Ownership structure and investment efficiency

This paper used all china a-share non-financial listed companies in 2001–2006 as initial samples, to analyze how the two dimensions of the ownership structure affect over investment of companies. This paper finds that the following conclusions: (1) There is a positive correlation between the share ratio of largest shareholder and overinvestment level. (2) The second largest shareholder plays a role in restraining overinvestment impulse. But overall, the ownership balance curbing overinvestment is not good; on the contrary it has increased the level of investment. The evidence provides a new idea to improve the governance of ownership structure and to securities regulators.