From The Perspective Of Investment Opportunity Set To Research The Impact Of Debt Financing On Investment

Earlier studies about the relationship between finance and investment are developed under the perfect capital market assumptions. Research scholars concluded that finance and investment are independent. Later scholars have gradually relaxed the assumptions of the study, the research results show that financing and investment behavior have intimacy relevance. Debt financing is an important source of funds for corporate, it plays an eminent role in deciding the capital structure of corporate. Different debt financing level will exact influence on investment behavior, and it will reflect on the scale of investment. In addition, different debt maturity structure exact different influence on investment. On the general situation, short-term debt has a stronger impact on the investment than the long term debt. Short-term debt to some extent decreases the inefficient investment behavior like underinvestment or overinvestment. Long-term debt limit the unlimited expansion behavior of managers, suppress managers’ imperialism tendency. These classical theories, like Capital structure theory, Agent theory, Asymmetric information theory, make great contribution to research the relationship between the debt financing and investment. These theories also have great significance for the financial management practices. But we should realize that the above research first put forward by western scholars, their research conducted under the background of western countries’ highly economic level and strong form capital market. From the perspective of our country’s practice, even our economic is on the stage of high development, but our capital market is still weaker than western countries’. So we should not use the conclusions put forward by western scholars directly, we should take into consideration of our country’s practice to verify whether the western theories is still useful in conducting our country’s listed corporate to adapt a rational financial and investment decisions.This paper from the perspective of investment opportunity set to analyze the relationship between them. When we have acknowledge of how the debt financing exact influence on the corporate investment at different growth level, it will make us have a further understanding about debt financing. This paper takes 267 private listed companies which are established on the main board of shanghai and Shenzhen A-share as study sample, eventually we obtain 1335 observations. Under the condition of controlling the variable of IOS, sale, cash flow and size, we analyze the relationship between debt financing and investment. From the regress result we can conclude that it exist a significant negative correlation between them. Then, we divide the private listed companies into two groups according to the level of growth opportunity. The empirical results indicate that two groups which on the different level of growth opportunity both show negative correlation relationship between the debt financing and investment, and the less the companies own the opportunity the more significant the negative correlation between them. After we take into consideration of the debt maturity structure, we find that the short term debt show the more restriction about the overinvestment behavior.