| Since the MM theory laid the foundation of modern capital structure theory, the capital structure theory has achieved great progress and development. With the emergence of asymmetric information theory, agency theory, free cash flow theory and the pecking order theory of financing, people began to focus on business relations between the investment and financing decisions, and further develop a special issue of the theory of corporate finance constraint system. Since Fazzari's (1988) groundbreaking study of the corporate finance constrains and the relationship between investment and cash flow sensitivity, the empirical researches of finance constrains have thrived. Both abroad and domestic studies have gradually expanded to the perspective of the causes of financial constraints, influence factors and performance and other factors. The research of the effect of financial development and property rights constraints on the level of corporate finance it is an important area for the rise in recent years.Since the perfect market assumption in the MM theory does not exist, the real market is always accompanied by asymmetric information and agency problems. The study has proven that due to asymmetric information problem between investors and managers, companies always have to pay excessive financing costs. The greater the gap between internal and external financing costs, the more business investment dependent on the internal cash flow, and thus investment-cash flow sensitivity is higher. As the competition in the financial market intensify, financial institutions gradually improve and the efficiency of resource allocation increase, the overall level of financial market will improve, bringing a significant positive external effect that the degree of information asymmetry between banks and enterprises will be reduced. In theory, this will reduce the level of financing constraints. However, different samples and research methods lead to different conclusions, which need to be explored for the reasons. This is another motivation of this article to examine the impact of financial development on the finance constrains. In addition, since Konai's theory of budget constraints in 1980s, it has been widely recognized that the socialist countries, state-owned enterprises and private enterprises are likely to face different financial constraints, and the empirical results are different. This paper will analyze the finance constrains at different levels of financial development in different areas, combined with the nature of corporate ownership, and draw some innovative conclusions.The data of 278 manufacturing companies listed in Shanghai and Shenzhen in 2003-2006 were selected to study. The paper analyzed the overall corporate financial constraints of the sample companies and the financial constrain level of companies with different corporate nature and in different areas of financial development. Furthermore, this article combined the features of financial development and property rights and investigated the enterprises with different property nature on the market. It also explored the financial constrains level of the enterprises with same property nature in different financial markets, and the soft budget problem affecting financing constraints of the state-owned enterprises, which also made a special analysis to support the main conclusions of this paper.Specifically, the paper is divided into five parts:â… . Introduction. The background and significance of the researches on this topic are summarized and described, the research issues and methods are discussed, the structure and framework are illustrated by graphs and possible innovations are discussed.â…¡. Literature Review of both abroad and domestic studies on financing constraints. This part focus on the areas of financing constraints, with the existing differences as clues, collates and analyzes the ideas, methods, conclusions, etc. of the existing literatures. There are three aspects:(1) the choice of proxy for financing constraints; (2) the choice of theoretical models; (3) differences in conclusions of the studies, and finally, a briefly review of the overall summary.â…¢. The theoretical analysis and assumptions. This chapter lays the theoretical foundation for assumptions, therefore, it gives a brief review of the background of financing constrains theory (including asymmetric information, agency theory, etc.). Secondly, it explains and analyzes the impacts of financial development and property rights on the corporate financing constraint mechanism and theoretical basis and presents four assumptions. â…£. The empirical study design, hypothesis testing and results analysis. This chapter starts from the sample selection of empirical study and introduces the data processing, model selection, variable definitions and other evidence. The overall samples are divided according to the level of financial development and the nature of the property rights. The empirical analysis and comparative studies are conducted. Further, the paper also accomplishes a empirical test on the soft budget problem affecting financing constraint of state-owned enterprises. In the last part of this chapter, a detailed analysis of the empirical results and the reasons are made.V. Conclusions and policy recommendations. To summarize the whole paper, this chapter gives a brief summary of the literature review, theoretical analysis and empirical analysis. To improve the corporate finance constraint as the core, a number of positive policy proposals are brought up from the aspects of the government, the enterprises themselves, markets, regulators, etc.After a comprehensive and comparative analysis, this paper concludes as follows:(1) compared to state-owned enterprises, private enterprises in China face a higher level of financing constraints; (2) the higher the level of financial development in the region, the smaller financing constraints faced by companies; (3) compared with enterprises in high level financial development region, in areas with lower financial development levels, financing constraints have greater impact on private enterprise; (4) The stronger the soft budget constraint of state-owned enterprises, the lower its level of financing constraints. But when the asset liability ratio of state-owned enterprises increases to a certain level, the financing constraints facing decrease. Therefore, this paper concludes that in order to improve the level of financing constraint and makes the state-owned and private enterprises balance their income in the financial market, the government and state-owned banks should try to reduce the restrain on the soft budget constraint. Companies should enhance their quality of information disclosure and use more credibility to attract the rational investment funds in the liberalized financial market.Main contribution of this paper:1. Different from previous studies which directly apply foreign measures of financial development indicator system to domestic study, this paper selected domestic scholar Fan Gang's (2005) financial market system that designed on the basis of Chinese market. This system is considered to be more objective and reasonable, and the return drawn from this reference index system will enrich the country's related study.2. The FHP model and Tobin's Q model are considered not fully reflect the impact of financial constraints on companies'investment-cash flow sensitivity. This paper chose Euler model, which contains a delay introduction of the variable investment spending. By using Euler model, we believe this return can reflect the actual situation of financing constraints.3. In comparing the different financial constraints between state-owned enterprises and private enterprises, this article made a targeted analysis on soft budget constraint of state-owned enterprise, and finally drew some innovative conclusions, which are surly new empirical evidence for domestic study of soft budget constraint.Finally, there are still some limitations of this study. On the one hand, we selected data from 2003-2006.After removing, there still remain sample of 278 firms. The proportion of state-owned enterprises and private enterprises of this case may not completely consistent with the real economy. Because in the current market, the information disclosure quality of state-owned enterprises are usually higher than the private department. On the other hand, although this study select the financial development system designed by Fan Gang (2005), which has being affirmed by most domestic scholars, it's also difficult to avoid the inherent subjectivity of this system itself that would defect on the impact of this study. In addition, when the ownership of enterprises changes during the sample period, the sample should be excluded, but limited by the accuracy of the database, we can not be fully accurate. |
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