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Overinvestment
(redirected from Over-Investment)

   Also found in: Dictionary/thesaurus 0.01 sec.
Overinvestment
In corporate finance, this refers to managers not acting in the best interests of the shareholders and investing too much (potentially in negative net present value projects).

Overinvestment
A situation in which the management of a publicly-traded company invests in too many projects, especially when the projects do not benefit shareholders. Overinvestment may be a violation of the management's fiduciary responsibility to shareholders, especially when the managers benefit from the arrangement and investors do not.


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This implies that when entrepreneurs prefer projects that yield a faster stream of returns, it is more likely to result in over-investment because it is either easier for entrepreneurs to be solvent or because this attracts borrowers who want to pocket a higher profit and run away without repaying.
 
 
 
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