Abstract: Two-frontier heterogeneity stochastic frontier model is used to measure the over-investment level of listed companies of China, and Structural equation as well as path analysis are exert to research the mechanism and effects that dual principal-agent problem affects the over-investment of companies. The conclusions are as follows.(1)In China, over-investment and under-investment are both existed in the listed companies. Over-investment which is caused by agency cost makes investment cost have a 31.4% plus over the best level, and occupies 42.8% of the sample.(2)Managerial stockholding incentive would ease the over-investment of listed companies through the paths of free cash flow, capital structure and dividend payment. On the contrary, the control of large shareholders would aggravate over-investment through the paths of free cash flow and capital structure.(3) 77.38%of company investment effect caused by dual principal-agent problem is brought about through the path of free cash flow. The rest 21.24% is contributed by the path of debt. The path of dividend is not remarkable, and does not produce remarkable constraint efficiency.

Key words: dual principal-agent problem, over-investment, two-tier heterogeneity stochastic frontier model, path analysis