A research on company capital budgeting efficiency

Budgeting is considered to be one of the most important management tools to steer the organization, evaluate its performance and motivate its people. Capital budgeting decisions affect the profitability of a business organization. This paper focus on the efficiency of capital budgeting. Over-investment or under-investment is inefficiency. Using Chinese listed company´s data, we find that when the majority stockholder has more stock, the more inefficiency of capital budgeting is. We also find that there is a negative relationship between leverage and the inefficiency of capital budgeting. The inefficiency of capital budgeting decreases as the number of independent director increases.