CEO Discretion,CEO Ability,and Corporate Investment Efficiency

Corporate investment efficiency is the focus of China's supply-side reform and the key to the corporate sustainable development.CEO,as the leading core of corporate managers,plays a key role in corporate investment decision-making.The CEO discretion is the power of the CEO to use the resources of the corporate,which reflects the degree of the organization's empowerment of the CEO.The greater the CEO discretiona is,the more decisions it has on the corporate investment behaviors,which will inevitably affect the corporate investment efficiency.On the one hand,the CEO discretion enables the CEO to make full and reasonable use of corporate resources,seize investment opportunities and improve the efficiency of corporate investment.On the other hand,the CEO may,out of self-interest,overinvest for his on-the-job consumption,build his "manager's empire" with his discretion,or underinvest for risk aversion,ultimately damaging investment efficiency.Therefore,it is undoubtedly a very important topic to study the influence of CEO discretion on the corporate investment efficiency in China.Further,previous studies tend to separate CEO ability from CEO discretion,and it is also a question worth studying whether the difference in CEO ability will affect the relationship between CEO discretion and corporate investment efficiency.This paper selects non-financial A share listed companies in Shanghai and shenzhen from 2007 to 2017 as research samples,and use empirical research methods such as ordinary least square(OLS),Tobit regression and quantile regression to investigate the relationship between CEO discretion and corporate investment efficiency,as well as the influence of CEO ability on the relationship between them.The research finds that:(1)There is an inverted u-shaped relationship between CEO discretion and corporate investment efficiency,that is,with the increase of CEO discretion,corporate investment efficiency will first increase and then decrease.(2)The inverted u-shaped effect of the CEO discretion on the corporate investment efficiency exists in the sample of under-investment,and when the corporate invests excessively,the CEO discretion has a positive impact on the corporate investment efficiency.(3)With the improvement of the corporate investment efficiency,the positive effect of CEO discretion on the corporate investment efficiency will present the feature of marginal decline.Only in corporates with low investment efficiency can the inverted "U" effect of CEO discretion on the corporate investment efficiency exist.(4)In terms of the role of CEO ability,I find that CEO ability is positively correlated with his discretion.(5)Compared with corporates with low-ability CEO,the corporate investment efficiency with high-ability CEO is more significantly affected by the inverted "U" type of CEO discretion.For the first time,the paper integrates different perspectives of "agency theory" and "butler theory",and gets rid of the single perspective of executive compensation incentive under the traditional agency theory.It deeply discusses the impact of CEO's discretion on the corporate investment efficiency from the perspective of board of directors' empowerment.And from the relationship between formal power and informal power to explore the impact of the CEO ability to play.This paper provides new empirical evidence for the research on the relationship between CEO discretion,CEO ability and the corporate investment efficiency.The research results provide some enlightenment for corporates to reasonably endow CEO with discretionary power,fully considers CEO's own ability and the corporate investment efficiency level to improve the corporate investment efficiency,which is helpful for China to better promote the process of supply-side reform and high-quality economic development.