A Research On Debt Government Based On Enterprise’s Life Style

Debt management is an important part of the company’s external governance, its study is of great significance for perfecting the corporate governance. Especially bank loan is the largest proportion of debt financing, to explore the governance effect is crucial for riching theoretical and empirical research in our external governance. Meanwhile, long-term bonds will also be included in the study. The agency cost theory,the theory of signal transfer and the theory of control-rights shift, These theoretical system proved great effects about debt financing on agency problem and corporate governance. The important role of debt financing is recognized by more and more researchers and corporations.This paper firstly reviews the foreign relatively mature theory, to tease out debt have the governance effect of reducing the equity agency cost and the threat of bankruptcy, to convey information of company’s good operating status. To analysis the difference of debt governance effect between short-term debt and long-term debt, which is based on the theory. The governance effect of short-term debt mainly present in cash flow constraints and easing the underinvestment of the management. The governance effect of long-term debt mainly demonstrate in reducing excessive investment and the threat of bankruptcy. Secondly according to cash flow patterns proxy for firm life cycle,we classify the business firms to the introduction and the growth firms,the mature firms,the decline and shake-out firms,combined with the characteristics of the enterprise financing, to put forward the theoretical hypothesis of the paper, to reveal the different governance effect of different maturities loans in the stage of firm life cycle.Through empirical research, it is proved to the cash flow patterns is reasonable to classify the life style of the business firms. Regression analysis showed that the debt governance effect is difference in the different stages of the life cycle of the enterprise, different term debt’s governance effect is also different for reducing agency costs. However, the governance effect of the threat of bankruptcy and restraining excessive investment is not play in the firm life cycle,debt is significantly negative related to corporate performance. For this, to a certain extent this paper propose that the debt plays governance effect to constrain free cash flow of the enterprises, for the inhibition of the perquisite consumption of executive, reducing agency cost, but the effect did not form a financial index which can be observed, and it is can not be regarded as our national debt governance effect is distorted. Finally, playing the effect of the debt governance depends on good internal control and internal governance environment, also need good mechanism of the threat of bankruptcy. These proposals can perfect corporate debt governance effect.