A Study On Debt Financing And Its Effect On Corporate Governance In Chinese Listed Companies

In this thesis, we analyze the corporate governance effect of debt financing in Chinese listed companies, based on capital structure theory, debt contracting theory and modern corporate governance theory. There are five chapters in this thesis. In Chapter One, I will introduce the reason and the meaning to choose this subject for research and some relative research others have done.In Chapter Two, we analyze the debt structures and its governance effects in Chinese listed companies, compare them with those in western companies. We find that most Chinese listed companies prefer to issue stock for financing. The debt ratio is much lower than that in western countries and its restrain on debtor is very week.Debt can decrease the cost of agency, restrain and inspire the managers in company. Its effects on governance vary from different debt structures and different debt contract. In Chapter Three, we do research in governance effect of debt in its period structure, distributed structure and priority structure, and then identify the differences in the effects and how to arrange all kinds of debts for corporate governance.In Chapter Four, we analyze the factors which affect the company to use debt and the relationship between the debt ratio and the value of the firm. In the result, the size of the assets, capital structure and the capacity to earn profits have positive correlation with debt ratio. The ownership structure, non-debt tax shield have negative correlation with debt ratio. The correlation between growing and the debt ratio is not very clear. Though in all the samples, the correlation between the value of the firm and the debt ratio is not clear. But in some area (TDR<30% or TDR>60%), the correlation between the value of firm and debt ratio is obvious. This result at least discovers that there is a best debt ratio in our listed companies, if we aim at the maximization of value of the firm.In the last part of the thesis, Chapter Five, we make some suggestions how to improve the efficiency of debt financing and the governance effect. We can make some improvement in several ways, such as develop bond market; improve the relation between firm and bank; improve the debt contract; protect the creditor's benefits; reform credit valuation and assurance; and improve delisting and bankruptcy mechanism.