Financing And Esclation Of Commitment

In the modern theory of the firm, the investment decisions and financing decisionsare the most important decisions. Investment and financing relationship has been the focusIn the financial sector, the two are the dynamic expression of corporate capital flowsduring the different stages, investment and financing business efficiency reflects theability of enterprises allocation of funds, the decision of the enterprise to survive in thecompetitive market status and development prospects. Moreover, the efficiency ofinvestment and financing companies also affect the allocation efficiency of socialresources. In recent years, China’s economy has maintained rapid growth, but this growthis highly dependent on large-scale investment and a lot of energy consumption, reflectingthe extensive features. Declining investment efficiency in the process, the quality ofeconomic growth and sustainability are not so optimistic. A series of studies haveindicated that, in recent years, China’s investment efficiency of listed companies is nothigh, the inefficient investment behavior is widespread. Therefore, how to suppressinefficient investment and improving the efficiency of investment in order to achievesustainable development of China’s economic development become a reality problem to besolved. China’s capital market is evolving emerging capital market, based on our uniqueenvironment and corporate governance structure characteristics, study the relationshipbetween investment behavior and efficiency of financing behavior becomes extremelynecessary and urgent.Currently, secondary equity offering(SEO), convertible bonds and bank loans are themain financing method, this paper attempts to study the impact of these three ways oninvestment efficiency, they provided theoretical basis for policy-making, sustainabledevelopment of listed companies and investment decision. Escalation is a decision-makingdilemma managers often have to face, their behavior is clearly contrary to the traditionalprinciples of economic rationality, it is a common investment pitfalls, it is not only a wasteof resources, but also enable enterprises to lose the chance of development. This articleselects escalation as the metrics of the business efficiency and effectiveness, because theescalation is a common psychological tendencies and cognitive biases decision-makers,and the company is the product of agency problems. Escalation as a non-efficiencyinvestments, compared to others, escalation is more sensitive to corporate financing, thispaper study the major financing ways’s impact on corporate investment efficiency fromthe perspective of escalating, which will be to have a beneficial supplement to the previous study.Based on the institutional context of the transition period, the paper select thesamples of companies in Shanghai and Shenzhen during2005-2010, respectively, to studythe secondary equity offering, convertible bonds and bank loans affect on the escalationbehavior, and three ways’ differences in the extent of the impact of escalating study. Wefound that secondary equity offering and bank loans are easily leaded to escalation, bankloan’s probability of occurrence of the escalation behavior is greater than the secondaryequity offering. In a further distinction between the nature of the enterprise we found thatcompared to non-state-owned enterprises, state-owned enterprises has resulted in the bankloan facilities of escalating behavior. The study is not only to promote the study from theperspective of escalating investment and financing theory, but to promote the study ofmalignant capital increase, while making us the perspective from escalating profoundunderstanding of the secondary equity offering, convertible bonds, and economicconsequences of the credit and financing differences, in order to improve our equityfinancing, convertible bond financing and credit financing mechanism provides a usefulinspiration.