The Empirical Research On The Effect Of Debt Governance In Chinese Listed Companies

Debt is one of the essential ways which the enterprise raise capital in, the mean of the debt-to-asset ratio of Chinese listed companies is46.83%in2012.Debt is not only a way to raise capital, but also a way to enhance corporate governance. But the control effect of debt does not play well and the mechanism of debt payment is not perfect in China, these problems may weaken the effect of debt governance. The researches of debt governance began in1950s’ abroad, the domestic research began in the end of20th century. Domestic researches make a different conclusion from abroad researches, they consider that debt does not play the effect of debt governance or just part of debt play the effect of debt governance. In the situation that debt play a important role in raising capital but does not make the effect of debt governance, the researches on debt governance have positive significance for improving the governance of listed companies and enriching the researches on the effect of debt governance.In this paper, the text is divided into six chapters:The first chapter is introduction. This chapter introduces the background, significance, purpose and frame of this paper.The second chapter is literature review. This chapter divides the researches into domestic researches and abroad researches. According to the method of governance, this chapter divides abroad researches into three kinds, they are the method of excitation and constraint, the method of camera control mechanism and the agency of debt. According to the index of debt governance, this chapter divides domestic researches into three kinds, they are performance of enterprise, over-investment and other index.The third chapter is theoretical analysis and the research hypothesis, this part firstly introduces theories related to this paper, then according to the free cash flow hypothesis, this chapter analysis process of debt governance effect mechanism, the process is divided into two steps, and put research hypothesis to two steps respectively.The fourth chapter is the empirical model design. This chapter explains the selection of sample data and source, the selection of variable and the establishment of mode.The fifth chapter is the empirical results and analysis. Through the part of empirical analysis, this paper get the concludes related to the effect of debt governance mechanism:in terms of the influence of debt to free cash flow, debt has not constraint free cash flow on whole, long-term bank loan constraint free cash flow, short-term bank loan and commercial credit make free cash flow increase. In terms of the influence of free cash flow to agency costs, free cash flow will promote the increase of excessive on-the-job consumption agent cost and excessive investment agency cost, and vice versa.Sixth chapter is conclusion and suggestion. This chapter summarizes the empirical analysis above, it concluded that the debt can’t play a effect of debt governance through the way of free cash flow, the reason is that the debt can’t constraint free cash flow. This chapter also makes suggestions according to the conclusions.Contribution of this paper lies in:domestic related research generally explore whether debt play the effect of governance by examining the impact of debt on corporate performance and over-investment, these studies focus on the result of the debt governance effects, but lack of ignores the debt governance effect mechanism. This paper will be based on free cash flow hypothesis and other debt governance theory, study the mechanism of debt governance effect from the perspective of free cash flow, with the hope to make supplement to the study of domestic debt governance effect mechanism. Along with rapid economic development and enterprises’ awareness of the debt governance effects, debt governance effect will be in dynamic changes, this paper will make a research on the recent situation of debt governance effect.The defects of this article include such problems:in order to eliminate the influence of industry factors, this samples is limited to the scope of manufacturing industry, it will drop the universality of the results of the study. The selection of indexes of free cash flow, period expense and the index of growth in Vogt’s model are not precise enough, it will affect the accuracy of the results of the study more or less.The theories used in this paper are within the scope of the capital structure theories, it may ignore other theories which can explain the debt governance effect effectively.