Overinvestment

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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 ?
Looked at from the opposite perspective, the lower asset turnover ratio of larger businesses could be reflective of over-investment on their part.
The Central Bank also issued a warning: "Experience shows that over-investment in property has proven to be an unwelcome feature of economic success in many countries."
When managers have both empire-building tendencies and fears of default, over-investment occurs under low debt levels and under-investment occurs under high debt levels.
The crisis in the Asian economies was brought on by what UNCTAD describes as a combination of "financial fragility, over-investment and a variety of structural weaknesses." It affected South Korea and then Hong Kong, before spreading to Japan, and acted as a revealing sign.
The debt is a result of over-investment and foreign exchange losses after the Thai economy fell into crisis.
Debbie says when she tackled Jacko he blamed "over-investment" for his cash-flow problems.
The low quality of banking supervision in countries such as Thailand led to a number of non-performing loans when property prices slumped as a result of over-investment.
The 1994 inflation was related to the over-investment that occurred in the preceding years.
However, the telecommunications sector - unlike the roads sector - has learned how to avoid the extremes of congestion and over-investment. It does this by adopting pricing rules and investment criteria developed in market economies to make the best use of scarce resources.
Finally, two adverse effects relating to providers' incentives are shown: costs increase and over-investment.
A rigid approach to defining programs based strictly on absolute nursing hours per patient day fails to consider the interplay of these variables, can cause over-investment in payroll, and create programs which are not responsive to the market.
The chapter on development considers the role of transport investment in the third world and properly emphasizes the not infrequent over-investment in transport infrastructure and the limited success of the effort to encourage broad economic development by such investment.