Debt And Corporate Investment In Diversified Company

The relationship between debt financing and investment behavior is one of the most central issues in diversification companies. This article reviews many kinds of relevant research.Using the data from 2005 to2009,We will study the impaction that debt financing on investment behavior from the angle of diversification.Firstly, as for total liabilities,whether diversified companies or specialized companies, debt can inhibit of inefficient investments, That is,the debt have the role of governance. Compared to the specialized companies, diversified companies have more investment and debt; and at the same time, compared with the specialized companies, the governance role of diversified companies was weakened, which may be associated with the diversified organizational structure in diversified companies. At the same time,compared with the high-degree of diversification companies, high-degree of diversification companies have a more significant negative correlation. Then we introduced the cross terms of Hdi*Db and Dt*Db by regression, the results show that with the increasing of the diversification,the influence of the debt to investment behavior will be weakened gradually. This shows that we should carry out diversification based on the external environment and business conditions in their own modest diversification,rather than blindly diversification.To further study the relationship between investment behavior and debt under the double impact of the Ownership and diversification, we have divided the sample into four parts on the basis of the nature of property rights and the index of Herfindahl.the results show that whether the state holding listed companies or non-state-controlled listed companies, goverment effect of debt were more stronger in the low-diversified company, which explains the process in operation Should be chosen in the appropriate diversification.What's more, we classified the diversified companies according to the diverse types to study the influence between liabilities and corporate investment. The results showed that the amount of non-related products-based company are more than the type of professional companies and compared to related diversified companies, and non-diversified corporate liabilities associated with a better result,As is inconsistent with the current mainstream research.To verify the robustness of this conclusion, we have divided the sample into two parts on the basis of the ideas of Rumelt.. the results show consistent conclusion with the earlier conclusion. Therefore, we have believed that this study has some representation.Finally, based on the empirical results, it is beneficial for us to improve the corporate finance structure, regulate diversified company investment, improve the investment efficiency of listed companies and promote optimal allocation of economic resources.