Corporate Strategy Differentiation And Debt Cost

Financing difficulties and high financing cost have always been the constraints of the real economy.In order to promote the development of the real economy and effectively alleviate the financing difficulties of enterprises,the state has adopted a series of targeted measures.On August 8,2016,the State Council promulgated the Work Plan on Reducing the Cost of Enterprises in the Real Economy,and solved the problem of "effectively reducing the financing cost of enterprises" from six aspects.Article 25 of the "Guidelines for the Due Diligence of Commercial Banks on Credit Granting Work" issued by the China Banking Regulatory Commission on July 25,2004 expressly proposes that commercial banks should analyze and evaluate the non-financial factors of customers,as well as the production equipment and technical capabilities of customers' companies.Product and market,industry characteristics and macroeconomic environment,including the strategic positioning of enterprises such as product positioning,dispersion and concentration,product development and industry positioning.In the credit market,lenders represented by banks hope to fully identify the financial status and non-financial factors of the company,such as major changes in customer strategy,business or environment,frequent changes in business strategies,and the maintenance of equipment or poorly managed equipment.The core business is overly pursuing risks such as diversification,rapid business growth,customer company governance,production equipment and technical capabilities,products and markets,and industry characteristics,etc.,to increase the degree of transparency of information to the borrowing company,so as to collect full amount of principal and interest due by the due date.It can be seen that non-financial information such as corporate strategy is also an important source of information for creditors.Existing research has focused on the impact of corporate strategic differences on the cost of equity capital(Wang Huacheng et al.,2016),while ignoring the impact of corporate strategy on creditors,the key bearer of corporate risks and benefits.State-owned Assets Supervision and Administration Commission of the State Council announced in January 2017 that the average gearing ratio of central SOEs in China was as high as 60.4% by the end of 2016.Therefore,corporate strategic differences will have a more profound impact on creditors.Therefore,this paper will use the corporate strategy as an entry point to discuss in depth the impact of corporate strategic differences on corporate debt financing costs and its working mechanism,and further explore the heterogeneity of the company,product market competition The impact of industrial policy on the relationship between the two from three dimensions: micro,meso,and macro view.Through research on the sample of non-financial companies listed on China's A-shares from 2007 to2015,we have reached the following conclusions:1.The strategic differences have a significant positive correlation with the cost of corporate debt financing.Compared with non-state-owned enterprises,state-owned enterprises have weakened the positive correlation between the strategic difference and the cost of debt financing,indicating that creditors have more trust in state-owned enterprises;Compared with small enterprises,large-scale corporate strategic differences and debt financing costs are relatively weak;compared with low growth companies,high growth enterprises strategic differences and debt financing costs are more significant correlation.Further tests found that both business risk and information asymmetry play an intermediary role in the process that strategic differences affect the cost of corporate debt financing.2.The higher the degree of industry concentration and the greater the market power of products,the smaller the negative impact of corporate strategic differences on debt financing costs;compared with state-owned enterprises,this phenomenon is more pronounced in non-state-owned enterprises,which indicates that the external environment effect is more pronounced in non-state-owned enterprises.3.The support of industrial policies will reduce the negative impact of corporate strategic differences on the cost of debt financing.Compared with non-state-owned enterprises,this phenomenonis more pronounced in state-owned enterprises.4.The degree of strategic diversification has brought about more business risks and information asymmetry,and the increase in debt financing costs due to the above two reasons.The innovation of this article is mainly reflected in the following aspects:1.It has enriched and expanded the research on the factors that influence the cost of debt financing.In the past,research on the influencing factors of corporate debt financing cost focused on corporate characteristics,corporate governance structure,internal control,information disclosure quality and the network of directors.However,ignoring the influence of non-financial factors such as corporate strategy on the cost of debt financing,this paper digs out the influencing factors of debt contract from the perspective of corporate strategy,and provides new understanding for the formulation of debt contract.2.Added and improved the study of the economic consequences of corporate strategic differences.Existing studies have examined the degree of strategic divergence that has brought about more business risks and information asymmetry,and the increase in equity capital due to the above two reasons.Some scholars have also proved that due to the operational risk and information asymmetry brought about by the difference in the company's business strategy,equity investors require a higher required return rate,and the cost of equity capital increases(Wang Huacheng et al.,2016).They ignored the influence of strategic differences on the important stakeholder creditors of the company.This paper examines the impact of corporate strategic differences on debt financing costs and clarifies the mechanism of the effect of strategic differences on the cost of debt financing and provide new evidence on how degree it affect corporate value,supplements and refines the economic consequences of strategic differences.3.Based on the impact of strategic differences in product market competition research on debt financing,and from the perspective of industry characteristics of Meso View,the mechanistic perspective has been expanded to study the mechanism of the influence of meso-level on the relationship between corporate strategic differences and debt financing costs.In the past,the study of the economic consequences of the degree of strategic diversification of a company neglected the degree of competition in the industry in which the company is located.When a creditor represented by a bank is developing a debt contract,the degree of competition in the industry in which the company is located is also an important information about creditors(commercial Bank Credit Due Diligence Guidelines,2004).4.Based on macroeconomic policies such as industrial policies,research on the impact of corporate strategic differences on debt financing has enriched the literature on the effects of macroeconomic policy on the relationship between strategic differences and debt financing costs.Industrial policies will affect the support that companies receive in taxation,credit,etc.,which may result in a lesser level of financing constraints for companies that are supported by industrial policies than those that are not supported by industrial policies.Therefore,industrial policies will affect the creditors' tolerance for corporate strategic differences.The research in this paper enriches the literature on the impact of the degree of strategic heterogeneity and debt financing costs at the macroeconomic policy level.From one side,it provides evidence for how macroeconomic policies affect corporate behavior and decision-making.The conclusions of this paper are conducive to researchers further understanding the transmission mechanism of macroeconomic policies and broaden the thinking for us to study the interaction between macroeconomic policies and enterprises.