The Sensitive Motivation Test Of The Enterprise Investment - The Cash Flow

Since Modisliani and Miller's research, enterprise investment decision became an important topic in micro-financial area. Enterprise target is to implement]enterprise value or maximize the wealth of shareholders ,and enterprise investment is the inevitable way to maximize wealth. At the same time enterprise is the composition of macroeconomic and capital markets .Enterprise investment behavior promotes the economy. Current theories agreed that the investment opportunity, interest rates and financing environment play decisive roles in enterprise investment decision, while in the real economy financial factors had a big influence on business investment. Since Fazzari, Hubbard and Petersen (1988) studies, many empirical studies have shown that cash flow is an important financial factors affecting business investment. Studies which are of great importance about the relationship of business investment and the cash flow are the two theories -the pecking order theory and free cash flow theory. Both acknowledge that financing constraints are important causes affecting cash flow on investment, but they had a different interpretation on this issue. Pecking order hypothesis think that due to external financing cost higher than within source financing cost enterprise prefers to consider inner source financing channel first. That makes enterprise investment inevitable bring internal cash flow reduced, resulting the negative relationship of business investment and the cash flow; and free cash flow assumptions think that due to agent behavior operators will make too much investment in using cash flow, leading investment and cash flow exists relative relationship.This article summarize the pecking order theory and free cash flow theory. We know that external financing directly affects internal cash flows, then internal cash flow affects business investment decisions. The motive factors of financing constraints include: the nature of the business (whether is State-owned enterprise), degree of development in financial market, before or after the economy crisis. Home and abroad, researches on cash flow and enterprise investment decision generally use Q-model and Euler model. Due to Q-model only considers one indicator Q and has its limitation, Euler model had avoided using stock price index and the calculation of Tobin Q value, therefore we choose to use Euler model .This article make the investment model of Laeven, Bond and Meghir as the basic model. Then combining the sensitive study of financing constraints about enterprise investment on cash flow, we design out innovative models which contain factors of financing constraints. The article treats the explanatory variable and explained variable of innovation model to mathematical method, then combining the empirical statistics results according to the data of the 77 production listed enterprises, induces out the eventually empirical research results and conclusions. In the real fact, the foreign theoretical study and empirical results about sensitivity of enterprise investment decision and the cash flow are resulting in a mature market environment, and Chinese basic environment is still far away from the mature market economy environment. The level of developed financial markets and the extent of administrative intervention are still rather serious. All the above makes foreign relative studies are not fully applicable to the actual situation in China. At the same time, given the current realities of Chinese capital market imperfections, information asymmetry, agency problems and more serious problems such as transaction costs, cash flow plays a vital role in the survival and development of enterprises. This article systematically absorbing studies home and abroad ,and combining the China current capital status, researches the motivations of investment and cash flow of sensitivity of China listed productive companies ,and aims to establish the relative analysis framework, accelerate the financing reform ,make a contribution to economic policy selection and investment efficiency.Previous studies also agree with the conclusion that internal cash flow effects enterprise investment decision. But the analysis which reveals the incentives behind cash flow is quite few. This article focuses on to research the factors behind financing constraints. Therefore, this article makes a certain degree of innovation on the index, and breaks through the range on this topic, and expands of the dimension of the topic, and pays attention to the reasons behind the investment-cash flow sensitivity. This article also makes a innovation points in effect value which is different from traditional research method, that makes empirical results more perfect.