Empirical Research Of The Capital Cost And Return Of Investment In Heavy Pollution Industry Listed Companies

Investment decision is important ways and means which realize the normal operation of social economy and capital appreciation in enterprises. Our State Senate (control) shares of listed companies accounted for the vast majority of all the listed companies has become the backbone of China's capital market. In the listed company, heavy pollution industries concentrate state-owned capital, these industries investment situation, directly determine the economy running smoothly and form the industrial structure which save resources and protect the ecological environment. This paper uses the economics and management theory, with the cost of capital and return on investment, measures and analyzes the investment efficiency in heavy pollution industry of the listed company. Based on this, the paper gives some policy suggestions on how to make the capital flow conform to the principle of market operation principle.This paper outlines the present situation of macro economy, and summaries relevant theoretical research on domestic and foreign capital cost and investment returns. Then it which uses revised Fama and French method, estimates A-share listed company 1990-2007 years as a whole, heavy pollution industries and sub industries heavy pollution industry return on value (the cost of capital) and return on cost (the return on investment). We found that under the circumstance that the return on cost (the return on investment) is close, the cost of capital on heavy pollution industry is 17.56%, higher than the overall listed company which the cost of capital is 13.76%. The investment efficiency of heavy pollution industry is 4.36%, lower than the overall listed company which is 7.35% in the investment efficiency.Then, the paper analyses the reasons which cause that the heavy pollution industry listed companies has higher cost of capital than the overall and the capital does not conform to the principle of the market. We analysis the overall heavy pollution industry and various sub industries's capital structure and found that its leverage common higher than the overall level, the source of trade and operating capital for heavy pollution industry is reliance the short-term borrowing and long-term loans than the whole industry. The phenomenon caused by that the marketization in China is not yet over, and the result of government intervention and bank debt soft constraint in the financial system. From the investment efficiency, we conclude that the A-share listed companies of heavy pollution industry is not efficient industry. But they can obtain the needed capital which is necessary to develop and expand, and do not be eliminated by the market principles. This phenomenon does not correspond to the capital investment expected. Low efficiency industries do not follow the survival of the fittest rules in market withdraw from the market competition is caused by underdeveloped factor market and the high withdrawal barrier enhanced by asset specificity.Finally, we give some policy suggestions to change the situation that the capital flow does not conform to the principle of market operation in our country and improve enterprise innovation ability.