Overinvestment


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Related to Overinvestment: underinvestment

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.
References in periodicals archive ?
To Austrians, a zero-interest environment might seem a particularly quixotic goal, but certainly sufficiently wasteful overinvestment in capital equipment would depress the marginal return on capital and interest rates for some time, as during the technology boom of the 1990s (Garrison and Callahan 2003) or the housing bubble of the 2000s.
Similarly, short-term debt maturities could improve the investment efficiency and could reduce the overinvestment and less than enough investment problem.
Overinvestment and gambling on success are, to some extent, 'normal' in this environment.
Our findings, which may be attributable to overinvestment and the overestimation of future cash flows, imply that R&D resulting from overconfident behavior does not provide any value to firms.
Concerns in developing economies include large current account deficits in countries such as India and Turkey, currency crises in some countries including Argentina, overinvestment in productive capacity, and rebalancing economies to rely more on domestic consumption and less on exports.
Current account deficits Concerns in developing economies include large current account deficits in countries such as India and Turkey, currency crises in some countries including Argentina, overinvestment in productive capacity, and rebalancing economies to rely more on domestic consumption and less on exports.
Even mighty China may stumble because overinvestment has led to a tsunami of bad debts.
Most importantly, the risk insurance implied by TBTF is likely to generate excessive risk taking, which fosters overinvestment in risky activities.
So it comes with the territory and our solution to that has always been overinvestment in long-term brand health.
Inspired by Hayek (1937a)'s claim that "monetary nationalism" renders the international economic system fragile, we aim to further analyze the limits and risks of domestically oriented monetary policies based on a Mises-Hayek overinvestment (1)/ credit cycle framework.
Competing Explanation 3: Overinvestment Explanation
We find that CEO signature size is positively associated with a number of proxies for overinvestment, and that abnormal investment by narcissists destroys firm value via reduced sales growth and future revenues," the University of North Carolina study states.