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The Effect Of Financing Constraints On Company Investment

Posted on:2014-02-25Degree:MasterType:Thesis
Country:ChinaCandidate:W ShiFull Text:PDF
GTID:2249330395981189Subject:Finance
Abstract/Summary:PDF Full Text Request
According to MM theory, in a perfect capital market, the company is not subject to external financing constraints. Perfect capital market does not exist in reality due to the asymmetry of information, the principal-agent problem and transaction costs, thus the company’s investment will be influenced by financing constraints, and is sensitive to its internal funds.This paper introduced the company’s investment model according to the modern theory of corporate finance; financing constraints indicators selected China’s Shanghai and Shenzhen manufacturing companies as samples, the listed companies in China investment the sensitivity of relations with internal cash flow to explore the impact of financing constraints on investment in different situations.The results show that corporate investment significantly dependent on internal cash flow. Multiples of interest earned in the measure of financing constraints as interest earned multiples lower, that is, the higher the company by financing constraints, the stronger the company’s investment of the cash flow sensitivity. These findings suggest that asymmetric information theory cannot fully explain the investment cash flow sensitivity and financing constraints relations, corporate governance factors may be an important factor leading to related research conclusions are inconsistent, asymmetric information and agency problems exist.
Keywords/Search Tags:financing constraints, corporate investment, internal cash flow, asymmetry of information, agency cost
PDF Full Text Request
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