An Empirical Study On Financial Development And Firm Performance Based On Financing Constraints

Because of the existence of asymmetric information and principal-agent problems on the market, the dependence of company’s external funding and internal funding is different, which results in financial constraints. In recent years, some Western economists began to study the micro-mechanism of financial development promoting the development of economic growth. They switch their perspective to examine the effects of and the financial development alleviating the company’s external financing constraints. It has made a wealth of research results. Thus, the effect of financial development on the company’s external financial constraints is very important. Level of financial development among our country different regions is relatively large, so different degrees of financing constraints of the company in different areas. In general, financial development can improve the company’s external financing environment and ease the financing of constraints. So the study of financial development, the relationship between financing constraints and firm performance has a certain practical significance.In this paper, for the microscopic evidence of financial development’s role in promoting the economic growth, I studied China’s financial development affecting listed companies’ financing constraint in all regions, thereby affecting the company’s performance. First, comprehensively integrating predecessor’s relevant existing research, and deeply understanding of the basis of asymmetric information and agency theory and financial development theory, I put forward reasonable hypotheses. Using the data of listed Companies of China in 2009 – 2014 and reasonable methods, I empirically test and analyze my assumptions. In the part of empirical research of the relationship between financial development and financing constraints, coefficients corresponding to the result of cash flow and of cross product terms of cash flow and financial development in the classic cash- cash flow models regression result are to verify the presence or absence of financing constraints, and to find the impact of the level of financial development on financial constraints. Therefore, in order to accurately measure the level of financing constraints, in this paper, I use binary discriminant analysis, prepacketed in the interest coverage ratio, and build comprehensive financial constraints index with company’s assets-liability ratio, liquidity ratio, ROE, enterprise-scale. It concluded:(1) the existence of financing constraints of listed companies;(2) financial development can effectively alleviate the financial constraints;(3) the decrease of level of financing constraints will help to enhance the company’s performance.Financial development ease financial constraints for the company, and thus enhance the company’s performance.It has great significance. In order to promote investment and overall economic growth, states should further deepen the financial and market-oriented reform, and accelerate the pace of financial development and marketing process. In order to achieve the company’s good and healthy growth.,of course, companies have a responsibility to strengthen its management to ease the financing constraints. So finally, this paper put forward the corresponding policy recommendations, from my Government level and micro-enterprise level.