Influences Of Stock Price Bubbles On Enterprise Capital Allocation Efficiency

Stock market, as one of the most important means of direct financing, can optimize enterprise capital allocation and effectively improve the efficiency of capital operation. However, investors’ irrational trading behaviors will lead the stock prices to deviate from the basic value so as to cause the bubble. Stock price bubbles will change the enterprise capital structure thus to influence the allocation efficiency of capital, as a scarce resource in the company, and directly relate to the healthy development of securities market. Therefore, study on the influences of stock price bubbles on the allocation efficiency of enterprise capital has important theoretical and practical significance.This dissertation divides the research time period into three intervals of rational, irrational interval and non-bubble period according to the theories of rational bubbles, irrational bubbles and enterprise capital allocation. It analyzes the influencing mechanism of the different intervals of stock price bubbles on the efficiency of capital allocation and selects a total of 5984 unbalanced panel data of the manufacturing enterprises listed on Shanghai and Shenzhen stock exchanges from 2005 to 2012. The empirical test is carried out on the enterprise level. It can conclude by theoretical and empirical researched that:(1) In rational bubble interval, the growth of stock price bubble can effectively reduce the financing costs of listed companies to alleviate the financing constraints, thus to promote the adequate investment and improve the capital allocation efficiency. In irrational bubble interval, the expansion of the bubble distorts the manager’s investment decision-making and expands the non-efficiency investment thus to lower the capital allocation efficiency. The bursting of the bubble breaks saws the capital chain of the listed companies which hinders the production of the project under construction, reducing the capital allocation efficiency. During the non-bubble period when the stock market is at the repair stage, enterprise production and investment gradually recover. Also, capital allocation gradually optimizes.(2) During 2005-2006 of the rational bubble interval, the bubble has a significant positive effect on corporate capital allocation efficiency, and this effect is the strongest among three intervals. With the expansion of bubble, enterprise efficiency of capital allocation effectively improves.(3) During 2007-2008 the irrational bubble interval, the stock price bubble swells and bursts. At this time, the bubble has a significantly negative impact on the enterprise capital allocation efficiency, suggesting that the excessive expansion of stock price bubble and the burst will reversely impact on enterprise capital allocation efficiency.(4) The four years of non-bubble period from 2009 to 2012 is a stationary phase when the bubble exists in the stock market as a normal phenomenon, imposing a positively influence on enterprise capital allocation efficiency, but this effect is obviously smaller than that in rational bubble interval. This suggests that the moderate amount of bubble growth will contributes to enterprises to improve the efficiency of capital allocation. Finally, this paper puts forward recommendations from the perspectives of improving the system of securities market, broadening the financing channels and conducting financial regulation.