Cash Flow,Ownership Structure and Corporate Investment

摘要

This paper tested the effect of internal cash flow and ownership structure on the investment of listed company in China.The empirical evidence shows that underinvestment will occur in non-state-holding enterprises when the free cash flow is low,the investment is sensitive to internal cash flow,while in state-holding enterprises it is the other way round.When the free cash flow is high,overinvestment will occur both in state-holding enterprises and non-state-holding enterprises and the investment in both are sensitive to internal cash flow.The median ownership structure could constrain overinvestment in state-holding enterprise,however,the decentralized and the overcentralized ownership structure may induce more frequent occurrence of overinvestment.In addition,median ownership structure neither constrains overinvestment nor promotes the effective investment in non-state-holding enterprises.