Research On The Listing Corporation’s Financing Structure And Irrational Investment Based On The Ultimate Control

Financing and investment is the two most basic financial activities in the process of enterprises’ normal operation. The investment brings the profits to the enterprises as well as risks. It is the basic activity of the enterprise to ensure its management and profit. Financing solve the problem of the source the investment funds, and it is the premise of the enterprise’s investment. Both are independent, but still have an indispensable link with each other. In the last80’s century, many scholars had put forward that the concentration of ownership is widespread, even the states which has a mature market like American also has this kind of phenomenon. In fact, China’s ownership structure is also concentrated relatively, especially the state-owned listing Corporation and family business. In this case, the interest conflicts between the controlling shareholders and the small shareholders are inevitable, and this lead to a series of irrational investments. For example, poor efficiency investment efficiency, excessive investment, seriously idled funds etc..In addition, China is still in the transition period, the capital market is still not perfect, the funds that enterprises needed not only from the capital market, but also from banks. Bank credit financing is an important part of the source of funds. However, our Chinese enterprise does not make full use of the positive effect of the debt financing on the corporate governance. Instead, the interest conflict appear because the agency problem between the shareholders and creditors, and then lead to the irrational investments.This paper start from the ownership and control of the ultimate controller of the enterprise, researched the relationship between the ownership structure of the ultimate controller, debt financing structure and irrational investment, established the multiple regression model, analysis the relationship of the three. It verified by the Chinese listing Corporation of Shanghai and Shenzhen stock market. The results are as follows:there is a two function between the ownership and control of the enterprise’s ultimate controller with the irrational investment of the enterprises. Bank credit financing and long-term loan financing in the financing structure easily lead to irrational investment; commercial credit financing can inhibit the over-investment problem effectively, but it may cause under-investment; short-term financing can weaken over-investment and under-investment at the same time in the theory, but empirical research is not significant. The ultimate ownership of enterprises more easily lead to high rates of assets and liabilities, and make enterprises more inclined to bank credit financing and long-term loans; in the case of ownership concentration, the ultimate controller’s control and ownership of the deviation degree is higher, more easily choose commercial credit financing and short-term debt financing, on the contrary, deviation of the two rights degree is low, enterprise more easily choose to bank credit financing and long-term loan financing. The enterprise which its ultimate controlling shareholder has more ownership are more likely with higher level of debt, more bank credit financing and long-term loans; in the case of ownership is concentrated, the enterprise which its ultimate controlling shareholder’s right of control and ownership have high deviation are more likely to choose commercial credit financing and short-term debt financing, on the contrary, the low deviation with the bank credit financing and long-term loan financing. At last, this paper puts forward the countermeasure that the enterprise can weaken the irrational investment from two aspects which is the ownership structure and the debt supervision.