Studied On Listed Companies’ Over-investment Behavior Of Financial Distress Under The Soft Budget Constraint

With the increasing fierce market completion, enterprises are more easily to be infinancial troubles. In this situation, investments have become an important means to increaserevenue and get rid of financial troubles. On the other hand, the investments of domestic fixedasset maintain a sustained high growth and over-investments have appeared frequently inmacro-level enterprises. So, whether enterprises in financial trouble will takeover-investments in such factors?Currently, there are not enough researches on the over-investments of enterprises infinancial troubles. Our research is based on the data of two special treated enterprises inShenzhen and Shanghai stock exchanges between2000and2012, which studies theover-investments behavior of listed enterprises in financial troubles. Firstly, we haveconstructed a theoretical framework which studies the impact of Soft Budget Constraint onover-investments and have proposed some surmise; Secondly, we have estimated thebehaviors of over-investments when the enterprises are in financial troubles. What is more,we have also studied the impact of nature of property rights and whether the over-investmentsbehavior of nationalized business is on account of more bank loans. Finally, we get theseresults:1) there exist over-investments behavior in listed enterprises when in financial trouble.2) Nature of property rights could effect the enterprises’ over-investments by degree of SBC,for which reason, nationalized businesses have obvious over-investments over privateenterprise.3) Intensive over-investments of nationalized business over private enterprise isowe to their more bank loans.4) Over-investments behavior of listed enterprises underfinancial trouble reduces corporate performance, which is not conductive to get rid offinancial troubles. According to the results, we give some corresponding feasibility proposals.