Interest Rate Market And Corporate Investment And Financing Decisions

marketization of the interest rate is the crux of the reform of our financial system currently. Over long period of time, the constraint policy of the interest rate has limited development of our financial market, consequently curbing our economic growth. By analyzing the impact of businesses, the writer proposes countermeasures for business reform in investment and financing system, under the condition of marketization of the interest rate.In the first chapter, initially with support of traditional economic theories about decision of the interest rat, the writer shows that it is in the market that the interest rate is determined by the market power of supply and demand. However, the rate mechanic in developing countries is not capable of function as investment adjustment, because of government severe constraint of the interest rate. Then in this part the writer introduces the theory of financial deepening represented by R.L.Mckinnon, whose kernel is to abolish constraint of the interest rate so that it can freely adjusts investment.In the second chapter, the writer reviews China's constraint policy of the interest rate over the past long time, and changes in business financial mechanism as well, suggestion that the development of China's financial market is seriously suppressed, so the government must carry on reform at the interest rate towards marketization.In the third chapter, the writer analyses the positive effects of the interest rate marketization on business investment and financing in both direct and indirect financial markets. Though marketization of the interest rate, the rate can genuinely function as adjustment but on the conditions of clarified property right of investors' ownership, hardening of budget restraint as well as improved financial market with powerful functions.In chapter four, in the light of the above analysis, the writer comes to a conclusion: to achieve the aim reform of the interest rate towards marketization, it is essential for us to reform our business regime of property right, in company with improving of our financial market so as to establish a standard and pluralistic investment and financing system, which enable our businesses to enjoy independent decision-making right of investment and financing, and the interest rate to function as investment adjustment, as a result, to promote our financial and economic growth.