Abstract: In this paper, by building the real options model, the impact of controlling shareholder agency over the investment policy, corporate value and agency costs under the ownership concentration is esamined.The research shows that the controlling shareholders-maximizing motivation will lead to over-investment, which cause higher agency costs of debt. The entrenchment of controlling shareholders not only affects the agency conflicts of different shareholders, but also the agency conflicts of stockholder and bondholder. Increasing of ownership of controlling shareholder can lighten the overinvestment, increase corporate value and decrease the agency costs of debt, which shows the incentive effect of corporate governance. Increasing of the separation degree of control from cash flow of controlling shareholder can aggravate overinvestment, decrease corporate value and increase the agency costs of debt, which shows the entrenchment effects of corporate governance.

Key words: ownership concentration, investment policy, agency costs of debt, real options