions for further research.