Whether And How The Institutions Can Influence The Firms' Conservative Financing Policies

Compared with the exiting of many financial conservative firms, the research of why firms choose conservative financial policies is limited and compared with the facts that there are many academic researches on the institutions'influences on macro economics , the research of whether and how the institutions can influence the behavior of micro firms is also limited. Based on these limitations , the main research topic of this dissertation is studying whether and how the institutions can influence the firms'conservative financial policy choice behaviors.Through the research of this paper , we hope we can not only explain the reasons why firms choose conservative financial policy in theory but also can acquire the empirical proofs how the institutions influence the micro firms'behaviors. We think the different institution environments make the firms face the different external constraints and the firms make the different economic decisions , so the economic development of one country can become different with the other countries.We mainly answer the following two problems , whether and how the institutions can influence the firms'conservative financing policies .Through the theoretical and empirical research , we find the following results:1. According the definitions of the institution, firms and firm's financial policy choice ,we think we should include the institution into the decisions factors of the firms'financial policy .2. According to the measurement indexes of economic development, we find the there are big gaps between the different area and in different areas the legal and financial development environments are different.3. We think why the institutions can influence the firms conservative financing policy choice behavior is that in the different institutions environment , the protection power of creditor is different, in the areas where the creditor face the stronger protections power and monitor the behaviors of the debtor efficiently in order to reduce this kind of monitoring pressure, firms will choose less debt. But in the areas where the institutions can not protect the interests of the creditor effectively ,the debt can not exert monitor function and itself will be misappropriate by the debtor, and the firms located in these areas will not adopt the conservative financing policy more . Through the investigating of the SOEs'conservative financing policy choice behaviors from 1999 to 2004, we find that firm's conservative financing policy choice behavior is not only connected with its insider corporate government structure ,but also is influenced by the institutions factors. The firms ,located in the better institutions enviroment areas, will adopt conservative financing policies more and the firms whose ultimate controlling stockholder are the central government will also adopt the conservative financing policies more.According the results ,we think the influence of the institution exerting on the firm's conservative financing policy is increasing, and the firms facing the different institutions environments will take the different choices and the existing of the better institutions environment can mitigate the limitations of the firms'inside corporate governance structure and protect the contractor's interests.According the findings of this dissertation ,we think that the legal and financial development environment will influence the firms'behaviors. When we analyze the firms'financial policy choice behaviors ,besides considering the firms'financial situations, market competition .corporate governance ,we should also consider the institutions'influences.