Environmental Uncertainty,Managerial Incentive And Investment Inefficiency

With the rapid development of China's economy,science and technology,the growth of Chinese enterprises has also entered a new era.In this new era,development opportunities of enterprises are far more than those in the past.However,there are also external threats accompanied with opportunities.One of these threats is environmental uncertainty.Uncertainty of international economic politics,the constant adjustment of domestic policies and the increasing demand for products quality and types by consumers are the environmental uncertainties that enterprises should face in the new stage of development.Therefore,how to understand and estimate environmental uncertainty correctly is one of the problems that Chinese enterprises need to solve at present.Moreover,with the development of enterprises,the expansion of investment scale is an inevitable phenomenon.Investment inefficiency has also become a widespread problem.Investment inefficiency behavior is the alienation and distortion of investment behavior,which will greatly reduce investment efficiency,resulting in resource allocation failure and resources' waste.Therefore,it is necessary to explore the two major problems faced by Chinese enterprises which is the link between environmental uncertainty and inefficient investment.As a key person who participates in the daily business decision of enterprises,the executives play a key role in coordinating the relationship between external environment uncertainty and inefficiency investment.According to the principal-agent theory,the executives themselves have the motivation to invest inefficiently in order to gain private interest and damage the interests of shareholders when the external environment is uncertain.At this point,managerial incentive is needed to play its proper role.The managerial incentive methods commonly used in China are monetary incentive and equity incentive at present.These two incentive methods are designed to coordinate the interest goal function between executives and shareholders as well as supervising executives to take decisions that can improve the performance and value of enterprises.However,it is worth paying attention to whether the monetary compensation incentive and the equity incentive can play their role properly.Therefore,this paper,taking the relationship between environmental uncertainty and investment inefficiency as a"window",explores whether the managerial incentive can adjust the relationship between these two,so as to observe and analyze the implementation of the executive excitation.In the empirical part,this paper takes the Shanghai and Shenzhen A share listed companies from 2011 to 2016 as research objects,using the investment theory,principal-agent theory and incentive theory to discuss the investment inefficiency problems of China's listed companies in the face of environmental uncertainty.It further divides investment inefficiency behavior into overinvestment and under investment.At the same time,this paper further examines whether executive incentives can regulate and inhibit the relationship between environmental uncertainty and investment inefficiency.Regression results show that there is a widespread phenomenon of investment inefficiency in domestic enterprises.The conclusions are as follows:(1)environmental uncertainty will strengthen investment inefficiency behavior,strengthening overinvestment as well as under investment in the same time;(2)the executive monetary compensation incentive is unable to effectively suppress the positive relationship between environmental uncertainty and investment inefficiency;(3)the unanticipated part of monetary compensation can inhibit the positive relationship between environmental uncertainty and investment inefficiency;(4)the equity incentive not only does not inhibit the positive relationship between environmental uncertainty and investment inefficiency,but also strengthens the relationship between these two.This article includes the following six parts.The first part is the introduction.This paper is based on the research background and the purpose of research,illustrated its theoretical and practical significance.This part introduces the innovation and contribution of this paper as well as puts forward the research ideas and research methods.The second part is the literature review.By referring to the theoretical and empirical literature of environmental uncertainty and investment inefficiency,managerial incentive and investment inefficiency.The progress and direction of related research fields are discussed.Literature summary and review are carried out to clarify the research ideas of this paper.The third part are theoretical analysis and research hypothesis.The definition of related concepts is clarified,the investment theory,principal-agent theory and incentive theory are integrated,research hypothesis are put forward as the theoretical basis.The fourth part is research design.It mainly includes setting variables definition and quantification methods,selecting and sorting out sample structure,building models and presenting data analysis methods.The fifth part are the empirical analysis and the results.This part mainly uses descriptive statistics and correlation test to analyze and process the data as well as verifies the hypothesis proposed by the multiple regression model.It provides empirical data support for later conclusion and the robustness test of the related analysis is carried out by correcting the systematic deviation of the ineffciency investment.The sixth part is the conclusion.Based on the empirical analysis,this part puts forward relevant policy suggestions and the prospect for further research.Combined with the conclusions and analysis of this paper,the following suggestions are put forward:(1)strengthening the internal control of companies,improving the process design of investment plan formulation,decision making and execution;(2)improving the information disclosure quality,introducing more external supervision and government supervision;(3)designing senior managers.monetary compensation reasonably to increase the proportion of unforeseeable and hidden salary.(4)strictly controlling the design and implementation of executive equity incentive.(5)designing a scientific mechanism to deal with environmental uncertainty,reasonably predicting and monitoring external uncertainties.