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 ?
According to Galai and Masulis (1976), Jensen and Meckling (1976), Jensen (1986), and Stulz (1990), the overinvestment problem arises when managers, considering firms as a means to increase their own capital, abuse their decision-making power by choosing projects with negative present value that could increase their own private profit and at the same time decrease and harm shareholders and debtholders wealth.
As a result, where there are nudge versus nudge interactions, there is a worrisome possibility that nudge versus nudge battles may result and that this could lead in some cases to overinvestment in nudges, as compared to the socially optimal level.
21) A broader and, in this sense, untethered priority created by the 25% carve-out would exacerbate the overinvestment problem.
The two versions of the overinvestment hypothesis, without and with patent protection, are analyzed in Sections IV and V, respectively.
Monetary Overinvestment Theories and Boom-and-Bust in Financial Markets
The effect of managerial discretion on debt maturity is studied by the agency theory and typically focusing on the problem of overinvestment.
Overinvestment refers to an EOR of narrow expected contributions from the employee and high inducements.
Call this the fifth anomaly -- the result of China's slowdown, the surge in supplies of energy and industrial metals (following successful exploration and overinvestment in new capacity), and the strong dollar, which weakens commodity prices.
Core price deflation in areas such as energy, commodities, and food has more to do with increased productivity and overinvestment outside of China than it does with yuan policy.
The fact is that Chinese growth has been based in part on overinvestment, says Robert Shapiro former Undersecretary of Commerce.
Panama City is overbuilt because it experienced overinvestment," he says.
On the level of a national economy, in Japan, overinvestment in heavy industry dramatically illustrates the impact of too much capital equipment.