Study On The Realitions Of Debt Financing And Investment Behavior

The financing and investment are the two basic financial activities of a company. According to agency costs theory, information equilibrium theory and control rights theory, the impact of debt financial on firm investment has both negative effect and positive effect. The positive effect means that leverage is one mechanism for overcoming the overinvestment problem where the conflict is between the shareholders and management. The negative impact is that debt reduces the incentives of the shareholder-creditor coalition to invest in positive net-present-value investment opportunities, which creates asset substitution and potential underinvestment. Therefore, the analysis of financing and investment behavior of enterprises is of great significance. Based on previous academic research and status of ownership structure, this Paper makes a research on the impact of debt financing on investment behavior from the perspective of ultimate control, so that we could have a more deeply research on this question.We first analyze theoretically that debt financing has an impact on firm investment behavior. Then, we analyze the impact of debt financing landed by ultimate control rights. After that, we have an empirical analysis. We select and study for 2006-2009 the A-share companies which were listed on the Shanghai. The empirical shoes that:for one thing, debt financing has a discipline role for over investment behavior in Chinese listed companies. For anther, although the debt financing of state-controlled and non-state-controlled listed companies have shown positive effects, the non-state-controlled listed companies who use debt financing to reduce shareholder-creditor confliction are superior to the state-controlled listed companies. Finally, according to the results of our study, we offer some suggests to business enterprises management.