Research On The Effect Of Corporate Strategy Differentiation On Inefficient Investment

Investment is the core of enterprise production and management,the source of value growth,and an important factor promoting economic growth.However,information asymmetry and agency problem lead to inefficient investment in Chinese listed firms universally.What determines the inefficient investment is one of the core issues of corporate investment research.Related studies show that the internal and external environment can affect inefficient investment significantly.Corporate strategy leads the overall development,and strategy positioning also has a direct influence on a series of financial decisions including investment.Therefore,this paper will investigate whether corporate strategy differentiation affects inefficient investment.This paper selects the A-type share listed firms over the period 2008 to 2017 to study the effect of corporate strategy differentiation on inefficient investment on the basis of information asymmetry theory and strategic management theory.First of all,this paper tests the relation between corporate strategy differentiation and inefficient investment.Further,from the perspective of internal control quality and the level of market competition,this paper investigates whether the internal and external governance mechanisms can moderate the relation between them.Finally,in the part of further study,this paper also discusses whether the nature of property right affects this relation differently.The results show that,firstly,corporate strategy differentiation has a significant effect on inefficient investment,and the increase in corporate strategy differentiation makes the level of inefficient investment greater.Secondly,when the quality of internal control is higher,the positive relation between corporate strategy differentiation and inefficient investment is less significant,and when the level of market competition is higher,this positive relation is less significant,which proves that the inefficient investment caused by corporate strategy differentiation can be restrained by the internal and external governance mechanisms.Thirdly,relative to state enterprises,the relation between corporate strategy differentiation and inefficient investment is more significant in non-state enterprises,which proves that there is an obvious difference on how corporate strategy differentiation affects inefficient investment in state enterprises and non-state enterprises.According to the conclusions,this paper makes policy suggestions in three aspects: firstly,for shareholders and creditors,in order to improve investment efficiency,they should realize the relation between corporate strategy differentiation and inefficient investment to take appropriate measures to make corporate governance better.Secondly,for potential investors,based on understanding the risk and profitability of corporate strategy differentiation,they should have a reasonable evaluation of the match level between corporate strategy positioning and business environment so that they can select subjects rationally to improve income from investment.Thirdly,the supervision department should further improve the policies and regulations for the disclosure of listed companies' strategic information and encourage them to improve the quantity and quality of strategic information disclosure.At the same time,it helps supervision department to improve the efficiency and effectiveness to comprehend the relation between corporate strategy differentiation and inefficient investment.