Study On The Impact Of Debt Structure On The Overinvestment Behavior Of Real Estate Listed Companies In China

To enterprise, financing activities and investing activities are two basic modern financial activities. Research on the relationship between the two has been an important academic issue. Many scholars have studied the impact of debt on investment behavior from the perspective of debt financing. They have two views: On the one hand, debt will lead to inefficient investment because there are agency costs of debt. Companies may appear over-investment behavior, companies may also appear inadequate investment behavior; On the other hand, debt can reduce the degree of inefficient investment positively.Currently, the real estate industry plays an important role in the development of economy. In 2013, the contribution of the real estate industry to China’s GDP was about 13.6 percent. It has become an important pillar industry of China’s national economy. Prices continue to remain high in recent years, the enthusiasm of the real estate investment is unabated. Investment in the real estate industry are rising. In 2012, investment in real estate grew by 16.19%.In 2013, investment in real estate grew by 19.79%. However, this does not mean that investments are effective. Under this background, this paper take real estate companies as an research object. Currently, there are too many real estate companies. A large number of houses can not be sold."Ghost town" continues to appear in our country. In order to suppress the enthusiasm of real estate investment, the Chinese government carried out a series of regulatory policies. Considering these phenomena, we believe that there is over-investment behavior in real estate industry from the micro financial perspective. Real estate is a capital-intensive industry, there is a strong dependence of liabilities. This paper focused on the impact of debt structure on excessive investment behavior. This paper studies that the debt is to promote the over-investment behavior or curb over-investment behavior in China’s real estate companies.On the one hand, this paper reviews relevant research.Then analyze the impact of debt structure on investment behavior in the real estate companies, according to the Asymmetric information theory, Principal-agent theory, Free Cash Flow Hypothesis and the Liabilities governing theory. On the other hand, What is the impact of over-investment in the debt structure is? We study this issue using the method of empirical analysis. Firstly, we put the 690 observations into the investment models, and found that there is over-investment behavior in real estate companies actually. Then, we found that free cash flow is not the main cause of over-investment. The companies in real estate industry chase high returns, this may be the main reason. Finally, the paper studies whether the debt structure can curb over-investment. The results show that there are two effects of debt, it can adjust inefficient investment, But it played more role in promoting the over-investment.Finally, based on the above analysis, this paper summarized the four conclusions:First, the mean free cash flow is less than zero, Free cash flow is not a cause of over-investment in real estate companies; Second, whether the source of the debt or the debt maturity can play a governance function. Compared to commercial credit, bank loans have better performance. Compared to the short-term borrowings, long-term liabilities have better performance; Third, to some extent, the debt can ease the financial strain and encourage investment in listed real estate companies; Fourth, the debt on the one hand to make up the funding gap, on the other hand the debt constraint overinvestment, and the boost effect is greater than the suppression effect. This paper also proposes some suggestions, hoping to prevent the debt-fueled investment, and enhance the positive effect of debt.