The Influence Of Financial Flexibility On Inefficient Investment From The Perspective Of Corporate Internal Governance

Investment activities are one of the important components in the operation process of an enterprise,and play an important role in the long-term development of the enterprise.Correct investment decisions allow the company’s funds to accumulate,so that the company has sufficient capital flow to meet the needs of production and operation,so that the corporate resources have been reasonably allocated,thus forming a virtuous circle,At the same time,the market competitiveness and value of the enterprise have also been correspondingly improved.However,due to the existence of environmental uncertainty,principal-agent phenomenon,and information asymmetry,some enterprises in China have inefficient investment phenomena.Therefore,how to effectively reduce the inefficient investment of enterprises has attracted widespread attention from the academic community.The daily production and operation of the enterprise and the additional needs for investment require that the enterprise maintain a certain ability to raise funds.Financial flexibility refers to the ability of an enterprise to adjust its cash flow and remaining debt to respond to unforeseen events in the future and seize investment opportunities in a timely manner.This kind of ability plays a key role in the enterprise facing environmental uncertainty and grasping investment opportunities.The research on financial flexibility has become an important direction for the research of corporate investment issues.In addition,the company’s internal governance level determines the quality and sustainability of the company’s development.By establishing a series of effective governance mechanisms,the company forms a mutually restrictive relationship between the company’s main stakeholders.Therefore,this article combines the improvement of the company’s internal governance level with the appropriate financial flexibility of the reserve to effectively prevent the problem of underinvestment or overinvestment.On the basis of the above background,based on reading and sorting out relevant domestic and foreign literature,this article discusses in depth the influence of financial flexibility on inefficient investment from the perspective of corporate internal governance.Taking the Shanghai and Shenzhen A-share listed companies from 2014 to 2018 as the research samples,the sample observations totaled 6024,of which less than 3864 were invested and 2160 were overinvested.Based on information asymmetry theory,financing constraint theory,principal-agent theory as well as property rights theory,this article deeply studies the impact of financial flexibility on underinvestment and overinvestment of enterprises;then selected eight indicators from four levels: equity structure,equity incentives,the structure of the board of directors,and the structure of the board of supervisors.Obtain comprehensive corporate internal governance indicators through principal component analysis,and use corporate internal governance as a new perspective,analyzes the connection between financial flexibility and inefficient corporate investment from the perspective of corporate internal governance;based on the above research,this article further combining the nature of property rights to divided into state-controlled companies and non-state-controlled companies for in-depth analysis,put forward hypotheses and construct empirical evidence based on each Model.The research results show that financial flexibility has a positive impact on corporate over-investment and a negative impact on corporate under-investment;a high level of corporate internal governance able to reduce the deteriorating impact of financial flexibility on over-investment and strengthen the restraint effect of financial flexibility on under-investment;After further distinguishing the nature of property rights,the results of this study show that,compared with state-owned enterprises,the higher level of internal governance of non-state-owned enterprises can better restrain the impact of financial flexibility on inefficient investment by enterprises.According to the research conclusions,this paper proposes three suggestions:construct a flexible financial management system,actively improve the internal governance mechanism of the company,and improve the construction of the capital market.