Tendency Analysis On Investment Of ST Companies

As the development of the stock market in China,Special Treated(ST) Companies have been scholars'focus recently.Investment is one of the most important financial decision,and it involves the collection and allocation of capital.Investment plays an important role in the course of firm's development.As the most driving force and the base of the future cash flow,investment influences the risk,earning and assement of decelopment direction.Investment is the first step of corporate decision.This paper begins with an analysis of the status quo of investment by ST companies in China and points out the prevalence of investment distortions,like over-investment and under-investment, and inefficiency in investment as a result。This study defines two kinds of investments based on the basic,called productive investment and expansionary investment.It is predicted that behaviors of much companies will show many differences from the healthy ones,including the investment decisions.In the meantime, investment will infouence the companies'condition and may help the companies resolve the problem.Results show that,ST company investment behavior will be affected by many kinds of factors,the productive investment-cash flow sensitivity between the ST companies and the normal companies, the ST companies show zero sensitivities to the productive investment-cash flow,it can be concluded that their cash flow sensitivities are indeed different that ST companies are more sensitive to their company size and control strength.The expansionary investment-cash flow sensitivity between the ST companies and the normal companies, the ST companies show zero sensitivities to the expansionary investment-cash flow,it can be concluded that their cash flow sensitivities are indeed different that ST companies are more sensitive to their working capital and asset-liability tatio.Subsequently,the study examines two potential investment behaviors'influences to the ST companies:contracting investment and expanding investment.It is observed that more than 3/2 of the ST companies choose to contract their investment while less 3/1 of them choose the opposite.Based on the sample of 200 ST Chinese list companies from 1998 to 2009,the method of linear regression analyses was used to explore the investment behavior of ST chinese list companies and their effects on the possibility of getting rid of financial distress.According to the Linear Logisitic Regression results,the effect of expanding productive investment may be so clear but it is very limited,that contracting expansionary investment will mitigate financial distress for the ST companies.Based on this paper it suggests that the ST company to prevent and respend to policy recommendations in order to get rid of financial distress.