Debt Constraints And Corporate Risk-taking

With the constant improvement of Chinese market system and the increasing levels of competition in the market, every economic subject, especially for the enterprise or corporation, will face a variety of risks in the process of production and management. The corporate risk-taking reflects the choices for projects of uncertainty expected cash flow. Undertaking the necessary risks to engage in investment, innovation and business activities for corporations is the manifestation of the vitality of the market economy and an important channel for listed companies to enhance shareholder value and the main driver of sustained economic growth. Corporate risk-taking plays an important role in the survival and development of corporation. Domestic existing literature mainly from the perspective of internal governance mechanisms to study the relationship between corporate governance and corporate risk-taking. Debt constraints as the most important external governance mechanism, the domestic existing studies do not give sufficient attention about the impact of debt constraints on the corporate risk-taking. Therefore, the research of debt constraints and corporate risk-taking has important significance in this paper.Taking the listed corporations from A-shares on the Shanghai Stock Exchange and Shenzhen Stock Exchange as samples. The sample period is2003to2012. After screening, this paper collects691sample corporations finally. Taking panel data regression to research the relationship between debt constraints and corporate risk-taking. The research found that as follows:(1) The debt can constrain corporate risk-taking, the size of the debt is negatively correlated with the level of corporate risk-taking.(2) According to the division of debt maturity structure, short-term debt and long-term debt both can constrain corporate risk-taking, but the constraint of the long-term debt is greater than the short-term debt. (3) According to the nature of ownership, debt can not constrain state-owned corporate risk-taking, but debt can constrain non-state-owned corporate risk-taking.Moderate corporate risk-taking play an important role in supporting the development of corporations. Protecting the interests of creditors is the requirement of maintaining the market economic order and ensuring a healthy operation of the credit system. Therefore, strengthening debt constraints is also the reasonable demands of the economic market. Strengthening debt constraints can inhibit excessive corporate risk-taking behavior. This study provides the basis for corporations to coordinate the corporate debt and corporate risk-taking according to their actual situation. And this study also tell us that debt can not constrain state-owned corporate risk-taking. Therefore, strengthening the debt constraints of the state-owned corporations is still one of the important directions for state-owned corporate reforms.