| Investment is a major driver of wealth growth,and quality investment is an important economic decision for companies that can increase the value of their assets,expand the scale of their production and operations,improve their market competitiveness and market share,enhance their future value,and help them build a "fast-growing,competitive and risk-resistant" It helps enterprises to build a solid shield of "fast growth,strong competition and risk resistance".However,in the actual economic activities,many factors can affect the investment decisions of enterprises,among them,the separation of management and operation rights,resulting in the commission-agent problem has been the focus of attention.Under the modern corporate system,management will manipulate investment behaviour according to their personal wishes for self-interest motives and power rent-seeking,thus undermining shareholders’ rights and interests and affecting Investment Efficiency.Considering the situation of listed companies in China,manipulation of accounting surpluses through Earnings Management practices is very common.Earnings Management will cause the quality of accounting information disclosure of listed companies to decline,making the problem of information asymmetry among stakeholders more serious,which in turn will lead to moral hazard and adverse selection,thus affecting the Investment Efficiency of enterprises.At the same time,in the presence of financial constraints,companies will actively adjust their surpluses to obtain external investment funds by means of Earnings Management.There is also a relationship between Management Power and Earnings Management: management with more power has unlimited possibilities to use Earnings Management tools to manipulate the company’s accounting surplus.The degree of Management Power itself affects investment efficiency,and it is therefore necessary to examine how the relationship between Management Power and Earnings Management changes in the context of the interaction between Management Power and investment efficiency.In this thesis,a sample of all A-share companies in Shanghai,Shenzhen and the North Stock Exchange from 2015 to 2019 is used to construct panel data for empirical analysis.In calculating the Investment Efficiency of the explanatory variables,the residual values obtained from the regression of Richardson’s(Richardson 2006)model were applied as proxies for Investment Efficiency,and the effects of the magnitude of Management Power and the degree of Earnings Management on the two types of Inefficient Investment behaviour were discussed separately,as well as the role of the interaction of Management Power and Earnings Management on these two effects.Secondly,using principal component analysis,indicators of Management Power of firms were developed in six dimensions.Using Dechow’s(1995)modified Jones model,manipulative accrued profits of the firm were measured and used as a proxy measure for the extent of Earnings Management.The regression model was used and the nature of ownership was added to conduct a regression analysis by industry by year.The findings show that(1)the amount of Management Power is positively associated with both types of Inefficient Investment behaviour,and as Management Power increases,Investment Efficiency decreases.(2)The degree of Earnings Management is positively related to Over-investment Behaviour,but does not necessarily lead to Under-Investment.(3)The degree of Earnings Management contributes significantly to the correlation between Management Power and Overinvestment Behaviour,but is not significantly correlated with Underinvestment.(4)Unlike state-owned enterprises,the degree of Earnings Management in non-state-owned enterprises strengthens the positive correlation between Management Power and Underinvestment Behaviour.On this basis,corresponding policy recommendations are made at four levels based on the findings of this thesis,and future research directions are provided. |
