The Influence Of Institutional Environment On Financing Decision Of Chinese Listed Companies

Corporate financing decision is one of the most crucial content in the research of finance. Corporate financing decision is affected by factors such as company characteristics, corporate governance, macro factors and manager’s behavior. In recent years, cross-country research on the effects of institutional environment on the corporate financing decisions has become popular since LLSV’s "law and finance" theory proves that regional difference exits in the external governance (such as legal system, property right protection, etc.), and it has a significant impact on corporate financing decisions. Nowadays, China’s market-oriented process has made significant progress, but because of the differences of resources, locations etc., different regions of a country present unbalanced development, leading to the finance differences among companies from different regions. In the view of this, based on Chinese institutional environment, this dissertation studies the impact of institutional environment on financing decisions.The dissertation is divided into seven chapters. Chapter one is introduction, introducing the research background, the research implication, the research content and technology route. Chapter two is literature review. Chapter three is an analysis of the capital structure characteristics of Chinese listed companies. Chapter four verifies that the factors of institutional environment have impact on listed company’s financing choices. Chapter five is the empirical analysis that the factors of institutional environment have impact on corporate debt maturity structure. Chapter six examines the impact that the factors of institutional environment on corporate capital structure. Chapter seven is the conclusion and the perspective.The main conclusions of this dissertation are as follows.(1) Building a multiple regression model between institutional environment and debt maturity structure, we find that listed companies in better institutional environment have shorter debt maturities and regional differences existed in the impacts of institutional environment on debt maturities.For the issue of debt maturity structure, by taking government intervention, financial market development and legality as the proxy variables of the institutional environment and using ordinary least square (OLS) method, this paper verifies the hypotheses that listed companies in the region with lower government intervention, higher financial market development and better legal system have shorter debt maturities; Grouping tests based on regional difference found that institutional environment have greater impact on eastern listed companies’debt maturities than central and western ones. This dissertation supports regional difference exists in the impact that institutional environment on listed companies’debt maturities among different regions in the same country.(2) By building dynamic panel model and using the GMM estimator method this paper verifies institutional environment have impact on listed companies capital structure and find regions with higher adjustment speed are distributed in China’s eastern coastal and central regions.For the issue of impact factors and dynamic adjustment of the capital structure of listed companies in China, by building dynamic panel model and using the GMM estimator method, this paper find listed companies’capital structure was not only affected by company characteristics, corporate governance and macro-economic factors but also by institutional environment; Empirical research with listed company data of provinces(cities) find the existence of the regional difference in the impact that institutional environment on listed companies’capital structure and capital structure adjustment speed; Regions with higher adjustment speed are distributed in China’s eastern coastal and central regions. It has been verified that capital structure adjustment speed difference exist in different countries, while this study further analyze and find even in the same country, regional difference still exists in the impact that institutional environment on capital structure adjustment speed.(3) By using Ordered-probit model, this paper verifies the existence of regional difference about the effect of the institutional environment on the choices of finance. Tests based on regional difference perspective find that eastern listed companies use internal financing in preference while central-western ones prefer short-term loans.Focusing on the issue of the choices of finance, by using Ordered-probit model, this paper find that listed companies in better institutional environment are more likely choosing internal financing. Grouping tests find that in eastern China, institutional environment affect the choices of corporate finance, and companies follow the financing order of internal financing, short-term loans, long-term loans, bond financing, new share issuance and allotment, while the central and western listed companies institutional environment doesn’t affect the choices of corporate finance, they follow the financing order of short-term loans, internal financing, long-term loans, new share issuance, bond financing and allotment. This paper considers that regional institutional environment difference is a key factor to explain the financing order difference.