Research On The Influence Of Executive’s Vertical Ties On Subsidiary Overinvestment

As the micro foundation of macro-economic growth,investment activity is an important strategic decision and the source of value creation of enterprises,and plays a vital role in the sustainable and healthy development of enterprises.The report of the Party’s 20 th National Congress stressed the need to deepen the reform of investment and financing systems,promote the transformation of the economy from a stage of high-speed growth to a stage of high quality,and give play to the key role of investment in optimizing the supply structure.However,in the process of transformation economic development,many listed companies are faced with the problem of inefficient allocation of resources and overcapacity,which restricts the healthy development of the capital market.Excessive investment behavior of enterprises is an important cause of inefficient investment or even ineffective investment.Guiding the correct flow of funds and improving the efficiency of investment have become the main issues that scholars pay attention to.At present,the common phenomenon of corporate overinvestment in practice has aroused extensive attention in the academic circle,and related research theories are increasingly rich.However,in the process of studying this problem,with the deepening of the research problem,the space for further improvement has gradually emerged.On the one hand,when studying overinvestment,most of the existing studies focus on state-owned enterprises and manufacturing enterprises.For the situation of joint governance,such as the situation of enterprise groups,the logic and function path of enterprise overinvestment are not clear.On the other hand,the existing literature,when examining the factors leading to the problem of enterprise overinvestment,all start from a macro or strategic perspective.Therefore,how corporate governance factors affect enterprise overinvestment has not been clarified.In addition,although some people have studied the problem of corporate overinvestment from the perspective of vertical part-time,most of them have studied from the perspective of "more supervision effect" and "more hollowing effect",and the relevant literature on the psychological mechanism of binding executives is still to be enriched.In order to further explore the cause of excessive investment of companies,and provide reference to our corporate excessive investment problems.Based on the principal-agent theory and the internal capital market theory,this paper takes the subsidiary of an enterprise group in the context of China as the research object,analyzes the influence of the parent-subsidiary executive connection on corporate overinvestment,and studies the introduction of intermediary variables such as debt financing ability and manager overconfidence,in order to clarify how the executive connection affects corporate overinvestment.On this basis,this study will introduce the regulatory variables of the property rights of enterprises and the uncertainty factors of national macro policies to investigate the over-investment behavior of listed companies in different governance scenarios.Finally,based on theoretical derivation and empirical analysis,this paper draws the following conclusions:(1)senior management linkage has a positive impact on the over-investment behavior of subsidiaries;(2)The debt financing ability of enterprises and the overconfidence of managers play an intermediary role in the relationship between the parent-subsidiary executive connection and the subsidiary overinvestment;(3)In state-owned enterprises,the positive influence of parent-subsidiary executive connection on managers’ overconfidence and debt financing ability is weakened.(4)When economic policy uncertainty is stronger,the positive influence of managers’ overconfidence on subsidiaries’ overinvestment will be weakened.This study explores the economic consequences of parent-subsidiary executive connection and the factors influencing overinvestment,which will further enrich the relevant literature and broaden the research perspective.Through the in-depth study of the problem of excessive investment in the subsidiaries of the group,this paper puts forward some thoughts on the management of the internal capital market of the group,the reasonable control of the power of connecting senior executives,and the improvement of the scientific and democratic nature of the company’s investment decisions,and gives some management enlightenment.Relevant suggestions can help improve the synergistic efficiency between parent and subsidiary companies,and thus improve the investment efficiency of the company.