A Study On Ultimate Control Rights And The Governance Efficiency Of Debt Financing In Listed Companies

Based on the agency cost theory, signal transferring theory, control rights theory, debt financing plays a very important role on corporate governance. Owing to this, we first analyze theoretically that debt financing has a positive effect to corporate governance which can be incentive and restraint to the operators and shareholders. Then, we analyze the governance efficiency of debt financing as a result of the problem of principal-agent leaded by ultimate control rights. After that, we have an empirical analysis. We select the A-share companies which were listed on the Shanghai and Shenzhen exchanges before Dec. 31st, 2003 and study for 2004-2006 The empirical results show that: For one thing, the governance efficiency of debt financing in China's listed companies has not been exploited. For another, although the debt financing of state-controlled and non-state-controlled listed companies have shown negative corporate governance efficiency, the non-state-controlled listed companies who use debt financing to play the role of governance are superior to the state-controlled listed companies. Therefore, the degree of corporate governance efficiency is not the same under the ultimate control rights.