Abstract: Based on the theoretic analysis of inefficient investment of ultimate owner,the paper analyzes the problem of inefficient investment of ultimate owner in private firms using unbalanced panel data of Chinese private listed firms. The result suggests that ultimate owner will make under-investment facing financing constraints,and he will do over-investment without financing constraints. The smaller of the cash-flow right owned by ultimate owner or the worse protection of investors,the more severe over-investment will be done by ultimate owner.Besides,the paper investigates the relationship between the tunneling and over-investment of ultimate owner and finds the negative correlation without financing constraints.

Key words: pyramid structure, ultimate owner, financing constraints, under-investment, over-investment