Debt Financing And Investment Behavior Of Listed Companies

The investment behavior for listed companies in China presents some pondering phenomenon: Such as investment direction is frequently altered, and the investment efficiency and performance is low. Such as for the sake of extension of the company scale, exterior funds are invested in various not-ideal investment items, even invested in the realm from which benefits can't be acquired. Such as some enterprises deliberately "pack" the loss items, but the soft debt budget control of bank to enterprise causes enterprise overinvestment and underinvestment. Such as some large shareholders obtain benefits in illegal ways, which makes enterprise into embarrassing situation as a result. But when listed company faces bankrupt, it is large shareholders that come out to alleviate listed company's debt crisis. Again such as "fish engineering" is often seen in China, and a great deal of debt are baits. Carrying on the risk investment by using the national funds or loans frequently takes place in the state-owned enterprises.But the ownership of shares of most China listed companies concentrate, and in fact the important decision is made by large shareholder. The function of the board is weakened. The control power controlled by large shareholder will influence the decision behavior of the company, including financing behavior and investing behavior. Especially under the circumstances that the small investors' protection is still not perfect enough, the large shareholders can take private benefits easily. So does the investment behavior of listed company have something to do with its special financing structure and control power of the company? What aspect and how much dose debt influence investment behavior? What characteristics may the relation between debt and investment present in different stages of debt development? How "Private Benefits of Control" will influence the relation between debt and the investment behavior?This paper analyses the influence of company debt on investment behavior in an simplified company investment model when private benefits exist. The choice of investment items will be influenced after control-power's proprietor compares public benefits from "good item" with the sum of public benefits and private benefits from "bad item". The exterior investor has expectation to this, thus decides the sum of money provided to enterprise, and also determines the amount of investment of enterprise. Under the situation that enterprise has debt (more widespread phenomenon to the listed company) , the ratio of the debt influences the investment behavior. Along with the increasing of debt, enterprise also faces bankrupt risk. The bankruptcy will cause the private benefits loss. Control-power's proprietor will consider this factor when he makes the investment decision, then the influence of debt on investment behavior will present dissimilar.Further this paper chooses 393 listed companies as the research samples, uses data from CCER, and examines the influence of debt on investment behavior. The empirical result shows: higher the ratio of debt is, smaller investment scale is, that is, the ratio of debt presents negative relation with investment scale. And with debt increasing, the relation degree between them will be influenced when enterprise faces bankrupt risk. The conclusion announces debt will cause underinvestment or repression of overinvestment when private benefits exist. Under the circumstance of bankruptcy risk, debt again alleviates underinvestment or repression of overinvestment when debt is enough.Finally suggestion is provided: perfecting information system; improving the outlet of financing; strengthening the company bankruptcy and settlement; restricting benefits violation of large shareholder and strengthening rights protection of the medium & small investor; strengthening the market mechanism of control to the governor's behavior.