| Information Processing and capital allocation are two of the most basic functions of the securities market, stock prices guide capital allocation towards the direction of maximizing the value of the effective operation is the inherent requirement of the market. In the framework of traditional efficient markets theory, information effective be simply treated as the effective of capital allocation. Consistent with this, the existing literature on the effectiveness of the securities market mostly only studied the effectiveness of price response to information, having longer neglected another important branch of market efficiency study-the effectiveness of price signals guiding capital allocation. With the academic reflection on the traditional efficient market theory, foreign scholars began to study the role of price signals guiding capital allocation.Through theoretical and empirical research to study the role of stock price informativeness in promoting the efficiency of capital allocation, but the research is still relatively weak. In addition, research conclusion based on the experience of developed countries weather be applicable in China's securities market is still to be empirical tested.Firstly, the paper clarifies the background and significance, this study established the framework of ideas and research. Then, the author systemly classificate, analysis and commente on the related literature. This work is not only laid the foundation for the paper's innovation, but also defines the content of stock price informativeness, for the rational selection of the measurement methods of the main variables, empirical model and control variables laied a solid literature basis.Secondly, the paper made a more detailed analysis and comment on the efficient market theory, demonstrated that the information effective is not equivalent to the capital allocation effective, they can not be the one to one Simple relationship. The paper theoretically analysis the causes of stock price comovement, it lay theoretical foundation for the the choice of methods to measure of the stock price informativeness. The paper analyze the microscopic mechanism of informed stock price effects on capital allocation efficiency by theoretical models, further reinforce the theoretical basis for this study. In addition, the paper analyze and comment on the development achievements of China's securities market and the gap with mature capital markets.Based on the the review and analysis of the relevant literature and theory, the paper investigated the relationship of stock price informativeness and capital allocation efficiency on a samples of China's listed company between 2001 and 2008 from the industry-level, regional-level, firm-level and firm. For the robustness of the conclusions, this paper applied single variable model and multivariate variables model, cross-multiplication effect model and capital allocation elastic coefficient model to test the research hypothesis. In addition, the paper applied fixed-effect variable coefficient model investigated the change trend of capital allocation efficiency in China stock market from the industry level, regional level and corporate level. By comparing and analysis the results of empirical research, the paper demonstrated the effective allocation of capital at the macro level does not mean it effective at the micro level, it prove that study internal logic relations from multiple dimensions between stock price informativeness and capital allocation efficiency is necessary.Through theoretical and empirical research, this paper obtained the following conclusions:(1) The empirical results from macro-level show that, the efficiency of capital allocation has been significantly improved with the increasing of the stock price informativeness both from industry-level and regional- levels. Specifically, the test results of cross-multiplication effect model showed that capital inflows are more sensitive to the changes of profit with the increase of stock price informativeness. The test results of capital allocation elastic coefficient model show that the stock price informativness has a strong positive effect on the capital allocation efficiency.(2)The empirical results from micro-level show that, the efficiency of capital allocation has been significantly improved with the increasing of the stock price informativeness both from firm-level and firm. On firm-level, capital inflows are more sensitive to the changes of profit with the increase of stock price informativeness. In the firm, capital investment efficiency is significantly improved with the increase of stock price informativeness, that is the inefficient investment behavior of enterprises effectively suppressed and investment cash flow sensitivity shown a significant decline.(3) The inhibition mechanism of informative stock prices on the over-investment and unde-rinvestment is different, the former is indirect mechanism and the latter is direct mechanism. Specifically, as the increasing of stock price informativeness itself can not effectively inhibit over- investment, but it can effectively alleviate the behavior of abuse free cash flow to over-investment. The relationship between stock price informativeness and over-investment is insignificant negative correlation, but the item of stock price informativeness cross-multiply with free cash flow is significant negative with over-investment. The increasing of stock price informativeness can directly inhibit under-investment, the relation-ship between stock price informativeness and under-investment is significantly negative correlation.(4) Informative stock price not only effectively ease the investment cash flow sensitivity caused by financing constraints, but also effectively inhibited investment cash flow sensitivity caused by agency conflicts. Informative stock price has played a positive role in promoting the efficiency of capital investment improvement. Further comparative study found that, informative stock price ease financing constraints is better than the effect on agency conflicts. |
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