Stock Market Mispricing,nature Of Property Rights And Corporate Investment And Financing Behavior

Since the reform and opening up,China's economy has achieved world-renowned achievements,and the rocket development of China's economy has benefited from the rapid development of the capital market.However,a large number of studies have shown that even in western developed countries,capital market is not completely effective,and the price of assets will deviate from its true value to a large extent,which will directly affect and distort the resource allocation function of the capital market.For China,where the capital market is still in the development stage,the lack of effectiveness of capital market has been unanimously recognized by the academic community and the industry.While establishing and perfecting a multi-layered capital market with Chinese characteristics,in-depth analysis of the impact of the mispricing of the stock market caused by the lack of market effectiveness on resource allocation methods and efficiency is extremely important for the development of China's capital market and the real economy.However,the current domestic research on stock market mispricing is relatively fragmented,and there is no systematic and complete research on the impact of mispricing of stock market on corporate financing and investment behavior,and on the assessment of its economic consequences.The present researches mostly have specific perspectives from the impact of mispricing of stock market on corporate financing decisions or investment decisions separately.As we all know,the financing decision and investment decision of a corporate are interdependent and will lay effect on each other.The study of separating the corporate investment and financing behavior will greatly affect the validity of the research conclusions.In addition,the research based on the mispricing of the Chinese capital market does not deeply integrate China's basic national conditions.Concerning the particularity of the China's economy,both the private and state-owned economies play an important role in the development of the Chinese economy.However,state-owned enterprises with government control characteristics show apparent differences from private enterprises in terms of business objectives,manager characteristics,resource acquisition capabilities,and decision-making chain,which in turn leads to different ways and degrees of response to the mispricing of stock market by investment and financing behaviors of enterprises with different property rights.China is now committed to establishing and perfecting a multi-level capital market system with Chinese characteristics.To establish a capital market system that is compatible with Chinese society,we need a more in-depth analysis of the operation mode based on the existing social system,economic development stage and ideological environment.At the same time,China is at a critical stage of accelerating the two-way integration of private enterprises and state-owned enterprises and the ultimate goal of two-way integration is to take advantage of the respective advantages of private enterprises and state-owned enterprises and learn from each other's strengths,instead of simply binding those two kind of enterprises together.To achieve that goal,we need an in-depth analysis and understanding of the characteristics,behavior methods and interaction methods of enterprises with different property rights and mispricing in the stock market provides us with an excellent opportunity to conclude that analysis and understanding.Regarding the above reasons,this article attempts to systematically study the impact of mispricing of stock market on corporate financing,investment behavior,and a series of following economic consequences on the basis of the strict distinguish of the nature of property rights.The main contents and opinions of this article are as follow:Chapter 1 is the introduction of this article,introducing the research significance and background of this article,and elaborating the specific research content,research innovation and research contribution.Chapter 2 is a review of the literature.This part starts from the efficient market hypothesis and gradually extends to capital market mispricing with focus on the analysis of the impact of stock market mispricing on corporate financing and investment behavior.In addition to that,the paper also reviewed the existed researches on investing and financing behavior of different property rights.Finally,we make a brief review of the existing literature.Chapter 3 studies the impact of stock market mispricing on corporate equity financing behavior on the basis of strictly distinguishing the nature of property rights.In China's capital market,listed companies have obvious equity financing preferences,and equity financing is often the most direct and effective way for companies to raise large-scale funds.Based on the market timing theory,we study the timing of equity financing of private and state-owned enterprises by distinguishing the nature of property rights.The study found that: first,when the stock market soars and the stock price is overvalued,the equity financing probability and scale of equity financing of Chinese listed companies increase significantly;secondly,the equity financing behavior of private enterprises is significantly more affected by stock market mispricing than state-owned enterprises;lastly,stronger financing constraints of private enterprises leads to stronger timing of private enterprises and higher shareholdings and equity incentives of private enterprise executives leads to stronger timing of private enterprises.Private enterprises with the characteristics of high-tech enterprises have stronger dependence on equity financing,and although private and state-owned enterprise executives have different background characteristics,there is no significant difference in the timing.Chapter 4 is based on the research conclusions in Chapter 3.By distinguishing the nature of property rights,it further studies the impact of stock market mispricing on corporate investment behavior.The study found that: first,when the stock market soars and the stock price is overvalued,the investment scale of Chinese listed companies expands significantly,and this phenomenon is more pronounced in private enterprises;secondly,the expansion of enterprise investment scale resulted from the larger scale of enterprises;lastly,although the overvaluation of stock prices has reduced corporate financing constraints and improved corporate financing capabilities,it has led to more serious overinvestment by private enterprises and is not conducive to alleviating the problem of underinvestment.The reason why enterprises are more prone to over-investment at the stage of over-valuation of stock prices is that private enterprise executives have the potential incentives for over-investment and the objective conditions for over-investment.Chapter 5 further studies the economic consequences caused by the mispricing of the stock market based on the previous two chapters,that is,the phenomenon of resource redistribution behind the different ways in which private and state-owned enterprises react to the mispricing of the stock market.The study found that: first,private companies that participated in overinvestment during the overvaluation stage are more likely to fall into financial distress,and the financial distress caused by this reason has a certain duration of persistence,and private companies cannot recover their financial health in the short term,and State-owned enterprises are less likely to fall into financial distress due to over-investment,and can quickly get out of financial distress and restore financial health;secondly,mispricing in the stock market is not only an important promoter of over-investment by private enterprises,but also exacerbates over-investment to a certain extent.In the years when the stock price collapsed,the probability of private enterprises falling into financial distress due to over-investment in the previous period was significantly higher.Finally,private enterprises in financial distress may choose to sell assets,equity,and control right to state-owned enterprises to get through the difficulties.Thus,the over-investment caused by the mispricing of the stock market has further led to the redistribution of resources among enterprises with different property rights.Chapter 6 is the summary of this article.We summarized the research conclusions and deficiencies of this article,and put forward the feasible research directions in the future.The possible innovations and contributions of this article are mainly reflected in the following five aspects:First,the existing literatures on the impact of capital market mispricing on corporate behavior mainly focus on either financing behavior or investment behavior.However,the investment decision and financing decision of a corporate are interdependent and would affect each other.Thus,if those two decisions are separately studied,it will fundamentally affect the robustness of the research conclusion.This article also studies the impact of stock market mispricing on corporate investment and financing behaviors,and pays attention to the interaction between the two.In this way,it fully describes the impact of stock market mispricing on corporate investment and financing decisions and makes up for the existing literatures' deficiency.Second,the existing literatures on the impact of stock market mispricing on corporate investment and financing behaviors mainly focus on their impact on the "quantity" of corporate investment and financing behaviors,while ignoring the research on "qualitative".Thus,this article not only pays attention to the impact of "quantity",that is,the impact of stock market mispricing on the scale of investment and financing,but also uses its impact on the corporate investment efficiency as a starting point to study the "quality" and proposes and accurately sorts out the applicability of the two mechanisms of "increasing over-investment mechanism" and "reducing under-investment mechanism" in China's capital market,which consists a comprehensive evaluation of the impact of stock market mispricing on the efficiency of resource allocation and makes up for the existing literatures' deficiency.Third,the existing literatures on the impact of mispricing in the capital market on corporate investment and financing behaviors didnot pay enough attention to the nature of property rights.The difference in the features of nature of property rights means that we cannot use the same analysis framework to analyze the impact of stock market mispricing on private and state-owned enterprises.For companies with different nature of property rights,the impact path and ways of impact of stock market mispricing on corporate investment and financing decisions are outstandingly different.Thus,full consideration of the nature of property rights helps to better understand the operating mechanism of China's economy and society,and to assess the economic consequences of stock market mispricing in China's capital markets.Fourth,the existing literatures on the behavioral features of enterprises with different nature of property rights usually focus on behavioral feature differentiations of enterprises with different nature of property rights in terms of one specific behavior.While this article has a systematical research on comprehensive feature differentiations in terms of investing and financing behaviors of private enterprises and state-owned enterprises as well as the interactions between those two in the background of stock market mispricing,which,thus,providing a meaningful and profound observation for understanding behavioral features of enterprises with different nature of property rights and the fundamental function of nature of property rights in Chinese capital market.Fifth,this article puts forward the view that the stock market mispricing has caused the redistribution of resources among private and state-owned enterprises,and this view has been empirically tested in this article.On the one hand,the smoother equity financing channels brought by the overvaluation of stock prices have led to excessive investment and excessive expansion by private enterprises.On the other hand,the sharp fluctuations in stock prices have made it easier for private enterprises to fall into financial distress due to excessive investment.When the stock market is sluggish and private enterprises' financing is hindered,only state-owned enterprises with strong financial resources can help private enterprises overcome difficulties through mergers and acquisitions.The research in this article finds out a unique path in which stock market mispricing affects China's resource allocation methods and resource allocation efficiency,which has greatly enriched the existing research.