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Abstract
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Article Information:
Corporate Governance, Internal Control and over Investment under Insider Control: Evidence from Listed Manufacturing Companies in China
Yu Tuanye and Chen Chucan
Corresponding Author: Yu Tuanye
Submitted: February 16, 2013
Accepted: February 25, 2013
Published: December 05, 2013 |
Abstract:
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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.
Key words: Insider control, internal control, over investment, path analysis, , ,
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Cite this Reference:
Yu Tuanye and Chen Chucan, . Corporate Governance, Internal Control and over Investment under Insider Control: Evidence from Listed Manufacturing Companies in China. Research Journal of Applied Sciences, Engineering and Technology, (22): 4247-4253.
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ISSN (Online): 2040-7467
ISSN (Print): 2040-7459 |
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