A Study On The Effect Of Debt Financing On Corporate Governance In Chinese Private Listed Companies

Along with the development of market economy, studies on the corporate governance become more in-depth. The corporate governance theory extends from shareholders'governance to stakeholders'common governance. Under the guidance of stakeholders'common governance, people become paying more attention to the creditor's protection mechanism. Debt governance then has gradually become the forefront of theoretical research. Under this background, this paper studies the effects of debt financing on corporate governance in Chinese private listed companies.The paper firstly interprets the effects of debt financing on corporate governance from aspects of manager stimulation, signal transfer and control-rights shift. And then the effects of different terms of debt and different kinds of debts on corporate governance are made comparisons. Secondly, the paper reviews the development of Chinese private listed companies. And then sum up the debt financing in the mass, analyze the debt structure of directly listed companied and indirectly listed companies separately. Based on the statistics and analysis, the paper chooses the private companies which are listed before 2003 as samples. According to the financial data during the year 2004 and 2006, the paper proceeds to empirical research on debt financing and governance performance. The results show that as a whole, debt financing doesn't help up with corporate governance even if the capital structure is in normal scope. But separately, long-term debt and debt to employee do have positive impact on governance performance while the short-term debt and business credit have negative impact on governance performance.According to the results, the paper in the end analyses the reason and then propose suggestions from two aspects, i.e., perfects the debt financing governance mechanism and optimize the debt structure of Chinese private listed companies.