The Research Of Corporate Overinvestment Behavior On The Impact Of Issuing Corporate Bond By Listed Company

Corporate bond is an important means of debt financing. Due to the reason of historical and institutional development in our country, corporate bonds lack attentionfor a long time. At the same time, China’s legal system is not perfect, resulting in the development and financing of corporate bonds is not sufficient. After the release of the bond market recently, wehave little researches about corporate bonds and majority of them stay on at the theoretical level which are not very deep. Over the past decade, we can always maintain our rapid economic development, because investment and exports have played an irreplaceable role in driving. In this economic situation, many companies have to adapt to the situation to increase investment. Many companies appeared over-investment behavior, namely "over-investment" phenomenon, because there are many factors, such as the amount of resources, market demand, the complexity of the decision-making process and the internal corporate governance, ownership structure, etc.As a new debt financing, the issuance of corporate bonds will how to affect the issuing company investment behavior. The main issue will push the over-investment company farther overinvestment or make the company’s investment behavior back to the normal. This paper attempts to study the debt financing’s influence to the company’s over-investment, through the comparison with different length of the debt and bank debt.In this paper, I use the literature review and empirical analysis method to analyze the impact of the corporate bond financing to over-investment behavior. This paper chose the listed companies who successfully issued corporate bonds in January 1, 2009---December 31, 2013 as the research object. We use these companies’ financial data from 2007 to 2013 as the empirical analysis’ sample to establish the over-investment analysis model.Through the over-investment model analysis, we found that some of the listed company have over-investment phenomenon and there are also some listed companies have under-investment phenomenon, but the former phenomenon’s proportion is bigger. We use the model’s residuals new investment result to analyze the impact of the company’s free cash flow to excessive investment behavior and liabilities’ restraints to the over-investment companies, as well as the liabilities with different maturities’ influence to the over-investment behavior.It was found that over-investment behavior of listed companies really increases with the company’s free cash flow and increasing; Debt financing can constraint over-investment behavior; Compared to short-term debt, long-term debt play a more significant role in binding over-investment behavior; Corporate bond financing can really curb excessive investment behavior of listed companies, but the bank loan is to promote the company’s over-investment behavior. This is mainly because, compared to corporate bonds, bank loans can be obtained mainly large companies which have a government background, the company’s operating conditions may not be good, but because they have a government background, it can be relatively easy to get access to bank loans, while because of information asymmetry, banks do not understand the pros and cons of the company’s investment projects, and thus as a creditor, the bank would not achieve the binding effect on investment behavior. Corporate bonds issuing openly require companies to disclose financial information, which reduces the information asymmetry and increase the cost of default, but also play a role in signal transduction, and thus be able to bind over the company’s investment behavior. Meanwhile, compared bank loans, corporate bonds have less restrictions and lower cost, which make the financing conditions reducing, to sum up, the same debt financing, China should vigorously promote the development of the bond market, improve the corporate finance market.