An Research On The Relationship Between Financing Constraints And Investment-Cash Flow Sensitivities For The Chinese Listed Firms

In 1988, Fazzari, Hubbard and Petersen took the lead on studying the relationship between corporate finance constraints and investment-cash flow sensitivities based on The Asymmetric Information Theory, and presented that firms that appear more financially constrained exhibit significantly greater investment-cash flow sensitivities than firms that appear less financially constrained. From then to now the relationship between the financial constraints and investment-cash flow sensitivities has been debated by the academe, which makes them become the focus discussion of the field of corporate finance. This paper is based on a sample of the 600 non-financial listed companies in Shanghai and Shenzhen stock market from 2004 to 2010. Concerning the specific reality of our country, this paper selects financial market index and law index to measure external financing constraints, chooses company size and debt ratio to measure internal financing constraints and investigates the relationship between and investment–cash flow sensitivities according to the traditional research ideas and the inefficient investment ideas.The paper reaches some conclusion as follows: (1) There is a significant positive correlation between the listed company investment expenditure and its internal cash flow. And the inherent motivation tests show that financial constraints are the primary reason causing the listed companies'sensitivities of investment-cash flow. (2) According to the traditional ideas the empirical research shows that firms that appear in the poor external financing environment exhibit higher investment-cash flow sensitivities than firms that appear in the good external financing environment, which supports the conclusion of FHP (1988) .However, when financing constraints are classified by the companies'feature, firms that are smaller and higher liabilities exhibit weaker investment-cash flow sensitivities than firms that are larger and lower liabilities.(3) According to the inefficient investment ideas, investment-cash flow sensitivities of over-investment enterprise don't change correspondingly with the improvement of external financing constraints due to the different external financing environment. But investment-cash flow sensitivities of under-investment enterprise decrease correspondingly with the improvement of external financing environment. When financing constraints are classified by the companies'feature, investment-cash flow sensitivities of over-investment enterprise and under-investment enterprise increase as financing constraints mitigate due to the companies'feature. The innovation of this paper is as follows: Based on Richardson2006 model the paper investigate whether are the differences of investment-cash flow sensitivities among inefficient investment groups classified by Richardson2006 model to discover the influence of the change of financing constraints on the inefficient investment enterprise, thus to support the conclusion of the traditional research ideas from another perspective.