Research On The Impact Of Debt Restructuring On Corporate Investment And Corporate Value

As China's economy has entered a new stage of "new normal",the downward pressure on economic development gradually increases,and firm debt defaults occur frequently.For firms in financial difficulties,since they cannot fulfill their obligations with previous debt contracts,they usually actively coordinate debt renegotiation for debt restructuring in order to maintain their survival and sustainable development.As an important way to alleviate debt default,debt restructuring is not only a symbol of firms' financial distress,but also one of the main ways to alleviate the financial distress,so that the troubled firms with hope of recovery can be effectively avoided from entering the bankruptcy liquidation process.Debt restructuring is also helpful for reshaping and improving the bank-firm credit relationship and allowing firms to develop more healthily and sustainably under the new normal conditions.Consequently,debt restructuring has received extensive attention both in academia and in practice.In the relevant literature,scholars have researched debt restructuring from many aspects,such as the restructuring system,bank relationships,earnings management,trade credit,the characteristics of restructuring firms' assets and liabilities,and most of the research is based on the mature market environment.However,few studies have paid attention to the possible impact of debt restructuring on firm investment decisions and firm value.As the most critical part of a firm's economic activities,investment decisions are related to firm value and sustainable development.The analysis of the influence and mechanism of debt restructuring on firm investment and firm value has important guiding significance for in-depth understanding of restructuring behavior and improving the rationality of decision-making.At the same time,the analysis adds a perspective for a more comprehensive study on firm investment in debt restructuring and the promotion of firm value,and provides a useful reference for decision makers and policy makers aiming at improving debt governance,investment efficiency and promoting the growth of firm value.First of all,this paper evaluates the causal effect of debt restructuring on firm investment,and examines the impact of debt restructuring on investment behavior of listed companies in China from 2005 to 2016 by using PSM-DID.The empirical results indicate that the impact of debt restructuring upon firm investment varies with the differences in property rights,industry natures,payment modes and amounts of debt restructuring,and the characteristics of debt renegotiation.Furthermore,debt restructuring has a more significant impact on promoting investment efficiency for SOEs,firms in excess capacity industries,and debt-restructuring firms that pay off debts with assets.Debt restructuring significantly aggravates overinvestment when the amount of debt restructuring is large and has a significant inhibitory effect on underinvestment when the shareholder bargaining power is higher than that of debtholders in the debt renegotiation.Smaller debt renegotiation frictions exacerbate underinvestment and help alleviate overinvestment.China is in the stage of deepening supply-side reform,and uneven marketization has resulted in different resource allocation in various regions.Moreover,there are significant differences in market competition between industries,which is closely related to distress risk.At the same time,the Chinese government often plays an important role in business by taking stakes in firms and appointing government-backed executives.In view of this,this paper further investigates whether and how external governance(i.e.,regional marketization,industry market competition and political connection)affects the relationship between debt restructuring and firm investment.The results show that,first of all,for firms with good regional marketization,debt restructuring significantly reduces investment expenditure and effectively alleviates overinvestment and underinvestment,thus improving the investment efficiency.Second,the debt restructuring of firms in the strong industry market competition prominently alleviates underinvestment,and further promotes the investment efficiency.Third,debt restructuring in the politically connected firms effectively reduces inefficient investment,and mainly inhibits overinvestment and underinvestment.It is worth noting that with the increase of government intervention,the positive impact of debt restructuring on investment turns to negative impact,which reflects the distinction in the impact of different political connections degrees on the relation between debt restructuring and investment.This paper provides new evidence for understanding the investment behavior of debt restructuring firms,and provides certain reference value for managers and decision makers aiming at improving the investment behavior of firms from the perspective of external governance of regional marketization,industry competition and political connection.For debt restructuring firms that have defaulted on their debts,concessions from creditors in the renegotiation give them the opportunity to stay in business rather than be forced to liquidate.So,do different internal governance mechanisms have different effects on the relationship between debt restructuring and firm value?What are the influence mechanisms?Therefore,this paper examines whether and how firm internal governance affects the relationship between debt restructuring and firm value from the perspective of ownership structure,board characteristics and management incentive.The results show that,first of all,from the perspective of ownership structure,debt restructuring significantly improves firm value in the case of higher institutional ownership concentration and ownership concentration.When the degree of equity balance is low,debt restructuring has a positive impact on firm value.Second,from the view of board characteristics,when the board independence is high,debt restructuring is conducive to the improvement of firm value.Compared with the large board,the debt restructuring significantly improved firm value with small board size.Thirdly,from the perspective of management equity incentive,debt restructuring has an obvious positive effect on firm value in firms with low executive ownership.However,when the ownership of directors and supervisors is high,debt restructuring has a negative impact on firm value.The evidence provided in this paper about the impact of debt restructuring on firm value under different internal governance mechanisms has not been recorded by previous studies,which provides new evidences for understanding of the internal governance of debt restructuring firm.The findings also provide a reference for stakeholders who aim to improve the value of restructuring firms from the perspective of ownership structure,board characteristics and management incentives.