| Abstract | Jenson and Meckling (1976) argue that the principal-agent problem between shareholders and the firm manager arises under the dispersed ownership structure. One result of the agency problem is that the firm manager may invest in inefficient projects, which is known as over-investment. Richardson (2006) puts forward a measurement to measure over-investment, which is termed Rindex in our paper, and it widely used by a large number of domestic literatures. Nevertheless, in this paper we find a series of evidence showing that Rindex is not suitable statistically for measuring the investment efficiency for China's listed companies. Therefore, present conclusions based on Rindex about Chinese corporate governance deserve further studies. |