Research On Managerial Power, External Governance And Enterprise Investment Efficiency

As a key link in the business activities of modern enterprises,investment plays a decisive role in the sustainable development of enterprises,making it one of the hot topics for many scholars.Reasonable investment arrangements can bring sustainable development momentum to the enterprise.However,in actual practice,due to conflicts of interest between the principal and the agent,and difficulties in designing a complete contract to constrain the management's behavior and the asymmetry of information between the two parties,the efficiency of corporate capital allocation is often not satisfactory.The existence of over-investment or under-investment has seriously affected the company's operating conditions and it is difficult to establish core competitiveness.Compared with shareholders,the management has a more detailed grasp of the company's production and operation situation,while shareholders have the situation of untimely grasp,and even cognitive blind spots.And the management has direct decision-making power over the resource allocation of the enterprise.According to the principal-agent theory,when management holds powers beyond its scope of responsibility and the corporate governance mechanism cannot form a corresponding binding force,management will consider for its own interests,including building a business empire,pursuing personal status,excessive income,preserving personal reputation,etc.,make some unnecessary or even unfavorable investment decisions for the survival and development of the enterprise,leading to overinvestment and underinvestment.As for the means to restrict the power of management,whether in the practice of enterprises or in the research of many scholars,more attention is paid to internal governance,while the existence of external governance means is ignored.Nowadays,the interaction with the outside world has penetrated into every link of enterprise production and management.Therefore,the critical role that external governance can play should not be ignored.Among the many external governance methods,analyst coverage and product market competition's restraining effect on managers' abnormal behavior has been well received.As an effective supplement to the internal governance mechanism,under the background of the incomplete legal system of external supervision,analysts can actively monitor the abnormal behavior of management by issuing investment forecast reports.Similarly,as an external governance mechanism,product market competition makes horizontal comparisons between companies more straightforward,and performance levels can be used as an important indicator for evaluating management efforts.Moreover,the fierce competition in the product market will challenge the company's market position,reduce the potential profit space,increase the difficulty of survival,and force managers to do their due diligence to avoid salary cuts or dismissal.Based on the perspective of the principal-agent mechanism,this article explores how the investment efficiency of enterprises is subject to managerial power,and adds analyst coverage and product market competition,two external governance methods,and explored their roles in regulating the alienation of managerial power.By combing the existing literature,different hypotheses are proposed based on different theoretical foundations,and multiple regression models are used to verify the hypotheses.The article selects A-share listed companies from 2014 to 2018 as a sample,select the three indicators of dual position,equity balance,and general manager part-time to comprehensively evaluate the managerial power of the sample company;According to the model proposed by Richardson in 2006,predicting the investment efficiency of enterprises;The number of analyst teams or individuals who issued investment rating reports on sample companies during the year was used to measure the analyst coverage level;The Herfindahl index was used to measure the market competition faced by the sample.After data cleaning and sorting,a total of 5,389 samples were obtained.This paper uses STATA15 to conduct an empirical analysis,and finally obtains:(1)Managerial power has a negative impact on the investment efficiency of the enterprise,that is,the investment efficiency of the enterprise will decrease as the power of management increases;(2)Analyst coverage can suppress the negative impact relationship between managerial power and corporate investment efficiency,that is,as the analyst coverage intensity increases,the negative correlation between managerial power and corporate investment efficiency will be weakened;(3)Product market competition can suppress the negative influence relationship between managerial power and enterprise investment efficiency,that is,as the product market competition intensifies,the negative correlation between managerial power and enterprise investment efficiency will be weakened.The article takes the theory of principal-agent,information asymmetry and incomplete contract as the theoretical starting point,and focuses on the influence of managerial power on corporate investment efficiency,and uses analyst coverage and product market competition as two different external governance measures as moderating variables.It enriches the research on the economic consequences of the alienation of managerial power,and the governance effect of analyst coverage and product market competition.It provides a new reference for companies to reasonably define the scope of managerial power,which in turn helps to improve the efficiency of capital allocation and improve the company's sustainable development capabilities.At the same time,it has certain guiding significance for cultivating a benign competitive market and focusing on analyst industry management to improve the effect of external governance.