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Empirical Research on the Inefficient Investment Behavior Arising from the Conflicts between Stockholder and Creditor

Author: YangShaoHua
Tutor: ZhangLing
School: Hunan University
Course: Business management
Keywords: Conflict of interests of shareholders and creditors Inefficient Investment Over-investment Insufficient investment
CLC: F224
Type: Master's thesis
Year: 2007
Downloads: 377
Quote: 0
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Abstract


Corporate financial management , investment decision-making as the main motivation for the company's growth and an important foundation for future cash flow growth , is the starting point of the company's financial decision-making . Normal circumstances should proceed from the goal of maximizing enterprise value investment project in the net present value is greater than zero , to abandon the project net present value is less than zero . Foreign literature study shows that a conflict of interest exists commissioned agency costs and information asymmetries exist between shareholders and creditors are likely to enable enterprises to give up the stable cash flow positive NPV project , accepted cash flow fluctuations but the net present the project value is negative , resulting in non - efficient investment behavior ( lack of investment or over-investment ) , damage to the interests of the creditors and the enterprise as a whole . Combing existing domestic and international theory and empirical research basis , the system analyzes the investment behavior of the shareholders and creditors of a conflict of interest caused by the non- efficiency of the internal mechanism and external conditions , and make assumptions . Then , the paper established a short-term debt ratio , cash flow ratio , short-term investment opportunities , long-term investment opportunities for control variables , multiple regression model testing the relationship of long-term debt ratio and the scale of investment . 2000 to 2006 , 478 Chinese manufacturing listed company data to an empirical test , empirical results show that : Chinese manufacturing listed companies , shareholders and creditors of a conflict of interest due to over-investment and lack of investment behavior exist ; projects in high- risk enterprise , the shareholders and creditors of a conflict of interest caused by the non- efficiency investments mainly to over-investment , mainly to insufficient investment in low-risk project enterprise ; lack of investment in higher growth businesses , shareholders and creditors of a conflict of interest caused behavior , on the contrary , in the low growth businesses , causing over-investment behavior ; higher risk of bankruptcy of the enterprise , the shareholders and creditors of a conflict of interest caused by overinvestment and underinvestment row of more severe . Finally, some suggestions for how to reduce the shareholders and creditors of a conflict of interest due to over-investment and inadequate investment behavior .

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