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Capital Investment and Firm Value of Chinese Listed Companies

Author: ZengYi
Tutor: YangXingQuan
School: Shihezi University
Course: Accounting
Keywords: large shareholders stock checks and balances environmental management capital investment firm value
CLC: F276.6;F224
Type: Master's thesis
Year: 2010
Downloads: 17
Quote: 0
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Abstract


Capital allocation efficiency in company investment is always the theory of corporate finance basic concem.Modigliani and Miller (1958) of the MM theorem of the company created a precedent for micro-investment theory, they describe a perfect world, the company’s investment, financing and dividend policy are independent, the company’s total investment spending is also only faced by the companyset of investment opportunities in the decision, independent of other factors.However, back to the real world, as well asymmetric information and agency problems influence, as the main drivers of the company’s growth and future cash flow growth, an important foundation for the company’s capital investment will inevitably affect the value of the company.With the corporate governance of stock distributed from the typical structure of the United States continued to extend to other countries, worldwide more and more studies confirm that most companies there controlling shareholders (La Porta et al.,1999).Controlling shareholders and minority shareholders the proxy conflict between the dispersed ownership gradually replaced the traditional agent under the conflict as the focus of the study of corporate governance issues of modern corporate governance, Financial Decision Making Institute under the focus of attention.This paper studies the value of capital investment and corporate relations, investment and the establishment of a theoretical model of large shareholders and the capital investment of theoretical model to analyze the level of investment, investment opportunities and free cash flow of the company’s capital by value of the company brought the changes of the major shareholders of capital investment under the control of the value of the company investigated how to control the environment affect the company’s capital investment and thus affect the value of the company.The main conclusions of this paper is as follows:1.Listed companies increased investment will help enhance the value of the company, but the companies have the low investment opportunities and more free cash flow reducing capital investment value of listed companies.2.Controlling shareholders will act on the capital investment value of a negative effect.In particular, the existenc of controlling shareholders, government-controlled companies and the separation of ownership will reduce the value of listed companies, the negative effect of Controlling shareholders is more serious in the low investment opportunities and more free cash flow companies.3.Appropriate checks and balances equity and good governance environment will help to enhance the value of corporate capital investment, and governance environment, the role of this positive behavior of controlling shareholders will play a negative role of a good extent.The enlightenment bringing about from this is, in the inside governs mechanism by the company, harmonize the strong stock holder and small and medium shareholder benefit, simultaneous with standard our country listed company capital investment behavior, wants attention to be governing important, more fundamental machine-made the back factor inward in concealing too, is that what company gets along governs an environment (the investor protects degree).

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CLC: > Economic > Economic planning and management > Economic calculation, economic and mathematical methods > Economic and mathematical methods
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