A Study On Effect Of Financing Constraints On Private Enterprises Investment

After 30 years of development, China's private enterprises have already become an important part of the socialist market economy, and they have been the major force for driving the social economy to develop sustainably and stably. However, financing constraints problem hinders the development and growth of private enterprises as a critical factor. In capital market, there are some imperfect factors, such as asymmetric information, agency cost and transaction cost, therefore private enterprises are confronted with financing constraints problem when they use external financing. Financing constraints problem existences in many enterprises, but it is more serious in private enterprises.This paper elaborate on the business investment theory and related literature, combining with the special system background of China's capital market, and then analysis why private enterprises are faced with financing constrains problem. This study chooses the listed non-financial private companies of Shanghai and Shenzhen stock market from 2005 to 2008 as research sample, and examines the relationship between corporate investment and cash flow. At the same time, this paper researches the effect financial development level and group-forming process of on the private enterprises'financing constraints.The empirical study shows that there is a positive relationship between corporate and cash flow in private enterprises. There is a negative relationship between financial development level and the private enterprises' financing constraints, namely high level of financial development can relax firm's financing constraints. The firms with group-forming process are less financially constrained, that is group-forming strategy can relax private enterprises'financing constraints.