A Study On The Determinants Of Corporate Borrowing By Issuing Short-term Financing Bills

Since the issuance of the first approved short-term financing bills on May26,2005, the short-term financing bill has become an important short-term financing tool for public firms in China. By September2011, the firms has financed capital accumulated up to about$3.12125trillion through issuing short-term financing bills, has increased by87.54%over2009. It accounts for more than one third to the financial bonds, and far more than the total amount of corporate bonds.It is thus clear that the short-term financing bills market has developed very rapidly. So what kind of enterprise, in which situation, will make the financing decision to issue the short-term financing bills, and make full use of the financing advantage of it? Is there a’borrows short and invests long’phenomenon or some potential liquidity risk existing? What were the primary determinants of the short-term financing bills issues? The solution of these problems can let us better understand the development of short-term financing bonds market, and furthermore, benefit to promote the healthy and orderly development of this market.So, this paper focuses on the enterprise characteristics in the three perspectives of financial situation, corporate governance and capital requirement. The results of empirical analysis suggest that firms with bigger size, higher credit ratings, and higher earnings per share, lower leverage, lower operational risk, and deficit capital demand are more likely to choose short-term financial bills. But the growth index and corporate governance have no significant effect. In the empirical analysis of capital requirements, we found that short-term financing bills issuance has a positive correlation with capital expenditure, and a negative correlation with net growth of operating funds. It reflects the sample firms have make use of the financing money for long-term capital requirement, there exist the’borrows short and invests long’phenomenon.This paper firstly make Logistic analysis by selecting a sample of870firms from May26,2005to September30,2011, which include435listed company of non-financial industry issuing short-term financing bills and435paired company of the same industry, the same year and the nearest current ratio. The strict matching principle would guarantee the preciseness of this empirical analysis and the reliability of the results. And we also use the original435sample company to research on the’borrows short and invest long’phenomenon, so as to make empirical analysis of the relationship between short-term financing bills issuance and capital requirement. Then we could ensure the continuity and comparability of the empirical analysis.The main contribution of this paper as follows:in theory analysis, it integrate the theoretical framework of short-term debt financing, and put forward the idea of research on short-term financing tools; in historical analysis, compared with the U.S. commercial paper market, it found that there would be institutional defects and potential risk in the market of our country; in empirical research, it found that the firms issuing short-term financial bills is of higher quality in the aspect of financial status, but there is also hidden many risks that cannot be left unnoticed. First, the situation of corporate governance and the change of some dynamic index should be on the alert and get more attention. In addition, investors should also watch out for liquidity risk and payment risk especially as existing the’borrows short and invests long’ phenomenon.The paper has five chapters, manly contain literature analysis, theory study, historical analysis, and empirical study, in which chapter one is literature summarization; chapter two is the theoretical framework of short-term debt financing, expounds capital structure theory and debt financing theory; chapter three is historical analysis, mainly introduce the historical development of the short-term financing bills market and make a comparative analysis on the commercial paper market in United States; chapter four is empirical research, it spread from theoretical analysis, set assumption, and then descriptive statistics, correlation analysis, and finally Logistic analysis. In addition, in the capital requirement perspective, this paper made a further empirical research to test whether there exist the’borrows short and invests long’ phenomenon or not in the short-term financing bills issues; chapter five summarizes the research conclusion and expounds the implications of the result for the market participants.