Debt Governance And Investment Efficiency In Chinese Listed Companies

The research of corporate governance always is a popular topic. Compared with the research of equity governance, as one branch of corporate governance, although the debt governance research abroad has been relatively mature and perfect, domestic related research is much less, especially the empirical research of debt governance. The most important reason is that China's capital market development lags behind, and the legal system environment is incomplete. But as the market reform of various aspects such as financial system, particularly for the provinces whose economy is relatively developed, debt governance environment tends to be more mature, which provide a better platform for debt governance research. Also, investment creates value and is the core of corporate value. Debt governance can affect the investment efficiency, then it will affect corporate value. There are complicated relationship between debt governance and investment. As these, from the perspective of empirical research, this paper tries to discuss how the debt governance affects the investment efficiency of China's listed companies with the reference of Richardson(2006) expected investment model.This paper follows the framework from theory to empirical. Firstly it will review and classify the domestic and abroad related researches. Then it will expound the related theories of debt governance and investment efficiency, on the basis of theoretical analysis, the research hypothesis of this paper will be put forward step by step. Secondly according to Chinese listed company market index compiled by Fan Gang, Wang Xiaolu and Zhu Hengpeng(2007). According to the top ranking of market comprehensive index, government intervention index, credit capital distribution index, the listed companies from the five provinces of Shanghai, Jiangsu, Zhejiang, Guangdong, Fujian are selected as the research sample. There are 316 companies which are all A listed company. The paper selects sample data of 1264 from 2006 to 2009 to study the relationship between debt governance and investment efficiency. Finally the paper will analyze the evidence-based regression result and gets the research conclusion.The study results show that with the gradual improvement of market reform, to a certain extent debt governance begins to play a role in China's listed companies. Debt can inhibit inefficient investment. And when debt ratio reaches 20% to 40% interval, the effect is more obvious. At the same time, with the improvement of market level, the influence of corporate ownership on debt governance is weakened. There are no apparent differences of debt governance between state-owned holding listed companies and non state-owned holding listed ones. Besides, the role of short-term debt inhibition of inefficiency investment is more significant than long-term debt.The paper may have some contributions as follows. First of all, the selection of research sample is different from predecessors, various external governance factors such as the level of market and legalization are considered. The paper chooses the listed companies with more mature debt governance environment to be the study objects. It does not select samples from all the listed companies broadly. To a certain extent, external governance environment differentiation is avoided, which make the research conclusion more targeted, and to coincide with the research significance. What's more, on the basis of theoretical analysis, the paper is trying to assume that there be a inverted U-shaped nonlinear relationship between debt ratio and efficient investment and to explore the relation between them by empirical study. Finally, according to the selected sample, from the perspectives of the company's overall debt level, company ownership nature and debt maturity, the paper tries to explore how debt governance influents investment efficiency. Thus it will be a kind of complement for the predecessor's research conclusion.