Study on the allocation of decision-making power and corporate value: empirical evidence from enterprise groups

【Author】

PAN Yilin;ZHU Kai;CHEN Xinyuan

【Institution】

School of Accountancy, Shanghai University of Finance and Economics;Institute of Accounting and Finance in School of Accountancy, Shanghai University of Finance and Economics;Institute of Accounting and Finance in School of Accountancy, Shanghai University of Finance and Economics

【Abstract】

This paper tested the impact of the allocation of decision-making power on the operational efficiency and market value of enterprises. On the one hand, centralized management can play a big role in coordinating enterprise resources, utilizing the internal market, and enhancing the efficiency of existing resource management. On the other hand, in making investment decisions with higher uncertainty, decentralized management can play a good role in combining decision-making power with proprietary knowledge. However, centralized managers may worsen over-investment in the absence of proprietary knowledge. By using the proportion of employee salary paid by the parent company as an indicator measuring the centralization level of the enterprise group, this paper tested the economic consequences of the allocation of decision-making power. According to the empirical results, centralized management of enterprise groups can remarkably enhance the efficiency of existing resource management, but it can trigger over-investment simultaneously. The path analysis results indicate that management efficiency and over-investment serve as the important means for decision-making power to affect corporate value. The research results of this paper are of great significance for enterprises in their establishing an appropriate allocation mode of decision-making power.

【Keywords】

centralized management;management efficiency;over-investment;corporate value

References

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Springer Journals Database

Total: 20 articles

  • [1] Lu Zhengfei and Zhang Huili, The Arrangement of Ownership,the Space in Rent-seeking and the Cash Distribution, Management World,
  • [2] ZHANG Hui-li1,LU Zheng-fei2(1.School of Economics and Management,Beijing Normal University,Beijing 100871, China;2.Guanghua School of Management,Peking University,Beijing 100871,China), Does Business Distribution of Listed Companies Affect Earnings Quality? Evidence from Listed Companies and Relative Business Scale of Their Whole Subsidiaries, Journal of Finance and Economics,
  • [3] Zhang Huili and Lu Zhengfei, The Cash Distribution, the Corporate Governance, and the Over-investment: an Investigation Based on the State of the Cash Holdings of China’s Listed Companies and their Subsidiaries, Management World,
  • [4] Wan Hualina,Zhu Kaib and Chen Xinyuanb(a:Shanghai Lixin University of Commerce;b:Shanghai University of Finance and Economics), Valuation of Corporate Capital Expenditure under Tax Reform, Economic Research Journal,

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