Study On Debt Financing And Firm Investment Size

The impact of firm investment behavior on investment decision as the major factor has been the focus of academic study and practice. Based on the case of 2001-2005 listed manufacturing companies, the capital structure theory, agency theory and control theory, then comprehensive use of quantitative and qualitative analysis of the method, this paper examines the impact of debt financing on firm investment behavior, which reveals the economic consequence from the conflict between shareholders-creditor and the camera management role of leverage.The study shows that: First of all, by the means of both theory of shareholder -creditor coalition and the camera management role of leverage, debt financing overcome the firm investment on the whole. Secondly, when divide the sample into three groups based on the growth opportunities, we find there is significantly negative relationship between debt financing and firm investment in high-growth and low-growth opportunities firms, but not for mid-growth opportunities firms. Thirdly, according to shareholding structure classification, the study find that there is positive correlation between debt financing and firm investment in stated-owned firms, but not for private firms. Finally, from the perspective of the scale of assets, the negative relationship exists in large and median scale firms, and such a relationship does not exist in small scale firms.Furthermore, the study found that there is varying degree positive correlation between the net rate of return on capital, internal cash flow, Sales growth, the Tobin Q value and the firm investment, Which reveals these factors contributed to the firm investment and such a conclusion meet the people's expectations.Finally, according to the empirical analysis of our study, the paper offers some related propositions which attainments of the perfect corporate governance structure and enhance the corporate value. Furthermore, the paper proposals the future development of this area.