Study On The Correlation Between Corporate Governance And Debt Financing

In a market economy, reasonable corporate governance structure will not only benefit the company’s performance, can also promote the long-term development of the company. From the point of view of corporate governance, debt financing can impact corporate governance performance. Theoretical studies at home and abroad have shown that on the one hand, debt financing reduce agency costs between shareholders and managers, improve the efficiency of corporate governance. on the other hand, agency costs between the shareholders and creditors was added, which determine a reasonable proportion of debt financing plays an important role on the effect of corporate governance. Most of the empirical results at abroad show that the relationship between corporate governance and debt financing is positive, but domestic are mostly negative. It shows that debt financing do not promote the corporate governance efficiency.On the basis of summing up the results of previous studies, this article conducted a study on the correlation between corporate governance and debt financing on Chinese pharmaceuticals and biological products industry. In recent years, Pharmaceuticals and biological products developed very rapidly, and economic benefits have also greatly improved. Pharmaceuticals and biological products industry is a high-tech industry, requires large capital investment in the development process, return on investment period is very long, and it is significant to study that.Data display that characteristics of debt financing of pharmaceutical and Biologics industries is that average current liabilities ratio is too high, and level of long-term debt rate is low, and it rely mainly on the Bank loan. Empirical results show that the debt financing of pharmaceuticals, biological products industry showed the negative effects to corporate governance. Article concludes with a number of recommendations to improve the performance of corporate governance. First of all, promote the development of China’s bond market. Second, it is a good measure to improve the Bank’s role in corporate governance. Finally, debt guarantee mechanism of perfection can promote corporate governance effect of debt financing.