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 ?
China is "full of opportunities, but bloated by over-investment in many sectors," warned panelist Xu Xiaonian, a professor of economics at the China Europe International Business School (CEIBS).
But professor Xu Xiaonian of the China Europe International Business School in Shanghai said the strategy supports structural imbalances -- over-investment, surplus production capacity, and under-consumption -- while neglecting long-term objectives.
The banking sector had been overstretched by too many bad loans and over-investment in the capital market and the oil and gas sectors when commodity prices were high.
If that does not happen, there will be over-investment, and inefficient investment.
He admits there's an irony in now railing against a system in Austria that has seen over-investment in foreign talent at the expense of young, homegrown players.
At the same time, though, he had sober news for companies looking at China as a panacea for their woes, noting that China for the first time became a net exporter of vehicles in 2005 and that over-investment there has led to lower profitability and massive price-cutting for the OEMs.
These were increasing at an alarming rate on many farms, due largely to over-investment encouraged by favourable tax allowances and numerous grants.
China's central bank is expected to raise reserve requirements for some weak banks in an effort to stem over-investment and rising inflation.
The risk to the UK's economy of underinvestment in the NTS would far outweigh the cost of some over-investment.
The collapse of Cellar 5, with its Booze Buster fascia, has left fingers pointing at supermarkets' cut-throat drinks prices, although a longer-term appraisal might point to over-investment in expensive retail brand concepts in the 1990s and high ongoing costs.
Economies such as the Philippines, Vietnam and India did not participate in the investment boom of the 1980s and 1990s, and have therefore avoided the excesses of over-investment and over-borrowing.