Debt Structure And Corporate Investment Behavior

The influence of debt financing on enterprise investment behavior is a classic research field.The existing studies focus more on the impact of debt financing on corporate investment behavior from the perspective of the overall debt level.Some literatures have discussed the economic consequences of debt financing from the perspective of easing the financing constraints,and they find that when the enterprise’s internal capital is insufficient,debt can help to expand its own financing scale,provide financial support for the enterprise’s operation and investment activities,and enhance the firm value.On the other hand,some studies analyze the governance role of debt financing,and found that the contractual rigidity of debt financing can reduce managers’ discretionary cash flow and reduce over-investment behavior;the bankruptcy risk associated with debt level can supervise managers to work hard and create value for shareholders.However,the existing studies focus more on the impact of debt financing from the perspective of the overall debt level,ignoring the influence of internal structure of debt.In fact,the leverage of enterprises includes both debt level and debt structure.The deviation of leverage ratio might have a negative impact on the development of enterprises.Too fast rise of debt ratio might accumulate risks,and the decline of debt ratio may lead to the shortage of liquidity.How to coordinate the relationship between“leverage stability” and “risk prevention” is a difficult problem for Chinese enterprises.In order to control the negative effects of high leverage,optimizing the debt structure of enterprises is also important.It is of practical significance and academic value to study the impact of bond financing on corporate investment behavior.First,as an important source of direct debt financing,bond financing plays a key role in broadening financing channels,improving debt financing conditions and optimizing resource allocation.In 2015,the State Council adopted the “Implementation Opinions on Further Increasing the Proportion of Direct Financing and Optimizing the Financial Structure”,and put forward the policy of“actively expanding direct financing tools and channels,promoting the innovation of bond market varieties,develop long-term bonds and high-yield bonds”,and “expanding the main body of direct financing,broadening direct financing channels and improving the efficiency of direct financing”.In 2016,the opinions of the State Council on actively and steadily reducing the leverage ratio of enterprises(GUOFA [2016] No.54)pointed out that it is necessary to “accelerate the innovation of corporate credit bond products,enrich bond varieties,promote enterprises to use the bond market under the premise of controllable risk,increase the proportion of direct financing,and optimize the debt structure”.Continuously improving the direct financing market system and actively expanding direct financing channels are becoming important goals of the practitioners and regulatory authorities.However,the domestic research on the development of bond market and corporate bond financing is lack of systematic.Therefore,it is of practical significance and academic value to study the impact of bond financing on corporate investment behavior.Secondly,the impact of bond financing on corporate investment behavior is uncertain.From the perspective of debt sources,corporate debt financing mainly relies on public debt represented by bond financing and private debt represented by bank loans.Compared with bank loans,bond financing has the following characteristics.First,bond financing belongs to direct financing,which can realize “financial disintermediation”,and directly connect the supply side and demand side of funds,which is conducive to reducing the intermediary cost and transaction cost.Thus,under the same conditions,the cost of bond financing is usually lower than the cost of bank loans.At the same time,the debt service period of bond financing is generally medium and long-term.In order to prevent operational risk,banks are generally more willing to issue short-term loans to enterprises.Only those enterprises with certain relationship,such as enjoying the care of the government’s “father’s love” or having bank connections,can obtain more long-term bank loans.Therefore,the repayment period of bonds is generally longer than that of bank loans.But on the other hand,bondholders usually only care about the direct income from holding the bonds.If the firm is unable to pay the interest or principal when it is due,they usually insist on acting in accordance with the law and liquidate the debtor.Compared with banks,on the one hand,bondholders lack long-term interest cooperation with borrowing companies.On the other hand,bondholders hold more scattered claims and high negotiation costs,so they lack motivation and ability to tolerate corporate debt default.That will make the bond show stronger characteristics of contract rigidity.In addition,the creditor’s rights held by bondholders are relatively scattered and lack of motivation and ability to supervise managers.Banks usually have long-term business contacts with enterprises,and they can accumulate private information of loan enterprises through business relations;banks have stronger supervision ability and willingness to supervise the business activities of enterprises because they hold relatively concentrated creditor’s rights and are not easy to get a free ride.Compared with banks,bondholders generally have lower supervision effect on enterprises.Therefore,the impact of bond financing on corporate investment behavior is uncertain,and it is of academic value to study the impact of bond financing on corporate investment behavior.As for the impact of bond financing on corporate behavior,existing studies mainly discuss from the perspectives of average financing cost,bank loan cost,cash dividend policy and earnings management level.It can be found that there are deficiencies in the field of the impact of bond financing on corporate investment behavior.The investment activities of enterprises include intangible assets investment,human resources investment and tangible assets investment,and different types of investment activities are quite different in investment object,investment form,investment cycle.Therefore,the influence mechanism of bond financing on different forms of investment behavior might be different.It is worth noting that although some literatures have discussed the impact of bond financing on the self-construction of tangible assets,M&A belongs to the outsourcing investment activities of enterprises.Compared with the selfconstruction investment,M&A has a longer investment cycle and requires managers to pay higher private cost.The above characteristics lead to greater financing constraints and higher uncertainty in the process of M&A.Therefore,it is necessary to study M&A investment separately.From the three dimensions of intangible assets investment,human resources investment and tangible assets investment,this paper uses three representative investment behaviors of innovation activities,labor investment and enterprise merger and acquisition as measurement methods to explore the impact of bond financing on enterprise investment behavior.First,corporate innovation as an important part of enterprises’ intangible investment activities,is the key driving force for the formation of enterprises’ core competitive advantage.This study uses corporate innovation to measure intangible assets investment,and find that bond financing is significantly and positively correlated with corporate innovation,which indicates the positive role of bonds enhancing corporate innovation ability through optimizing corporate debt structure occupies a dominant position.The result remains unchanged using PSM-DID test.Bond financing can promote corporate innovation by reducing the overall debt financing cost and extending the overall debt maturity.Furthermore,bond financing has a spillover effect on bank loans,that is,bond issuance can promote corporate innovation by reducing the interest rate and extending the term of bank loans.The effect is more pronounced for firms with more serious financial constraints.The effect of different types of bonds on corporate innovation is heterogeneous,and the convenience of bond issuance is an important factor affecting corporate innovation.The improvement of corporate innovation ability accompanied by bond financing can improve the future performance of enterprises.Secondly,human capital investment is very important to promote enterprise development and economic growth,and labor investment efficiency directly affects the allocation efficiency of human capital.This study uses labor investment to measure human capital investment,and find that bond financing plays a positive role in labor investment decision-making,and can significantly improve the efficiency of labor investment.The result remains unchanged using PSM-DID test.Heterogeneity analysis shows that financing constraints and product market competition play a moderating role in the relationship between them.In those firms with higher financing constraints and less product market competition pressure,bond financing has a more significant effect on labor investment efficiency,which indicates that relieving external financing dependence and increasing managers’ operating pressure are the two underlying mechanisms through which bond financing influence labor investment efficiency.In addition,bond financing can significantly alleviate the over investment and under investment in labor,among which,the alleviation effect of over investment in labor is mainly reflected in the over employed companies,and the alleviation effect of under investment in labor is mainly reflected in the under employed companies.Thirdly,this study uses M&A behavior to measure tangible assets investment,and find that bond financing has a positive impact on M&A behavior,which can significantly improve M&A tendency and scale.The result remains unchanged using PSM-DID test.The mechanism test shows that bond financing can improve the M&A tendency and scale of enterprises by reducing the overall debt cost.At the same time,bond financing has a spillover effect on bank loans,and improve the M&A tendency and scale of enterprises by reducing the cost of bank loans.In heterogeneity analysis,the results show that the impact of bond financing on M&A behavior is more significant in enterprises with higher degree of financing constraints and provinces with lower degree of banking competition,which further verifies the mechanism of bond financing influencing M&A behavior by alleviating enterprise financing constraints.It is found that the effects of different types of bonds on enterprise M&A are heterogeneous.Compared with corporate bonds and convertible bonds,the effects of short-term financing bonds and medium-term notes on enterprise M&A behavior are significantly enhanced,indicating that the convenience of bond issuance is an important factor affecting enterprise M&A behavior.In addition,bond financing has no significant effect on the short-term performance of M&A,but has a certain promoting effect on the longterm performance of M&A.The contributions of this paper are as follows.(1)Previous studies mainly study the impact of debt on enterprise investment behavior from the perspective of the overall level of debt.This paper mainly discusses whether and how the internal structure differences of debt affect enterprise investment behavior.And this study enriches the research perspective of enterprise debt and investment behavior.(2)This paper links bond financing with three important and special investment behaviors of enterprises,including innovation investment,labor investment and enterprise merger and acquisition,and further enriches the relevant literature on the economic consequences of bond financing.(3)The existing researches focus on the determinants of physical capital investment and innovation investment,but ignore the labor investment,which is an important factor of production.In the process of studying how bond financing affects enterprise investment behavior,this paper covers labor investment and further expands the connotation of enterprise investment behavior.Based on the previous theoretical analysis and empirical research,this paper puts forward the following policy implications.(1)The government should pay attention to the development degree of the bond market.In order to improve the corresponding system construction,encourage and promote the development of China’s bond market,and adopt effective preferential policies in terms of market scale and development degree.(2)The government should continue to strengthen the protection of bond investors,improve the relevant policies and laws,so that the legitimate rights and interests of bondholders can be effectively protected.And try to attract more investors into the bond market and constantly expand the market scale.(3)On the premise of controllable risk,the government should reduce the threshold of bond issuance,improve the level of innovation,constantly enrich the variety of bonds,and improve the convenience of enterprises using bond financing.