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 ?
It should be noted that I make no claims that agency cost is the only underlying cause of the accruals-future profitability relationship; in fact, an over-investment explanation could even be nested within a broader theory of diminishing marginal returns on investments.
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).
lt;span style="mso-spacerun: yes;"> </span>The end result was over-investment in infrastructure and over-construction in buildings, which did not bear fruit for the money spent and offers only a shaky foundation for further economic growth
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.
IOC top managers, to the reverse, are more concerned about career-ending decisions of over-investment.
These were increasing at an alarming rate on many farms, due largely to over-investment encouraged by favourable tax allowances and numerous grants.
A spokesperson for the company said that IT services spending is now growing by more than GDP and the recovery is expected to last until mid-2005 - the IT services industry is reportedly still suffering from over-investment in 1999 and during the Internet bubble.
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 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.