A Study On Financing Constraints' Effect On Investment Of Listed Company In China

In the famous MM theory, corporations internal funds and external funds can be replaced by each other in the complete capital market, so, corporations financing structure are not relevant to their investment decision. But in the incomplete capital market, there exists information asymmetry, transaction cost and agency problem. No matter in the cost or in the numbers, corporations external funds are restricted greatly. More and more research in the relation between corporations financing structure and investment decision emerged, and it became hotspots. With the fast development of Chinese economy, listed firms, as the investors will face more investment opportunity, and they cannot avoid the financing constraints when they invest. This paper will research the financing constraints'influence in the investment from the viewpoint of listed firms.This paper covered some theories on financing and investment, financing constraints, investment and so on. In the theory basis, I do some analysis in the correlation theory and research methods at home and abroad by the request of system theory. In the empirical research, this paper compute the number of financing constraints by PCA and descriptive statistic, then I construct the model between investment and financing constraints, internal cash flow, and I research by MLR. So that I analyze how financing constraints and other main influencing factors affect investment by both qualitative and quantitative methods.This paper proposed 4 hypothesis, by empirical research, I find: in listed firms of our country there existed significantly positive relationship between investment and investment opportunity, Internal cash flow and financing constraints. When I controlled the financing constraints, I find that the greater the number of financing constraints is, the more influence in investment cash flow and investment opportunity will have. However, when I control the cash flow and investment opportunity separately, I find that the more cash flow, the more influence in investment financing constraints will have. But no matter what the investment opportunity is, there still exists significant influence between financing constraints and investment.At last, this paper gave suggestions: we should enhance the management of cash flow, improve the investment efficiency of cash flow, investment must match with the cash flow; also we should improve the system of information disclosure and lower the information asymmetry; harden the restraints on budgets, so reduce the financing constraints from the radically; and relieve the over investment or under investment from agency problem.