The Influence Of Launching Margin Trading And Short Selling System On Corporate Investment And Financing

Under the pressure of insufficient impetus for global economic growth,the surge of external sources of turbulence and the drastic adjustment of the Global Value Chain,China has actively chosen to adjust to the development model of "Economic Dual Circulation" to cope with the macro trend of de-globalization.However,in domestic,the economy is facing the arduous task of transitioning to the "China New Normal".First,it must accept the reality of the decline in economic growth.Second,we must try to find the potential growth opportunity under the current situation of insufficient domestic and foreign demand.Third,we should handle the overcapacity and hidden debt problems accumulated in the stage of rapid economic growth.Under such circumstances,it is even more necessary to break through the predicament by insisting on high-quality economic development.Non-financial sector enterprises,as an important part of the real economy,must improve the efficiency of their investment and financing behaviors in order to achieve high-quality economic development.Under the current external conditions of complex and severe economic situation and significantly increased uncertainty,it is difficult to promote the high-quality development of enterprises only by short-term policy stimulus.It still depends on certain institutional arrangements and the formation of new mechanisms.In 2021,the "14th Five-Year Plan" and the outline of the 2035 long-term goals proposed to "improve a Modern Financial System with high adaptability,competitiveness and inclusiveness,and build a financial system and mechanism to effectively support the real economy".As a product of the market mechanism reform,the margin trading and short selling system gives investors the right to short-sell the targeted companies indiscriminately.The power of the market will stimulate the subjective initiative of independent reform within the enterprise.Since 2010,margin trading and short selling system has undergone more than 10 years in China’s stock market.The scope of the listed short has gradually expanded,and the transactions volume of margin trading and short selling have increased dramatically.It has become one of the mainstream trading systems in the stock market.However,China’s Margin Trading and Short Selling System still shows distinct characteristics of emerging markets,that is,the proportion of short selling transactions volume is too small,and the market is in a state of unbalanced between margin and short.As the tradable share of listed companies in China’s stock market is generally small.As of the excessive volume of margin trading,it is likely to cover up the market effect of the short-selling mechanism,thereby increasing the atmosphere of stock market speculation.In this way,it may be difficult for short-selling investors to exert short-selling pressure on enterprises through short selling transactions,and it will eliminate the governance role of the margin trading and short selling system.In this dissertation,I will test whether the margin trading and short selling system can still restrain enterprises’ inefficiency investment and financing behavior of and eventually help enterprises to achieve high-quality development.Based on Information asymmetry theory,agent theory,real option theory,trade-off theory and term matching theory,I empirically test the influence of the Margin Trading and Short Selling system on the investment and financing behavior of enterprises and its mechanism using a Differences-in-Differences approach.I choose the micro-data of A-share listed companies in Shanghai and Shenzhen stock market over 2007 to 2019 as a sample from CSMAR database.The main conclusions of this dissertation are as follows:Firstly,I use the investment scale,investment efficiency and excessive investment to describe the investment behavior of enterprises.I found that after the implement of the Margin Trading and Short Selling system,the listed companies of Margin Trading and Short Selling system would choose more conservative investment behavior.Specifically,the sacle of investment will decline,the investment efficiency will improve and the occurrence of overinvestment reduce.In addition,the greater the volume of short shorted and the higher the activity of short selling transactions in the market,the more obvious the above effects are.Indicating that the external governance effect of the margin trading and short selling system is mainly exert through short selling.Further test found that,first,the impact of the margin trading and short selling system on the investment behavior of enterprises is heterogeneous.The decline of invest scale and the improvement in investment efficiency is stronger in SOEs.Second,the mechanism of investment scale under the real option theory has been verified,which shows that the margin trading and short selling system reduces the investment scale more in enterprises with a higher degree of capital irreversibility and a higher degree of waiting for investment opportunities.Third,companies with a high degree of analyst follow-up and a high proportion of institutional investors’ shareholding are more sensitive to potential short-selling threats.The investment scale will decline more,the investment efficiency improve more and the possibility of excessive investment is less when facing more supervision pressure.Fourth,the external governance effect of the margin trading and short selling system on the investment behavior of enterprises mainly exert through improving the effectiveness of internal control and reducing the degree of real earnings management.Secondly,I use the excessive debt and debt maturity structure to describe the debt financing behavior of enterprises.The test finds that after the implement of the margin trading and short selling system,compared with non-standard enterprises,the degree of excessive debt of the target enterprises of margin trading and short selling significantly reduce,and the possibility of excessive debt significantly reduced.,the debt maturity structure is significantly shortened.The greater the volume of short selling transactions,the greater the degree of the above-mentioned impacts change,indicating that the external governance of the margin trading and short selling system on the corporate debt financing behavior mainly depends on the short selling mechanism.Further research found that,first,the debt financing costs increase after the implement of margin trading and short selling system.In addition,reduction of credit supply will cause the reduction of excessive debt levels and the shortening of debt maturity,but not the reduction of investment demand.Second,the macro deleveraging policy does not affect the change of debt financing behavior.Third,the margin trading and short selling system can exert the institutional effect of "structural deleveraging",which is manifested in the fact that the restraining effect of the margin trading and short selling system on excessive debt is in the SOEs,the large scale of assets,the strong equity financing capacity and the solvency of due debts.Fourthly,the margin trading and short selling system reduces the excessive debt of enterprises with greater external supervision pressure,and shortens the debt period more.Finally,the governance of different debt financing behaviors has different paths of action,that is,the mitigation of its excessive debt is due to the improvement of control activities and internal supervision,while the shortening of the debt maturity structure is due to the strengthening of the risk assessment process.Finally,I use long-term funding gap to portray the degree of mismatching the investment and financing.The test found that after the implementation of the margin trading and short selling system,the degree of mismatch between investment and long-term debt of the targeted enterprise has increased significantly.This negative effect is more obvious among companies with low degree of mismatching before.Short selling system causes the increase in the degree of mismatch of investment and financing,not margin trading.Further analysis found that: First,the impact of margin trading and short selling system on the degree of mismatch of investment and financing of enterprises has heterogeneity in different industries.The effect is more significant in Industry A,C,E,F and G.In addition,among SOEs and companies with high industry concentration,this negative impact is even more prominent.Second,the margin trading and short selling system mainly enhances the financing constraints and shorten the bonding period structure,which leads to an intensified degree of maturity mismatch in the investment and financing,rather than the deliberate items of the enterprise.Third,the maturity mismatch of investment and financing is not conducive to the improvement of the short term and long-term performance.Fourth,I has found that stimulating enterprises’ growth vitality,increasing management of management and strengthening external supervision in the stock market can help alleviate the negative impact of the maturity mismatch of investment and financing.In general,by introducing the short-selling mechanism,the margin trading and short selling system can open up negative information channels in the capital market,create shortselling pressure,and then exert an external governance effect on the inefficient investment and financing behavior of enterprises,but it will also exacerbate negative consequences of corporate investment and financing mismatch.Therefore,I suggest continuing to promote the construction of the margin trading and short selling system and adjusting the imbalance of the transaction volume between margin trading and short selling.Second,I suggest the regulatory authorities should strengthen macro-prudence in the margin trading and short selling system.Prevent the possibility of systemic risks arising from the margin trading and short selling system is necessary.Encourage the bank enhance the strength and precision of long-term credit issuance,so that the financing constraints faced by enterprises can be alleviatd.At the same time,encouraging enterprises to increase the proportion of direct equity financing,paying attention to the improvement of the internal governance environment of enterprises.In order to realize the function of the basic system of the financial system to serve the real economy.