The multi-infeed effective short-circuit ratio (MESCR) is widely used in indicating the strength of multi-infeed AC/DC power systems. However, when the widely used MESCR was adopted to evaluate the stability margin of the Eastern China Grid including three infeed ultra-high-voltage DC (UHVDC) and five high-voltage DC transmission lines in 2016, the MESCR result indicated the system was strong enough but in fact occasionally collapses after the N-1 contingency. To determine the reason for this conflict, this paper theoretically analyzes the limitations of the existing MESCR. The theoretical analysis reveals that when a large amount of capacitor compensations are concentratively installed in the system, the conventional MESCR will not be able to reflect the capacitor compensations’ influence on the system stability, and no matter how many capacitors are installed or where the capacitors are installed, the MESCR almost retains the same value; namely, the MESCR is saturated in such systems. To address the saturation problem of conventional MESCR, this paper proposes an improved multi-infeed effective short-circuit ratio (IMESCR) which considers the influences of all capacitor compensations by converting all capacitors installed throughout the system to virtual capacitors at the DC inverter station. Case studies are carried out based on the New England 39-bus system and the Eastern China Grid, respectively. The simulation results verify the theoretical analysis of the MESCR’s limitations in evaluating the stability of power systems with massive capacitors installed, and proves that the proposed IMESCR could accurately indicate the strength of AC/DC power systems. Therefore, the proposed IMESCR provides a new index for evaluating the stability margin of power systems with massive capacitor compensations installed.