The Study On Impacts Of Managerial Entrenchment On Corporate Financing Behavior Under Transition Economics In China

Corporate financing behavior is one of the core problems in the study of modern enterprise theory as well as the important topic which economics tried to solve for a long time.As we all known,capital is one of the key elements for enterprise survival and development,and the financing is an important means for enterprises to access funds.The financing way that company adopts not only impacts the cost of capital but also the corporate governance structure and efficiency.Managerial entrenchment is a behavior which managers choose to maintain their position and pursue their own utility maximization under the internal and external control mechanism.It has become an important factor to influence corporate financing behavior.Research shows that China's economy is often far from equilibrium in the process of economic transition.It leads that social and economic background is different from the countries which own mature market economy.So the western theory of corporate finance can not be used to theresearch of enterprise financing in our country.We need to explore the deep cause of enterprise financing preference behavior from a new angle under the transformation of the economic environment in China.With the rise of behavioral finance and behavior economics,more and more scholars began to close with causal relationship between psychological motivation and behavioral outcome,and the latest research results of psychology and relevant disciplines are absorbed into modern enterprise theory constantly.Scholars pay close attention to the decision makers' psychological motivation and preference for the company's financial decision-making and behavior.Based on managers in the company internal and external control mechanism under their career will face the threat and pressure of dismissal,enterprise bankruptcy and take over,so managerial entrenchment arises with managers choosing to maintaining their position and pursuing utility maximization.On that account,combining the characteristics of the transformation of economic and social environment in our country,this paper is on the basis of theoreticalresearch results on managerial entrenchment at home and abroad for reference.The target is to accurately recognize the present situation and features of our country'enterprise managerial entrenchment,reveal the motivation and affecting factors of our country enterprise managerial entrenchment and explore the mechanism between managerial entrenchment and enterprise financing decision,which has a special effect to enterprise financing behavior in our country.At the same time this study will analyze the deep reason of our country enterprise financing behavior from the perspective of managerial entrenchment.The Shanghai and Shenzhen listed companies in equity financing from 2010 to 2012 are selected as research samples,using the method of empirical study to test the correlation of managerial entrenchment impacts on corporate financing behavior choice and the method of experiment to verify the affection of managerial entrenchment to equity financing preference and the order of the public way in equity refinancing.It enriches a new angle of view to the explanation of the equity financing preference to our country enterprise in theory and also a deepening of the principal-agent theory.It helps to coordinate the interests relationship between shareholders and managers from internal and external mechanisms in practice.The goal of improving the management benefit would be achieved by building positive managers incentive mechanism,scientific financing decision procedure and standardize financing behavior.Specifically,compared with the previous studies,this paper's main work and innovation can be summarized as the following four aspects:First,under the transformation of our country economic environment,management,economics and psychology theory are applied to system analysis of the connotation to managerial entrenchment from multiple perspectives.The main characteristic of the transformation of the economic environment in China is pointed out and the concept of managerial entrenchment under the transformation of the economic environment is defined comprehensively.This paper argues that Bergeretal's definition of managerial entrenchment was vague,the meaning of status was widely;But Weir and Jone's was too narrow,it was only suitable for the position change.In our opinion,managerial entrenchment behavior is not only to ensure the position,also to adopt management decisions to pursuit the power,improve the reputation and so on,and achieve individual utility maximization ultimately.Second,breaking through the existing literature analysis theory framework,the research put forward the main factors influencing the managers defense behavior and motives which could be included into three aspects:the external macro environment,corporate governance structure and the managers' own factors.This paper analyzes and discusses managerial entrenchment motivation and behavior from the three aspects.And then through the modeling analysis of the influence factors of managerial entrenchment motivation finds that manager defense level gets inversely proportional relationship with managers' normal income,the probability of taking management defense behavior was found and the present value coefficient of manage's regular income.The present value of manager take defensive behavior to get extra income,take management behavior was found after the dismissal of remuneration,managers adopt management defense behavior get extra income are proportional to managerial entrenchment.And the relationship between managerial entrenchment and management term is more complicated.Third,using the theory of GONE in the Fraud Theory,combined with the feature of managers,internal governance structure and external characteristics,the main factors causing managerial entrenchment can be concluded into greed,needs,opportunities,exposure these four GONE theory factors.It implements the management theory of defense and the organic integration of the theory of GONE and enhances the interpretive nature of management theory of defense.This study is a new mechanism for the managerial entrenchment perspective of financing behavior extension and application.Fourth,real motive of some kind of financial decision-making is not to be directly observed in the practice of corporate.The managers use all sorts of reasons to hide their real psychological thoughts;managers may themselves don't even know what they do.So it is difficult to confirm the cause of managers' motivation and behavior choice by the history of financial data and information.Because of the limitations of empiricalresearch method,this paper uses experimental study to examine the way that managerial entrenchment motivation affects financial decision.We find that the management level of defense is on the rise when the manager ability decrease and the conversion cost increase.At the same time,equity financing and the behavior of non-public in refinance are also significantly enhanced.This is a more powerful proof to support the reality of"management defense hypothesis".