Capital Structure、Growth Opportunities And Corporate Investment

In a competitive market environment, the firms’ growth opportunities are often shown as innovation or special resources. In order to realize growth opportunities, enterprises will be more financing through their internal funds or equity issuance for the uncertainty of innovation and the asymmetry of information with investors, as well as the special type of resources and assets. When we study trade off theory, principal-agent theory and pecking order theory to make prediction how firms to choose the optimal capital structure, the growth opportunities of firms are needed to be taken into account.We select the non-finance firms which have completed the split share structure reform after 2006 as samples to study the optimal capital structure of enterprises, as well as the relationship between corporate investment and financing. First of all, the relationship between capital structure and growth opportunities is studied. Then we analyze whether the enterprise is adjusted to the optimal capital structure. Because the state-owned banks are more willing to finance the state-owned enterprises which have the problem of the soft budget constraint, we investigate the case of investment of excessive debt corporate to inspect the predictions of the agency theory based on the optimal capital structure of private listed companies in China. The main conclusions are as follows.The negative relationship between capital structure and growth opportunities is found in the group of descriptive statistics. After controlling other variables, the ordinary least squares regression results show that the growth opportunities have a significant negative impact on the capital structure of enterprises. And the capital structure is more consistent with convexity growth opportunities. We find China firms’ capital structure has mean reverse effect and we estimate the adjustment speed of capital structure using panel regression and GMM regression. The leverage of firms which have the high leverage keeps stable, this is due to many of them are state-owned firms which have stable financial leverage. To make it further we research firms’ investment intensity when firms are over-indebtedness. And here comes the conclusion: for the state-owned enterprises, there is no significant relation between the investment intensity and the growth opportunities, but the investment of the non-state enterprises increases significantly when the growth opportunities are high. High idiosyncratic risk of state-owned enterprises will harm the interests of debt holders for the asset substitution investment behavior of shareholders, but the idiosyncratic risk of non-state-owned enterprises did not have a significant impact on investment. Additionally, we find that excessive debt will reduce the intensity of investment in firms.