Study On The Impact Of Debt Over Firms Investment Behavior

The financing and investment are the two basic financial activities of a company.One of the center problems in the field of finance is that what are the relationships among financing,investment and the company governance performance.Borrowing process affects a firm's performance mainly through affecting its investment behavior and investment effect.The debt governance ought to be implemented according to the affection of debt on investment.According to agency costs theory,information equilibrium theory and control rights theory,the impact of debt financial on firm investment has both negative effect and positive effect.The positive effect means that leverage is one mechanism for overcoming the overinvestment problem where the conflict is between the shareholders and management.The negative impact is that debt reduces the incentives of the shareholder-creditor coalition to invest in positive net-present-value investment opportunities,which creates asset substitution and potential underinvestment.We first analyze theoretically that debt financing has an impact on firm investment behavior.Then,we analyze the impact of debt financing landed 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.31^st,2002 and study for 2003-2007.The empirical shoes that:for one thing,debt financing has a discipline role for overinvestment behavior in Chinese listed companies.For anther,although the debt financing of state-controlled and non-state-controlled listed companies have shown positive effects,the non-state-controlled listed companies who use debt financing to reduce shareholder-creditor confliction are superior to the state-controlled listed companies. Finally,according to the results of our study,we offer some suggests to both business enterprises management and govemment economic policies.