Study Of Debt Finance And Corporate Governance

Financial structure is the base of the corporate governance. This paper discusses the corporate governance from the point of view of debt finance. Its revealed that the debt finance could work effectively in the corporate governance by the summary of the evolvement and development of the corporate governance, financing structure theory, transaction cost theory, agency theory and incomplete contract theory. In the part of theoretic analysis, this paper analyzes that debt finance could alleviate the conflict of agency, reduce the cost of agency, and so improve the effect of the corporate governance. The mechanism of the creditor participating in the corporate governance was analyzed: the information feedback, market competition and the rational expectation is the basic mechanism, and the debt contract restraint, contingent governance, financial decision, price discovery and the bankruptcy mechanism are the main mechanisms. In the developed market economies, the creditor has participated effectively into the corporate governance, and the international comparison of the main models of the creditor participating into the corporate governance was made in this paper, and some suggestions were put forward for reference. The problem of debt finance and corporate governance was empirically studied with the data of the China's listed companies from 2001 to 2003, the conclusion is that it is negative correlation between the debt ratio and the performance of the listed companies, and so the problem of the soft restriction of debt were uncovered. And then, this paper analyzes the problem and the status quo of debt finance and corporate governance in China, and some frame suggestions were put forward: reconstruction of the relationship of the bank-firm, and the development of the bond market. The key points of the reconstruction of the relationship of the bank-firm are the reform of the bank system ,the marketing reform of the enterprises, and the adjustment of relationships of the bank—firm. Through the reform of IPO of the corporate bond, and the mechanism of the interest of the bond, the development of the enterprise bond market would be pushed forward, and then the mechanism of the bond finance to the corporate governance could be improved.