The Research On The Control Effect Of Debt In Chinese Listed Companies Based On The Free Cash Flow Hypothesis

The characteristics of the modern joint-stock enterprise are the separation of ownership and management, which makes the agency cost have become necessity. At present, the Chinese enterprises have the problem of higher agency cost. Some scholars have made empirical studies about the agency cost of free cash flow from different angles, and got different conclusions. It is necessary that re-verify the problem with the restructuring of the state-owned banks and the environmental changing of the enterprises. This paper is based on the control hypothesis of debt, it verifies the application of free cash flow hypothesis for the listed companies in our country, and gives the reasonable suggestion about the agency cost of the enterprises.The first is the review of the theory of agency cost and free cash flow, on the basis of previous studies, combined with the actual situation of China and the theory of free cash flow hypothesis make the assumption that, through empirical testing, the debts that the companies have low-growth and high free cash flow is related to the free cash flow. This result suggest Jensen's free cash flow hypothesis. Other factors like the industry, size, profitability, asset liquidity and the unique of the products can affect the correlation between debt and free cash flow.Then, uses audit fee as the induced variable, makes the second empirical analysis, through inspection, audit fee can reduce the agent cost, which suggests the control hypothesis for debt creation.Finally, gives the suggestions about how can improve the control effects of the debt, in according to the conclusions and the status of Chinese capital market and the trends of external environment of the listed companies.