The Influence Of The Change Of External Environment On Financing Constraints

After the financial crisis, the problem of financing which was confronted by middle and small-sized enterprises was highlighted and restricted the development of our country’s economy. Studying external financing condition which influenced the corporate finance, was also given a new meaning.Taking the differences of economic development level and social culture in various regions into account, this paper consider the wave of Headquarters migration which happen after2001and use a dynamic perspective about migration this paper to study. We choose the A-shared listed companies which have their headquarters migrated from2004to2013and divided them into groups based on the direction of migration and geographic span. We firstly test the relationship between investment-cash flow sensitivity and a firm’s financing constraints. Subsequently we explore the influence of the change of market environment and social cultural environment on financing constraints. At last the overall effects of external environment on financing constrain was verified.In this paper we found that:(1) the improvement brought by upward migration decrease a firm’s investment-cash flow sensitivity.(2) The process of marketalization would affect a company’s financing constrains. Specifically, the degree of financing constrain is relieved after the headquarter migrating from a place with low degree of marketalization to the other one with higher degree of marketalization. Conversely, the degree of financing constrain is intensified.(3). Credibility between regions would impact a company’s financing constrain. When a company moves headquarter from a place where it would face a high level of trust to the other where it would face a low level of trust, its external financing will be eased. On the contrary, its external financing will more likely be constrained if moving in the opposite direction.(4) Due to the mutual influence of external environment and social humanistic environment, the degree of financing constrain of a company is not improved significantly in short-term after the migration. This result is partly due to the direction of the headquarters migration in our country.The innovation of this paper are using a dynamic perspective-migration to explain the external factors which affect financing constraint and introducing marketalization index and trust indicator to measure the change of external environment which make our explanation more comprehensive.