Allocation of Control Rights, Power Balance and Investment Efficiency

Abstract

Abstract:

Based on the allocation of control rights and power balance, this paper uses Stochastic Frontier Analysis Model to study companies' investment efficiency under three models of control right allocation. The result shows that:(1) Investment efficient loss widely exists in Chinese listed companies:the estimation of over-investment by SFA model is 18.97% higher than the optimal level, and the estimation of investment-deficiency by SFA model is 16.04% lower than the optimal level. (2) The result in all models shows that the investment efficiency loss can be attributed to the separation of cash flow rights and control rights. (3) In the case of multiple shareholders controlling, the efficiency loss depends only on the relative shareholding of multiple shareholders, instead of the absolute shareholding of the shareholders. And the efficiency loss in companies' investment expenditure varies with the different features of power balance.

Key words: allocation of control rights, power balance, over-investment, investment-deficiency

Dou Wei, Ma Lili, Liu Xing. Allocation of Control Rights, Power Balance and Investment Efficiency[J]. , 2016, 28(12): 101-115.

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