The Research On Mechanism Of Debt Financing Governance Of Our Country

Based on several years research, many western scholars have generally accepted that debt financing has positive influence on minimizing equity cost and improving firm's performance etc. For example, it can stimulate and constrain operators' behaviors and solve the conflicts between shareholders and operators. It can not only transmit the signal which reflects the firm's real value to the outside investors, but also help them reduce the financing cost. Such points have been applied and demonstrated by practical experience of corporate governance of the foreign enterprise. However, there is a very important and determinant precondition hiding behind these conclusions: that is the existence of perfect and mature mechanism of debt financing governance. The positive effects made by debt financing are not only determinated by its quantities, but also by the mechanism. This paper considers that perfect and mature mechanism of debt financing governance should include governance efficiency mechanism and risk mechanism. The efficiency mechanism is to ensure that debt capital will be used efficiently and the risk mechanism is to protect the creditor's legal rights and interests from being violated. Only with these two aspects connected together can the debt financing perform an active function on improving the firm's capital structure and enhancing the recourse's using efficiency.China is on the way of economic transition, there are lots of problems in debt financing governance mechanism. On one hand, the reform of property rights of national banks and State-owned enterprises is confronted with lots of obstacles. There is not a real debtor-creditor relationship between them and the administrative interference by the government makes bond market develop rather slowly. On the other hand, bankruptcy mechanism performs no practical function, related laws and regulations are not systematic, and some security mechanisms are quite simple. What's more, the creditor is not aware of safeguarding his rights and interests. Above reasons have eventually led to weaken the efficiency of debt financing governance. Based on the current situations, this paper theoretically analyzes debt financing governance mechanism. Then it makes some suggestions, such as reducing government's administrative interference, molding the independent bank creditor, carrying out contingent governance mechanism, formulating and perfecting the creditor's security mechanism.