Debt Financing And Corporate Performance

With the rapid development of Chinese economy and growing domestic and international competition, corporate governance has received more and more attention. In order to survive and develop in the imperfect economic and financial system, the Chinese private economy which had been discriminated against for a long time, is exploring and adjusting its internal governance constantly. Difficulty of private companies in financing is one of hot researches concerned on by most scholars and officials. Improve internal and external governance mechanisms to promote private economy faster and better.On the basis of individual-controlled listed companies during 2005-2008, this paper using panel data model investigates the effects of financial ecological environment, political connection and the same control on corporate debt levels. We find that the better financial ecological environment, the higher the level of corporate debt; more close with the government , more easily the company take debt financing, corresponding higher debt levels; companies of ultimate control and direct control are the same, current liabilities were significantly higher, but the overall level of debt is not significant difference. After taking the cross term into the model, we find that compared with the individual-controlled listed companies in the area where the financial ecological environment is relatively bad, the positive relation between the political connection and the level of corporate debt is weaker in the area where the financial ecological environment is relatively good. In addition, we also use the data to examine the effects of the internal and external governance mechanisms, such as the company's debt level, financial ecological environment, political connection, board structure and shareholding structure, on the value of company. We find that debt financing is positively related to firm's market value. Independent director system and the equity incentive mechanism in China's private listed companies are not significant. Chairman concurrently general manager will have a negative impact the company's value.