Research On The Impact Of Overinvestment And Diversification On Corporate Credit Risk

In November 2015,the government issued the ?supply-side reform? for the first time.After that,the national leaders have repeatedly mentioned in the international and domestic important occasions.At this point,the ?supply-side reform? has been successfully launched,which take "go to production,inventory,deleveraging,reduce costs,make up the short board" as focus.?Supply-side reform? has been promoted by governments at all levels,and has become a hot topic in the field of industry and academia.Behind the reform,the macroeconomic depression,and continued to face downward pressure.China's economic growth rate decreasing since 2011,the economic development model will gradually change from over-reliance on investment.At the same time,the extensive model also brought about a series of drawbacks increasingly prominent.For example,the phenomenon of redundant construction serious,overcapacity,excessive competition,aggressive expansion of government and business,corporate financial leverage is generally high deformity,corporate profitability and cash flow weakening,which lead to the overall credit pressure of enterprises,and thus increase the corporate credit risk.It can be seen that overinvestment and diversification expansion may be important factors for the increasing of corporate credit risk.In fact,following the global economic recession,the enterprise faces unceasingly credit risk,ultimately reduces efficiency in production,operation and capital utility,and increases the possibility of bankruptcy.Based on this,from the perspective of credit risk,this article studies economic consequences and the influencing factors of overinvestment and diversified expansion.The main contents and conclusions are as follows:First,based on the reviewing and summarizing of relevant literature,this paper constructs the analytical framework about the relationships between overinvestment and corporate credit risk,and that is to examine the mechanism of the impact of overinvestment on corporate credit risk.The empirical results suggest that,overinvestment increases corporate credit risk.Specifically,Interest-bearing liabilities and performance were mediators in the relationship between overinvestment and corporate credit risk.Second,Based on the principal-agent theory and asymmetric information theory,this paper studies how to effectively control the credit risk caused by over investment.Based on the principal-agent theory,this paper analyzes whether the internal control can effectively control the credit risk caused by over investment,and whether the risk control effect of internal control can cause difference by the property right of firm.The empirical results suggest that,internal control can effectively reduce the corporate credit risk caused by over investment.Furthermore,compared with non-state-owned enterprises,the internal control of state-owned enterprises has more significant effect on the control of credit risk.Based on asymmetric information theory,this paper also analyzes whether the quality of accounting information can effectively control the credit risk caused by over investment,and whether the risk control effect of internal control can cause difference by financing constraints.The empirical results suggest that,improve the quality of accounting information can effectively reduce the corporate credit risk caused by over investment.Meanwhile,compared with higher financing constraints enterprises,the low financing constraints enterprises have more significant effect on the control of credit risk.Third,study the impact of diversification on corporate credit risk.Diversification may increase the corporate credit risk,and the implementation of diversification is closely related to the overconfidence of managers.Through empirical analysis of the relationship among managers' overconfidence,diversification and corporate credit risk,the study found that,the manager's overconfidence increases the degree of diversification,improve the degree of diversification can increase the corporate credit risk,and diversification is a mediator of between managerial overconfidence and corporate credit risk.The degree of diversification in the previous year will increase the manager's overconfidence psychology,and the effect of corporate credit risk in the previous year on manager's overconfidence psychological is weak.Eventually,after researching the impact of overinvestment and diversification on corporate credit risk,this paper further study the impact of diversification on overinvestment.So as to reveal the relationship among over investment,diversification and corporate credit risk.The empirical results suggest that,when the degree of diversification at a relatively low level,with the increase of the degree of diversification,overinvestment will be reduced,but when the degree of diversification increase reached a certain threshold,continue to increase the degree of diversification,overinvestment will increase.At the meanwhile,diversification will deepen financing constraints.Therefore,even if the degree of diversification is at a relatively low level,with the increase of diversification can reduce overinvestment,but diversification requires a lot of financial support,it will improve financial leverage and deep financing constraints,thus increase the corporate credit risk;when the degree of diversification in the high level,increase the extent of diversification that not only deepen financing constraints,but also increase overinvestment,this lead to an increase of corporate credit risk.Overall,the above research is an effective exploration for the relationship among overinvestment,diversification and corporate credit risk.From the perspective of credit risk,this paper deepens the economic consequences of over investment and diversification.This paper provides a reference for improving the efficiency of investment,adjusting management strategy and controlling the corporate credit risk,the results also provide empirical evidence for the ?supply-side reform?.