TITLE:
Difference on Capital Allocation and Operating Performance—Evidence from China Listed Companies
AUTHORS:
Jianfeng Zhao
KEYWORDS:
Capital Allocation, Operating Performance, Classified Reform
JOURNAL NAME:
American Journal of Industrial and Business Management,
Vol.8 No.11,
November
22,
2018
ABSTRACT: The neoclassical theory of
investment has been developed to explain, in a perfect market, the investment
decision of a company depends on the net present value of a project, and its
expenditure is determined only by the set of investment opportunities, and
independent of other factors. However, in reality, other factors influence
investment mostly. For the full sample of China listed companies, capital allocation
is consistent with operating performance. Controlling property rights of the enterprises,
we show that various kinds of investments in state-owned listed
companies are inconsistent with operating performance, but non-state-owned
listed companies reflect effective investment. In the long run, deepening
classified reform of state-owned enterprises is extremely demanded.