Industry Life Cycle,Institutional Environment And Debt Financing Behavior

Cross-integration of the corporate financial and industrial organization was an important area." Soaring in bad rule about wind power and photovoltaic industry of china-trapped miscarriage of justice in 2013" indicated that understanding of objective industry was very important.Based on seeming illusion about prosperity of some industries,the government and corporate might not have a good understanding about their own development of industry,leading to the existence of false decision.Debt ratio in some industries was irrational by "miscarriage of justice" and ultimately affected the value creation."Asset-liability ratio of Suntech as high as 81 percent-the richest man Zhengrong Shi becoming negative" in 2013 indicated that the asset-liability ratio was up to 81.8%,from $ 4.922 billion at the beginning felling to$ 149 million;"Debt ratio of LDK as high as 100%-$ 2 billion of debt maturity " in 2013 indicated that total liabilities of LDK was $ 5.418 billion and more than $ 5.275 billion total assets,carrying more than $ 2 billion in short-term debt.Different stages of industry development had an important role in corporate behavior,understanding development of the industry for the optimal allocation of resources was beneficial.Financing behavior was the main aspect of the company's financial operations,debt financing was especially critical;it was an important channel for the efficient allocation of corporate performance.Industry affected the behavior of the company's debt financing,thus industry had an effect on the value creation.But this research area was very small.To further explore the internal mechanism of value creation,this paper was to analyze the path that under the institutional environment(such as the market process,the nature of property rights and equity division reform,etc.)industry cycle affected the structure of debt financing,cost of debt capital and debt agency cost.This paper would find the mechanism of the industry cycle affecting the internal mechanism of value creation.This paper first described the research background,objective and significance of the study,determined research ideas and research framework.This paper explained the research method,technical route,main content and possible innovation.Then this paper analyzed study theories about topics and classification,analysis and commentary of important documents.It was theoretical foundation for further analysis.Combined with our special environment and hand-collected data on the industry life cycle,this paper analyzed the effects of different industry cycles on debt internal structure,debt capital cost and debt agency cost.It indicated that industry cycle was importance to optimal allocation of resources for debt.Through theoretical analysis and proposing hypotheses,this paper used the listed companies and unlisted companies to build a single phase or two-phase model to study topics.Through theoretical and empirical analysis it found the following conclusions:(1)The fifth chapter analyzed principal-agent theory,information asymmetries and institutional environment had an important role in debt structure allocation.asset-liability ratio of growing industry was relatively lower,asset-liability ratio of the fading industry was relatively higher;it was more significant that growing industry affected the asset-liability ratio in higher degree of market areas.Under certain asset-liability ratio,compared to non-growing industry,debt maturity of growing industry was relatively longer.It was lower proportion of long-term debt under higher degree of market areas.It was more significant that industry affected debt maturity in higher degree of market areas.Relative to private enterprises,state-owned enterprises had more debt resources and got longer debt maturity.This article also analyzed ultimate controlling and equity division reform and monetary policy:Debt higher rate and longer debt maturity of central holding company listed.The central holding get more debt resources than local government shareholders.Industry effect was more significant in local government shareholders of higher degree of market.The difference was significant between central and local government shareholders in non-growth industry.After share reform,the company increased the proportion of debt financing,equity financing preference declining.But the ratio of long-term debt to total debt declined.Industry effect was more significant in higher degree of market areas before share reform.But it was not obvious that industry affected it in different market areas after share reform.The loan rate was higher and the proportion of long-tern debt was lower in the tightening period of monetary policy.Higher financing cost reduced access to long-term debt;this phenomenon was more obvious after the share reform.Research supported liquidation risk hypothesis which was proposed by Diamond(1991a)and Flannery(1986)from the industry level.It was able to understand industry effect about debt financing structure under special environment.(2)The sixth chapter analyzed industry affected the debt source structure.Based on financing comparative advantage hypothesis and credit rationing of commercial credit,we found:Compared to the maturity and fading industry,commercial credit of the growing industry was lower.Compared to the lower regional marketization,commercial credit was higher in higher regional marketization.Based on certain asset-liability ratio,there was substitution effect between commercial credit and bank loan.Compared to the maturity and fading of industry,the growing industry mitigated substitution effect about bank loans for commercial credit.Compared to the lower regional marketization,commercial credit in higher regional marketization exacerbated substitution effect about bank loans for commercial credit.Compared to corporate growth characteristics,industry cycle characteristics was greater effect for debt sources.Commercial credit was higher after share reform.Industry effect was more significant in lower degree of market areas after share reform.This research showed that industry cycle had much more effect on debt source.(3)The seventh chapter analyzed industry affected capital cost of debt.This chapter analyzed information asymmetry was more serious in early stages of the life cycle(Petersen and Rajan,1994),the higher risk of liquidation of the company would try to choose longer term debt,but faced with relatively high risk lending rates(Diamond,1991a),through two-stage model we found:Compared to non-growing industry,interest rate of growing industry was higher;the cost of debt capital of growing industry was greater.Compared to non-mature industry,interest rate of mature industry was lower;interest rate of fading industry was greater.Industry effect was more significant in lower degree of market areas.Government intervention might be an alternative mechanism to industry in lower market region.Interest rate of state-owned enterprises was lower;property rights effect was more significant in lower degree of market areas.Further analysis found that:Capital cost of debt was lower in central government shareholders.Industry effect was more significant in local government shareholders of higher degree of market.After the share reform,the cost of debt capital showed an increasing trend,the cost of debt capital of growth industries was higher,the cost of debt capital of mature industries was lower,but it was not significant before the reform.Industry effect was more significant after the reform.Property rights still had an important role in the allocation of resources in the lower level of the market after share reform;Interest rate of state-owned enterprises was lower.Industry effect was more significant in monetary tightening period.But in relaxed monetary policy period,industry effect is not obvious,but property rights effect was greater,property effect instead of industry effect,it could bring the resource allocation effect.(4)The eighth chapter analyzed industry affected agency cost of debt.This chapter analyzed that asymmetric information was different in different development stages of industry.This principal-agent problem under asymmetric information might result in asset substitution or underinvestment act which was prejudicial to the interests of creditors,it damaged the value of company(Jensen and Meckling,1976;Myers,1977).We combined with credit rationing hypothesis constructed by Stiglitz and Weiss(1981).We found:Investment risk of growing industry was greater,the asset substitution phenomenon was more serious,while coefficient variation of maturity and fading industry was smaller,and asset substitution was relatively not serious.Investment risk of higher degree of market was smaller;the asset substitution phenomenon was not serious.Industry effect was more significant in higher degree of market.There was positive correlation between growing industry and under-investment,under-investment of growing industry was serious,debt agency cost was more greater,while maturity and fading industry was not.Under-investment of higher degree of market was not serious;industry effect was more significant in higher degree of market.After the share reform,investment risk and asset substitution behavior was lower.Interest rate was higher and asset substitution behavior was lower in tightening monetary policy period,while it was not in relatively loose monetary policy.After the share reform,under-investment and debt agency cost was lower.Under-investment was lower in tightening monetary policy period.This paper clarified the importance of the industry cycle affecting the enterprise value creation,one path was industry cycle affecting debt financing behavior which reflected its value effect.It found debt ratio of growth industry could not be too high,not too short term debt.lt was good inspiration that debt ratio was not anomal at Suntech and LDK through "miscarriage of justice".Theoretical model about credit risk and settlement risk hypothesis constructed by Stiglitz and Weiss(1981)and Diamond(1991a)was supported by industry level to some extent.Combined with our institutional environment had been further analysis.It expanded the literature about industry cycle,the internal structure of debt,the cost of debt capital and debt agency cost.So this study had some theoretical and practical significance.Based on the research,we enriched mechanisms and theoretical basis of industry cycle affecting debt financing behavior under the evolution theory.We enriched that the strategic management could connect meso industry and micro debt financing behavior to some extent.Based on the theoretical analysis it had drawn some conclusions and revelations,but there were also some study limitations.Overall,the research paper which was a useful exploring had certain theoretical and practical significance.