Overinvestment


Also found in: Dictionary, Wikipedia.
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).
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
Therefore, if associated with investment efficiency, with high financial reporting quality then the problem of underinvestment (rejecting positive net present value/NPV projects) and overinvestment (carrying out negative NPV projects) will be reduced.
According to Austrian business cycle theory, excessive credit expansions drive the interest rate below the natural rate and, thereby, incentivize overinvestment in the earliest components of the capital structure.
(4) The increasing cyclicality of financial markets can be explained using the monetary overinvestment theories of Mises (1912) and Hayek (1931), which attribute overinvestment and exuberance in financial markets during the upswing to too low central bank interest rates.
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.
Just as the complex relationships between work overinvestment and the self garner attention in this Special Section, so does the tie between work and social relationships.
We then modify the perfectly competitive growth model to provide an assessment of the second version of the claim, that is, that speculative profits may create overinvestment in R&D in the presence of patent protection and monopoly rents.
But as Eleanor dashes frantically from one disconcerting scene to the next, we understand that her overinvestment represents a desperate attempt to avoid what she calls "the ghost-walking, the short-tempered distraction, the hurried fog" that is "a disgrace, an affront to the honor and long shot of being alive at all." She is searching for salvation from a life that has become a series of "regrettable micro-transactions usually involving Timby, my friends, or Joe.
Overinvestment refers to an EOR of narrow expected contributions from the employee and high inducements.
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.
The challenge is whether a regulatory scheme can be designed to provide the right incentives for the delivery of cost effective services while ensuring there is no systematic underinvestment or overinvestment. Hence, regulators need to balance the cost and risk of underinvestment against the cost of overinvestment in maintaining and modernising the networks.