Market Process, The Nature Of Property Rights And Corporate Financing Constraints

According to MM theory,in a perfect capital market,the company’s internal funds and external capitalcan substitute undifferentiated.External funds can be raised by the same cost of internal funds,so there is noquestion of financing constraints on capital markets.However,in the reality of the capital markets,thecompany faces financing constraints due to the presence of asymmetric information and agency problemsWhen businesses financing constraints are large enough,it will lead to a series of consequences,the mostserious cause of bankruptcy. Therefore,the study on financing constraints has been a hot researchscholars.In reality,how to ease the company’s financing constraints and institutional context of a country isclosely linked.According to the report by Fan Gang et al(2004), due to the different regions of China’sgeographical location,natural resources and national policies,whether at the level administrative regions, orat the level of the industrial sector,the process of China’s market imbalance are very obviously,thecompanies external financing environment are thus profound changes.Therefore, based on the back groundof China’s market-oriented process,we study how China’s market-oriented process ease the process ofcorporate finance market constraints from three aspects of the market level,the level of financialmarkets,the role of investor protection.Combining with the nature of ownership of enterprises,we study thedifferences of role to ease financing constraints among the listed companies having different properties.Currently,researches on domestic financing constraints are more diverse and most scholars doresearches basing on investment-cashflow sensitivity studies perspective. This article bases on2003-2007Shanghai and Shenzhen A shares of non-financial,non-listed real estate companies. Learning from foreignAlmeida et al (2004) Mature cash-cashflow sensitivity model,we study the role to to ease the process offinancing constraints on China’s listed companies by the model of cash-cashflow sensitivity.Through the oretical analysis and empirical research, we find that Under the current financingenvironment, China’s listed companies face strong financing constraints. With the improvement of the levelof the market, the level of financial sector market, listed companies’financing constraints are effectivelyalleviated, This suggests that the promoting of the market’process is conducive to development and theefficient allocation of credit funds of the financial industry, easing the problem of information asymmetryin capital markets, providing more low-cost source of funding and a wider range of financing channelsreducing the company’s financing pressures, thus easing financing constraints state of the business. But theimprovement of the level of investor protection is not significant to ease the role of corporate financingconstraints. this may be because of the greater cost of oversight inadequate investor protection,there existcontrolling shareholder "tunneling" behavior in a listed company, in order to protect their legitimate rights,investors will require different levels of premium increases which increase the difficulty to get externalfinancing.Further, the paper considers the role of the market process to ease the corporate financingconstraints under different ownership properties. The results showed that for private enterprises, with theimprovement of the level of the market, the level of financial markets, financing constraints are effectively alleviate; For state-owned enterprises, the improvement the level of the market can not effectively alleviatefinancing constraints, The main reason is that there is a natural link between the state-owned enterprisesand the government, so the state-owned enterprises can get state financial and credit support easily. Softbudget constraint distort the true existence of financing constraints faced by state-owned enterprises.