Corporate Governance, Internal Control and over Investment under Insider Control: Evidence from Listed Manufacturing Companies in China

摘要

At present, there are more serious over investments in China's listed companies. Based on corporate governance and internal control, we build a driven framework of two paths of "direct driver" and "internal control driver". With 3002 manufacture samples from 2008 to 2011, we investigate the relationships between internal control and overinvestment, management control and internal control, overinvestment and between various corporate governance factors and overinvestment. Empirical result shows that sound internal control restrains over investment enormously, management control weakens internal control and promotes over investment. Executive compensation also significantly improves the quality of internal control and facilitates corporate investment behaviors. We suggest that companies should reduce over investment by enhancing internal control system, refrain from insider control possibility and improve the incentive mechanism of high executives.